The Central Bank of Jordan and the Indian State of Karnataka have been developing their person-to-government (P2G) payment channels and instruments within larger e-government initiatives. As the respective agencies within the government of Pakistan look to ramp up efforts to develop and refine the national payments system, it is worth reviewing how the Jordan and India strategies worked to bring digital payments to the broader citizenry. Detailed case studies for India and Jordan are available in the Global Landscape Study on Digitising P2G Payments. 

Background

Following the launch of the National e-Governance Plan by the Government of India in 2006, the state government of Karnataka established the Centre for e-Governance (CeG), an autonomous body responsible for conceptualizing, implementing and monitoring state-wide e-Governance initiatives. The CeG houses core infrastructure and coordinates project implementation by and across government departments. Housed in a department directly accountable to the Chief Minister, CeG is effectively the champion ensuring sustained momentum in the e-governance drive of the state government of Karnataka. The CeG delivery model evolved from brick-and-mortar citizen service centers in 2008 to a mobile phone based platform, MobileOne, the result of a collaboration between the local government and a private company, IMImobile. Currently, delivery of and payment for 1,000 government services and 3,000 private services are accessible via MobileOne.

The Central Bank of Jordan (CBJ) has championed the development of several initiatives aimed at providing e-government services to its citizens. In 2006, an e-government strategy was launched and in 2012 it was supplemented with a broader national payments strategy. This strategy led to the launch of a mobile payments switch, JoMoPay, in 2014 and subsequently, a payments interface called eFAWATEERcom that enables all mobile wallets to be interoperable with each other as well as other digital transaction accounts. The CBJ intends to eventually link eFAWATEERcom to JoMoPay so that government bills can be paid directly from a mobile wallet account.

What makes a national payments system effective?

In order for digital payments to replace cash, the process of paying digitally has to be as seamless (to the payee) as cash transactions. Four primary factors make national payment systems effective enough to replace cash: interoperability, accessibility, safety and reliability.  The initiatives in Jordan and India account for each of these factors in differing measures.

The goal of interoperability is to reduce friction so that a payee can use any instrument or channel for any payment they have to make. It results from leveraging infrastructure that already exists and adhering to internationally accepted industry standards. The government of Karnataka was able to capitalize on existing payments infrastructure: PayGov is a national payments gateway that was created by the government of India and that the state of Karnataka was able to plug into for its own P2G initiative. Jordan also took an inclusive approach to developing their ecosystem by structuring it to allow access by all payment instruments including mobile wallets. In addition to linking to the government’s payments platform, licensed payment service providers are 100% interoperable with each other as well as other financial institutions. The long-term strategy is to make all P2G payments payable via mobile wallets, with the expectation that this will encourage payments use cases beyond P2G.

Affordable and uncomplicated accessibility to the payments infrastructure, by new payments service providers (PSPs), is another key aspect of an inclusive payments ecosystem. In Karnataka, the state government gets access to PayGov at a low cost. MobileOne was developed at the government’s expense and private sector billers can join by paying a one-time fee. Other sources of revenue for the provider, IMImobile, include a pre-agreed fee for each service enabled and a convenience fee for some services, such as electricity, from either the biller or the payer. Keeping admission to the payments system cost-effective ensures continuous participation from the private sector and therefore greater financial sustainability.  The Central Bank of Jordan (CBJ) persuaded the private sector to get on board and support efforts of the national payments strategy after two years of intense consultations. Billers pay the transaction fee on most transactions which is then split up between CBJ, payer’s bank, and the owner of eFAWATEERcom.  Marketing costs for mobile-based products are being shared by the MNO and CBJ while the MNOs are taking on all costs associated with setting up agent networks. Whether or not this model is sustainable will become apparent after the subsidies are taken away in two years.

Finally, if a payments service or product has too much downtime, customers will be discouraged leading to account dormancy. Safety and reliability are therefore essential for an effective payments ecosystem. In India, unreliable internet access hinders efficient functioning of mobile applications. Additionally, consumers preferred using debit cards over mobile wallets due to a lack of trust in new digital account providers, as reported by MobileOne users in urban Bangalore. Gaining trust for increasing mobile wallet usage is therefore essential for India’s mobile payment service providers. Jordan has recently conducted an evaluation of the safety or reliability of their mobile wallet products and gaps are being addressed by CBJ.

Conclusion: Perhaps the most important takeaway from both P2G digitization efforts is that by relying on a prioritized list of use-cases embedded within the context of an overall e-government effort, both Jordan and India are providing compelling opportunities for active use of the digital payment channels. Moreover, when developing a national payments ecosystem, it is important to recognize the need for both public and private-sector commitment. Without an encouraging and enabling environment, the private sector will not be willing to innovate and bring new payments products to market. It is especially important for the public sector efforts to be driven by a champion from within the government to ensure appropriate messaging and buy-in. And without the private sector willing to use national payments infrastructure, the government has little incentive or revenue to continue to make much-needed periodic investments to help maintain standards and keep up with technology. The relationship between these players and their incentives creates a self-sustaining virtuous cycle. Interoperability, accessibility, and reliability both enhance and thrive from this virtuous cycle. Payments are a part of the overall process of interacting with government and a holistic approach is important for success. Building revenue models with an eye to long-term sustainability is another important aspect of a national payments system. Subsidies play an important role in launching public goods but need to be balanced against the threat of market distortion. As Pakistan continues to develop its own national payments plan, these are all questions that need to be kept in mind in a process that hinges on effective communication between the public and private sectors.