Government agencies seek solutions to streamline operations, improve financial inclusion, and enhance transparency. Fintech applications can play a significant role in achieving these objectives.
The experience of many countries underscores that digitalizing payments and reviewing associated business processes yields substantial operational gains. This is true for G2P and G2B payments, enhancing fiscal transparency and improving treasury cash management.
Transparency
Government payment solution encompass various tools and systems public entities use to receive and disburse funds. Across government agencies, payments are a primary source of revenue and a significant point of interaction with citizens. Payment applications can be a powerful tool for enhancing fiscal transparency and accountability based on their ability to automate, disaggregate, and publish payment data.
Combined with digital ID and robust bank reconciliation processes, they can enhance PFM digital solutions and support better budget planning and execution, especially in social program cash transfer programs.
These applications can also help overcome the trade-off between adopting tight eligibility criteria to ensure that only deserving beneficiaries receive support and expanding coverage to reach more people, which may increase fraud risks and inefficiency.
They can also facilitate more decentralized financial operations at the line ministry level while strengthening centralized controls and fiscal transparency through the electronic authentication of user payment transactions. This approach allows for systematic consideration of rationale-dependence and stakeholder-specificity.
Efficiency
Efficiency is the ability to accomplish a task or goal using fewer resources. It can be compared to efficacy, which focuses on achieving the desired outcome.
Procure-to-pay solutions can streamline the payment process by combining requisitions, invoicing, and reconciliation into one automated system that scales with your business. It can result in a reduction in the cost of processing payments and more timely reporting.
Government-to-person (G2P) payments, including royalties from extractives, dividends payments from state-owned enterprises, and fees for goods and services like passport issuance and port charges, are a significant source of non-tax revenue in many countries.
Digitalizing G2P payments can significantly improve operational efficiency through reduced travel costs to collect checks and cash, improved data collection timeliness, and lower transaction costs.
In addition, integrating fintech payments into PFM digital solutions offers additional potential efficiency gains. For example, during the COVID-19 pandemic, governments deployed G2P mobile money-facilitated cash transfers to mitigate logistical challenges and deliver lifelines to vulnerable households.
Flexibility
Having financial flexibility can put businesses at an advantage in an unpredictable marketplace. While it takes time and strategies to achieve this designation, companies of all sizes can develop their levels of financial flexibility.
Flexibility in the workplace is increasingly becoming necessary, and financial services companies have been adapting quickly to the pandemic. Even before the Covid-19 pandemic, many employees in the industry were already working flexibly.
In addition, leveraging an electronic payment solution can help governments reduce administrative costs. Consolidating payments onto a single platform reduces staff workload and improves transparency. It can also facilitate better delivery of public policy to citizens and reduce the cost of delivering cash-based social transfers. It can enhance fiscal transparency and accountability based on reliable disaggregation and reporting capabilities built into PFM digital solutions. Our unified payment platform allows for these improvements and offers many other benefits.
Security
Security is keeping personal data safe from unauthorized access or intrusion. It can be achieved by using encryption and multi-factor authentication. Encryption keeps data safe in transit, on the network, and in the cloud, while multi-factor authentication provides users an additional layer of protection.
Hardware security modules (HSMs) are external devices that act as safes for digital keys, providing a secure and tamper-resistant environment to store and process information.
Conclusion
Implementing fintech payment applications as part of PFM digital solutions for non-tax revenue collections improves budget planning and execution efficiency in cash transfer social programs. It enhances accountability through reliable, disaggregated payment data.
However, successful adoption requires essential prerequisites, including an operational FMIS, strong existing bank identification and verification procedures, and a robust accounting and reconciliation process.
