Travis Atkinson | Kick-starting mobile money through PATH
What if PATH beneficiaries could receive their benefits via their mobile phones? Yes, even the not-so-smart phones. Better yet, what if mobile PATH payments became the catalyst for a much larger, national mobile financial services ecosystem? Mobile PATH Payments: Efficient Social Support through a National Mobile Money Ecosystem, the latest report from the Caribbean Policy Research Institute (CaPRI), outlines the potential for this development in Jamaica and recommends clear considerations the Government should make to improve public-sector efficiency, increase the effectiveness of social support, and encourage innovation and economic growth.
The Programme for Advancement through Health and Education (PATH) is a conditional cash-transfer programme. On the condition that certain investments are made in health and education (for example: children zero to six months must be taken to the health centre once every two months), payments are made to beneficiaries via cheques (sent through post offices) or by electronic transfer. PATH is, therefore, important because it helps some of the most needy and vulnerable citizens: children, the elderly, persons with disabilities, pregnant and lactating women and poor adults, numbering almost 400,000.
Simply put, if we can improve the support for the poorest and most vulnerable Jamaicans and, at the same time, help the wider economy to become more productive, we have every obligation to do so.
First, consider the PATH beneficiaries. Most (about 90 per cent) collect PATH payments monthly or bimonthly at the post office. This oftentimes involves the recipients paying transport costs to get to and from the post office, after which, they then have to wait in long lines at banks to change their cheques. This not only costs the poor and vulnerable, but also takes up much of their time and can sometimes be a demeaning exercise. In fact, one study revealed that one-third of beneficiaries were dissatisfied with the current delivery methods of PATH payments. Using mobile phones to receive their payments would result in PATH beneficiaries getting their money faster and having easier access to their funds to pay bills, buy food as more and more wholesalers, shopkeepers and retailers also utilise the system on the mobile phone.
From the perspective of the Government, public-sector inefficiency is a major problem - so much so that the current IMF agreement specifically includes benchmarks to make the Government operate more efficiently. Similarly, the current administrative cost of making PATH (and other payments) is significant. With the use of mobile money, the cost of administering PATH payments - costs that taxpayers have to bear - would be much lower. And this is not only limited to PATH payments, but could be applied to payments of small contractors to the Government, etc.
There is a national picture as well, and this is where the wider economy comes in. A national mobile-money infrastructure that is accessible by different mobile networks, banks, other companies and consumers could drive an expansion in financial services and the technology development industry. Such cross-platform access, much like the MultiLink network of ABMs that connect several different banks, is what we call an 'interoperable' platform and would be required for wide accessibility via mobile phones.
As this interoperable platform has to be designed and built to fit within and enable the Jamaican economy, app developers and tech entrepreneurs could maximise this specific opportunity and also tap into this segment of an emerging technological industry in Jamaica. Other businesses could use a mobile-money platform to become more efficient and boost productivity. Ultimately, greater efficiency and productivity augur well for economic growth.
Is Jamaica ready for Mobile Money?
Mobile penetration rates exceed 100 per cent. Jamaica has a robust telecommunications infrastructure and a strong banking sector in which to anchor mobile money. Indeed, mobile money could be a more economically feasible way to deliver cash structurally, as well as an easy and cheaper way for individuals to access funds, especially compared to branches and ABMs in Jamaica. While countries like Brazil and Mexico, respectively, have 122 and 54 bank branches and ABMs per 100,000 people, Jamaica has only 6.6. This is underscored by the fact that only 14 per cent of the Jamaican population actually have transactional bank accounts with corresponding cards. That leaves 52 per cent of Jamaicans who are underbanked and 34 per cent who actually fall outside of the formal banking sector (the unbanked).
This means that these persons have limited access to, or cannot tap into, some of the benefits the formal sector provides, such as access to affordable loans or opportunities to protect or grow their earnings and save for retirement. This is an example of what we call financial exclusion. As the unbanked and underbanked present a potentially strong take-up of mobile money, it could, therefore, lead to greater financial inclusion in Jamaica.
So is Jamaica ready? Yes. But some work still needs to be done. The missing pieces are adaptive and responsive government regulation and scale.
Private companies in Jamaica may be cautious about investing in mobile-money infrastructure. After all, why would a company invest billions of dollars in a large-scale infrastructure project that hasn't been tested locally and that their rivals would freely piggyback on? To add to this, regulatory agencies are highly conservative.
By using PATH as a catalyst with its hundreds of thousands of beneficiaries and transactions, the Government would be both regulator and an anchor client. The sheer number of transactions coming from PATH payments not only gives the Government leverage, but also helps to create a strong business case for the private sector to get involved. PATH provides scale.
Why Mobile PATH?
Furthermore, considering that 90 per cent of PATH beneficiaries have a mobile phone, the project would have significant impact. It is also worth noting that 54 per cent of PATH beneficiaries have a positive attitude towards the concept of mobile PATH payments and 21 per cent are indifferent. Left to the private sector only, mobile money and its benefits may never come on track. PATH payments, therefore, represent an excellent catalyst.
Indeed, if done incorrectly, introducing mobile PATH payments would have dire consequences for the most vulnerable in society. This is where CaPRI's recommendations come in.
First, regulation has to be the starting point. Government legislation has to be comprehensive, adaptive and responsive. Second, more targeted research into the needs and readiness of beneficiaries needs to be conducted. This would involve a more comprehensive risk assessment and would help to inform the country's approach to implementing the programme and mitigating those risks.
Additionally, key institutional and individual drivers need to be assigned. Having an institutional 'champion' from within the Government with (i) the vision to lead and drive the initiative; (ii) the hierarchy and authority to coordinate and oversee all participants; and (iii) the capacity to enforce accountability and ensure alignment is an imperative.
The electronic payments ecosystem should then be developed. A successful mobile government-to-person (G2P) system should not be implemented in isolation, but rather as a component of a larger national electronic payment system with a solid agency network and the existence of adequate points of transactions.
All this effort would be futile if the public and direct beneficiaries are not educated and made aware of how to utilise the mobile payments infrastructure and the benefits to be derived. There, therefore, needs to be an effective awareness and education campaign.
Finally, such an initiative will fail without a strong public-private partnership arrangement. Mobile money is a huge undertaking requiring the expertise of several different, competent stakeholders working with the Government.
Ultimately, the implementation of mobile payments in the disbursement of PATH benefits could encourage economic efficiency, provide a catalyst for increased financial inclusion, and increase the range of financial services utilised by the un-/underbanked. However, these benefits will only accrue if we do it right, make decisions based on empirical data and research, and forge strong public-private partnerships.