by Irina Velasco, Head of Exploration, UNDP PH Accelerator Labs. 

Amidst the impacts of COVID-19 lockdowns, governments rushed to provide cash transfers to its vulnerable groups as part of their economic relief packages. With constraints on in-person interaction due to the risks of COVID-19, digital financial services (DFS) present as an alternative to deliver cash transfers safely, efficiently, and transparently. They also hold the potential to improve access to financial services especially for those who are not formally included in the financial system.

To this end, the United Nations Development Programme (UNDP) Philippines, in collaboration with government and private sector partners, launched the Adaptable Digitally-Enabled Post-crisis Transformation (ADEPT). This initiative aimed to pilot digital cash transfers through mobile wallets as part of Pasig City’s supplemental social amelioration program (SAP) disbursement and extend digital financial literacy to beneficiaries. The pilot targeted two sets of cash transfer beneficiaries, which provided the opportunity to test its applicability for social protection in the context of disaster response, while supporting the city’s vision toward good governance, digitalization, and financial inclusion. Together with IDInsight, project proponents and partners conducted a process evaluation of the pilot to better understand the implications of the different factors at play in realizing this ambition.

Below we share some reflections that surface considerations for government agencies and program implementers seeking to shift from manual to digital cash transfers for financial inclusion:

A balancing act: the need for expediency, while ensuring validation and long-term goals for inclusion

Delivering cash transfers from government to its citizens digitally involves screening for eligibility. This entails the collection of beneficiaries’ personal data for the crucial Know Your Client (KYC) verification undertaken by mobile money operators (MMOs) for enrollment into mobile wallets. The program aimed to do full KYC for beneficiaries to allow them to use the full functionality of the mobile money wallets, such as cashing out through designated outlets, or accessing certain services such as investing money and obtaining loans. Once beneficiaries have been properly identified and set up to receive cash transfers, digital systems can enable government disbursements at the click of a button.

To ensure they can reach as many families as possible, the city government’s set criteria require a database reliant on other databases to minimize duplication of household recipients. Attaining this however can be time and resource-intensive, especially in the absence of a national ID system or a real-time database of residents, which could inform a targeted approach more easily. For this project it entailed a process of sorting through hard copies of beneficiary lists and instituting basic management information protocols to sort and filter data accordingly. Yet as a process compliant with KYC requirements of the MMO, coupled with the city’s criteria for supplemental SAP and requirements for government compliance, this introduced rigor in the validation process especially where neither a national ID system nor baseline information at the city level is available. This exercise can therefore provide the foundation from which more advanced innovations can be applied to ensure efficiency in data collection and integrity of data quality, the purpose of which may well extend to governments’ planning, policy, fiscal and service delivery.

Meanwhile a common issue among beneficiaries was that some did not have the types of IDs that the MMO would typically accept. The program implementation team needed to find ways to accommodate alternative forms of ID. This is especially the case given that the criteria for qualification is based on current residence during the pandemic, rather than permanent residence as typically reflected in official documents, especially for migrant workers. Marginalized groups are also less likely to have personal documentation in place. As a result, some beneficiaries reported receiving their transfers over a month after they were screened for eligibility.

Automation helps, but with(out) the right foundations…

Realizing the potential of fintech innovation in this case therefore requires robust knowledge management that can cut through ambiguities and refine verification, amid nuances that can come with various categories and conditions for beneficiary targeting. This has implications on access to platforms, prospects for interoperability, and the mechanisms needed to facilitate data collection and enrollment systems that are streamlined to ensure smooth data flows. For this project, program implementers from the Pasig City government and UNDP were collecting KYC data in person offline, and then would process the enrollment into the MMO platform by batch later in the process. To this end, DevLive+, an app originally developed for household and property data collection for climate resilient planning, was repurposed to secure consistent data format and accelerate the transfer of information.

This however did not eradicate the challenges that arise from beneficiary validation, given that the final checks are undertaken by the MMO. Only then it can be revealed if the phone number was already registered to someone else, or if existing users had entered a different address, or did so with a different format. Program team members would then have to contact the beneficiary and the MMO to resolve issues, which was time-consuming and could have been avoided if KYC data collectors could immediately see errors as they collect beneficiary information. Government and program implementers would therefore need real-time access to the MMO platform to reduce registration issues. That registration issues relate to those whose mobile numbers have associated existing accounts (e.g. duplication, previously registered to another name, or beneficiaries sharing a number) surface how information discrepancies can undermine the speed of disbursement in line with due diligence. Because of challenges at this stage, three (3) in ten (10) people reported that they faced issues during the enrollment process.

Automation can therefore be reframed to support coordination mechanisms by integrating different data assets at the local level, which can also ease transfer of information between local and national government departments. Broader systems on national identity and information management must also be dynamic enough to respond to the realities of human mobility and changing circumstances. These must also be complemented with efforts to empower beneficiaries’ sense of data ownership so they can update their information accordingly, as well as anticipatory capabilities for the implementing government body to mitigate Black Mirror type of scenarios. Together these can set the building blocks for real-time information which can support targeted interventions for social protection.

Digitalization = contactless? The value of extending support in-person

To comply with the city government’s process for validating beneficiary eligibility, registration had to be done in person. The project team employed both smaller community registrations and house-to-house enrollment (while observing social distancing protocols) to collect data for mobile wallet enrollment and extend digital financial literacy. Among the beneficiaries, only about a third had mobile money accounts prior to the program, while the rest had to open accounts.

Those who were enrolled at home had a higher likelihood of being enrolled in the company of household members, which extended digital financial literacy training to family members who can then help socialize new technology. This support at home provided reassurance in enabling beneficiaries to learn and use digital wallet, whether in lending the smartphones, assistance in navigating the technology, or explaining the practical application of using digital wallets. Younger family members especially, stepped up to provide further technical support at home, which hints at the possibilities of using gamification to further engage and embolden families to reap the potential of digital inclusion. However, these would need to be balanced with continuous support both in terms of technical and financial literacy, to further harness beneficiaries’ financial autonomy.

Earlier into the pandemic, regulations for financial transfers were relaxed enabling the first batch of beneficiaries to be enrolled with partial KYC requirements for disbursement. While they were technically allowed to cash out within 90 days even without doing full KYC, beneficiaries reported incidents where official money-in-money-out (MIMOS) agents would not allow them to do so, limiting their options to access their money. This has also led some to access their cash through informal means, which admittedly led to mixed results regarding transaction fees. On the one hand, it raises the need to better streamline the cascading of information from MMO providers to their designated MIMOs. However, it also surfaces another signal on how social networks are leveraged as an accessible force to support transitions for technological adoption by filling in unanticipated gaps at the local level.

Digital disbursements may increase efficiency and reduce transaction costs, but it is far more effective when a whole-of-society approach is taken

A digital approach can reduce the need to deploy personnel to distribute physical cash, which also reduces the safety and security risks of carrying physical cash. However, unlike cash distribution which ends when money is given to beneficiaries, using DFS requires on-going support. For this purpose, Pasig City set up a hotline for beneficiaries to call for any issues they encounter. The hotline received requests to resolve various issues, such as having difficulty with a cash-out agent and following up on their cash transfer, as well as technical troubleshooting such as forgetting their MPIN and mobile app issues. Even if these issues could be addressed by the customer service of the MMO, many beneficiaries preferred speaking to a Pasig City representative instead. Despite having an automated notification system from the MMO, only seven (7) in ten (10) beneficiaries reported receiving an SMS message when the cash transfer hit their accounts. Others found out through word of mouth that disbursements were made, while some beneficiaries expressed uncertainty regarding delays in processing disbursements. These highlight the need for consistent and open communications to maintain trust. In addition to the automated notifications from the MMO, program implementers should plan for supplementary notifications.

For the community implementation, the team worked with a community-based group who supported the city government in identifying and mobilizing beneficiaries. They also played an intermediary role between beneficiaries in the lead up to the disbursement and were included in the capacity building for KYC data collection. Future iterations of such an initiative can benefit from identifying strategic local partners right at the onset and involving them in the implementation co-design to ensure that these are responsive to the realities of beneficiaries’ context. Apart from contributing to the development of processes, services, and incentives tailored to beneficiary needs, they may also serve as local champions for mindset shift to inform strategic communications in facilitating social preparation and navigating local dynamics. As the city government deepens its commitment to promote participatory governance, the pilot demonstrates how local community groups can be emboldened to support agile implementation of governance innovations on the ground. Groups can help leverage their local network and presence to sustain an inclusive ecosystem for social impact.

Working towards speedy disbursement to the intended beneficiaries, while setting up the ecosystem to facilitate financial inclusion, requires a whole-of-government and society approach. While data innovations may strengthen national identification and real-time information may accelerate the validation process, financial inclusion can only be sustained through the creation of an enabling environment supported by incentives, regulation and an ecosystem of actors to expand its application and use case. The recently-launched policy note on Delivering Cash Transfers Digitally Amidst COVID-19 in the Philippines presents preliminary insights on these, as the Accelerator Lab Philippines sets out to apply rapid ethnography and ecosystem experiments to further interrogate how digitalization can facilitate financial inclusion. Stay tuned and in the meantime, stay adept!

With thanks to Aya Silva (IDInsight), esteemed Pasig City partners and UNDP PH colleagues for their contributions.

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