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Switching to government digital payments, building win-win programs

Our final blog on the BPC annual client conference addresses the important topic of government digital payments and the key elements of successful programmes.

Government payments are of critical importance to citizens at municipal, regional and national level. The task of explaining the key elements of a government digital payments programme and how this market can be further developed fell to BPC’s own Oleg Patsiansky, head of digital banking.

Patsiansky began by discussing the range of solutions that have already been implemented, focusing on instant payments, tax collections, social benefit payments, and treasury payments as well as automated fare collection with digital banking services. Some of these initiatives can be backed by private institutions, but they can also be consortium based.
He then turned the discussion to tax collection and disbursement through mechanisms such as instant payments and social benefits payments, noting importantly that governments have a set of specific considerations that need to be taken into account.

Government interaction with its citizens is a long term relationship built on trust in which success can be put down to it not being limited to a single institution or government agency.
Building this long term and trusted relationship delivers a number of benefits. Starting with tax collection automation, Patsiansky discussed tax invoices. These invoices are generally generated and uploaded by the agency or tax officer, then processed by the system and sent to the taxpayer directly or through other financial institutions.

Once the taxpayer agrees to pay, the payment is sent directly to the portal or through the individual’s bank. When payment is received, the tax agent receives the payment and finally settlement and reporting happens.

This model works vice-versa, when government needs to get paid, but also when distributing social benefits and subsidies, paying households and organisations, such as micro and small enterprises in times of need. Since the pandemic, many governments have turned to a “digital first” approach to delivering social assistance, primarily cash transfers.

BPC has developed an effective solution for government tax collection consisting of several layers. The first of these is the processing layer, which is followed by the portal layer where the tax invoice is uploaded with authentication and single sign-on integration with other government systems.

Patsiansky highlights the amount of administrative work managed by the solution in terms of user management, system configuration, templates and database directories.

He then moved on to a focused discussion on instant payments. As we all know, instant payment solutions have become very popular largely because they provide a unified and protected mechanism for instant payments and transfers with the payment token being independent of the addressing service - so regardless of whether the user has a card, email or social network ID, payment tokens can be connected to their account.
This is because the message exchange is standardised and the modern payment system has clearing, settlement, reconciliation and configuration rules set by the central bank or regulator.

Patsiansky is excited about the potential of instant payment systems, saying they provide speed of transaction and reliability and build trust among members with unification of services as well as offering high availability and sufficient flexibility to configure new services without the need for vendor intervention.

He notes that person-to-person payments is now a very well understood process, that person-to-business payments is moving quickly into QR code-based payments, and that business-to-person payments is happening in areas such as payroll, education, and social security.

Eventually, business-to-business payments may be also processed through the instant payment system with support for cross-border payments. At this stage of the process we can expect to see further government participation with tax collection and issuance of fines as well as social benefits, grants and various types of subsidies distributed through the instant payment solution.

In situations where participants are not ready to connect, BPC can provide custom APIs to enable them to connect to the instant payment system. These custom APIs can be made available through the set of gateways that can be installed in members’ environments.
Patsiansky refers to the challenge of distributing social benefits during the pandemic and observes that every jurisdiction needs an equitable system that distributes all social benefits without exclusion.

Typical members and users of these systems include banks, acquirer banks, issuer banks and clearing banks. National switch could also be connected, providing transaction rules in clearing and reporting for card-based payments.

Patsiansky is clearly excited about the potential of digital banking and how it can be applied to government payments, outlining the ways in which BPC has created processes that are 100% user configurable.

He concludes by observing that since BPC has a very diverse portfolio of products, every time it looks at the requirement set it can understand how to build the right solution.