The promotion of cashless payments and financial inclusion has never been higher on governments’ digital transformation agenda. Due to the popularity of electronic payment methods such as Mobile Money, this ambitious project has been making steady progress. However, its growth truly soared over the past 18 months, as a result of the increasing demand for contactless payments.
By facilitating digital payments for both the banked and unbanked, interoperability accelerates the evolution towards a more cashless economy and supports financial inclusion. Indeed, in the case of Mobile Money, for instance, interoperability allows the customers of different providers to make direct payments to each other. Furthermore, interoperability increases the use of digital payment methods, which benefits the payment service providers collectively.
Interoperability for transaction security at the government level
Promoting a more cashless and financially inclusive economy implies that governments also embrace digital administration systems. There again, interoperability brings significant advantages. Indeed, it ensures the security and legitimacy of the governments’ digital transactions. These transactions typically involve multiple intermediaries and bilateral agreements, which creates a complex ecosystem difficult to oversee. Solutions that promote interoperability reduce the need for intermediaries and allow for more accurate monitoring. As a result, this limits the risks of fraud and human error. This is particularly relevant in emerging countries, where such issues cause governments to lose substantial amounts of money every year.
When it comes to fraud, examples unfortunately abound. Take pension fraud, for instance. According to an article published in the Sierra Leone Telegraph on 4 May 2021, various corrupt practices involving citizens’ pensions have been uncovered in Nigeria. Governments also lose substantial amounts of money to the remuneration of “ghost” beneficiaries. Indeed, the Namibian government has paid 130 ghost struggle veterans a total of N$8.8 million, as reported in allAfrica on 15 January 2021. Furthermore, in the Nigerian state of Bauchi and in Cameroon, ghost workers have received N500 million (US$1.2 million approx.) and 30 billion CFA francs (US$56 million approx.) respectively from the government, said Vanguard on 11 February and CGTN Africa on 27 May. Some of these amounts were however recovered, thanks to measures taken to flush these illegitimate beneficiaries out of the government’s system.
Optimizing interoperability technology through PPPs
Controlling these fraudulent practices – and limiting human errors – is therefore essential to optimize the security and efficiency of governments’ payment processes. Since these processes are increasingly digital, effective security measures should take the form of digital interoperability solutions. Ideally, these solutions would help improve the governments’ payroll management and minimize the risk of fraud and human error. They should also improve and streamline settlements between payment providers. And of course, support a more cashless and financially inclusive economy.
How can governments acquire such solutions? Any project that aims to promote financial inclusion and the security of the digital economy requires public-private partnerships for optimal technological development. This is the case of interoperability. In other words, governments wishing to adopt interoperability would benefit from the support of private companies specializing in the development of appropriate digital solutions.
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