NEXT GENERATION G2P PAYMENTS: Building Blocks of a Modern G2P Architecture

This report provides a framework for governments and policymakers designing and implementing digital government-to-person (G2P) payments. It outlines a vision for a modern G2P architecture focused not just on efficiency, but on achieving significant long-term development outcomes like financial inclusion, women’s economic empowerment, fiscal savings, and private sector development (p. v). The practical value lies in presenting the key systems, infrastructure, policies, and design choices—the “building blocks”—that enable effective, inclusive, and recipient-centric digital G2P delivery.

Core Arguments & Findings

The report argues that digitizing G2P payments offers a major opportunity to advance development goals beyond program-specific gains, but achieving these requires intentional design based on core principles and leveraging specific building blocks (p. 1, 5).

Objectives of Modern G2P Architecture (p. 5)

Adopting a modern G2P architecture should pursue three concurrent objectives:

1. Increasing recipients’ welfare: Enhancing convenience (lower costs, time, distance), promoting financial inclusion (access to useful accounts and services), and empowering women (increased control, agency).
2. Enabling government-wide fiscal savings: Improving efficiency, reducing costs and leakage, improving targeting, and deterring fraud across multiple programs by leveraging shared infrastructure.
3. Spurring innovation and private sector development: Creating a viable market for Payment Service Providers (PSPs) through aggregated G2P volume, spurring competition, lowering costs, improving product design for low-income populations, and stimulating financial infrastructure development.

Trade-offs, particularly between recipient welfare and government cost savings, may exist and require careful consideration and planning (p. 6).

Design Principles (p. 9-12)

A modern G2P architecture should strive to achieve key design principles:

• Infrastructure: Shared across programs, utilizes national payment systems, integrates with central treasury, limits bespoke solutions, minimizes manual intervention, and is scalable and secure.
• Product and Market Design: Uses transaction accounts, offers recipient choice (provider and instrument), ensures simple onboarding, avoids clawbacks, provides wide cash-out/acceptance networks, and fosters PSP competition with a sustainable business case.
• Inclusion and Empowerment: Collects sex-disaggregated data, designs for individual needs (prioritizing women), ensures recipients are well-informed, protected, and have access to redressal.

Key Building Blocks (p. 18-43)

The report details 16 building blocks organized under three pillars, outlining their desired characteristics for a modern G2P architecture:

Infrastructure (p. 18-27)

• Digital Stack (p. 19): Foundational elements including:
  • ID Systems: Trusted, inclusive, unique, digitally verifiable/authenticable, interoperable (p. 19-20).
  • National Payment Systems: Leveraged for interoperability (RTGS/ACH/FPS), accessibility for all PSPs, standardized acceptance, supporting bulk/agent/retail payments (p. 21-22).
  • Trusted Data Sharing: Secure, interoperable platforms/protocols enabling data exchange between systems (government, PSPs) with safeguards and transparency (p. 22-23).
• Central Treasury System / FMIS (p. 23-24): Integrated system (IFMIS) with a Treasury Single Account (TSA) for centralized fund flow, budget control, reconciliation, and integration with national payment systems.
• Other Supporting Databases & Systems (p. 24-26): Robust sectoral systems (e.g., social registries, payroll systems) that are interoperable, potentially integrated (e.g., integrated social registry), and feed accurate data into the G2P process. Social registries should allow dynamic inclusion and cross-agency sharing. Program MIS should integrate with payment initiation and account directories.
• Account Directory / Mapper (p. 26-27): Centralized system linking recipient unique IDs (e.g., national ID) to their chosen payment account, simplifying routing for programs and enabling easy updates/switching for recipients.
• Connectivity (p. 27): Stable and widespread mobile/broadband network coverage and reliable electricity access (including off-grid options) are crucial for recipients and access points (agents, POS). Affordable devices (including basic/smartphones) are needed.

Product and Market Design (p. 28-35)

• Bank and Nonbank PSPs (p. 29-30): A diverse range of regulated providers (banks, e-money issuers, etc.) participate, enabled by regulation, fostering competition and wider reach.
• PSP Business Models (p. 30-31): Sustainable models based on market fees/commissions (potentially government compensated), incentivizing good service and competition, rather than solely relying on social responsibility.
• Distribution Networks (CICO) (p. 31-33): Wide network of accessible (proximity, hours), appropriate (literacy, comfort), capable (technology, regulation), and liquid cash-in/cash-out points (agents, ATMs, branches). Regulations should support agent banking and interoperability.
• Payment Acceptance Networks (p. 33): Broad network of merchants/service providers accepting electronic payments, enabled by interoperability, standardization, and incentives.
• Accounts and Payment Instruments (p. 34-35): Recipients receive payments into fully functional transaction accounts (not limited-purpose) allowing storage, transfers, and payments. Account opening should be simple (tiered KYC, remote CDD). Instruments (cards, USSD, mobile apps) should be intuitive, secure, low-cost, and interoperable. Recipient choice of account type and provider is key.

Inclusion and Empowerment (p. 36-43)

• Communication and Literacy (p. 36-37): Intentional communication and financial/digital literacy programs embedded in delivery, using teachable moments, trusted messengers, practical content, and diverse channels.
• Recipient Protection and Grievance Redressal (p. 38-39): Clear, accessible, and effective mechanisms for recourse regarding both payment issues and program eligibility/details. Requires monitoring and two-way communication.
• Data Protection and Cybersecurity (p. 39-40): Robust legal frameworks, privacy-by-design principles, and technical/operational controls to mitigate risks (breaches, unauthorized disclosure/use, function creep, identity theft, surveillance, discrimination).
• Gender Lens (p. 41-43): Cross-cutting design considering and addressing gender disparities in legal rights, ID access, ICT access/use, financial/digital literacy, mobility, time constraints, and safety. Includes promoting women agents, women-friendly training, directing payments to women, and potentially integrating accompanying measures. Collecting and using sex-disaggregated data is vital.

Key Statistics & Data

• Globally, over a quarter of adults receive government payments (p. 1).
• Developing countries spend significant portions of GDP on G2P: average 1.5% (social assistance), 3.6% (pensions), 7.3% (public wages), potentially up to 27% combined in some countries (p. 1).
• COVID-19 response programs amounted to at least US$80 billion across developing countries in 2020 (p. 1).
• Receiving digital G2P was the reason over 40% of recipients in developing countries opened their first account (p. 7, citing Global Findex 2018).
• Examples cited include Peru (ID system for COVID response, p. 20; Juntos CCT savings pilot, p. 37), India (interoperability at scale, p. 22), Turkiye (integrated social registry, p. 25), Iraq (registry fiscal savings, p. 25), Bangladesh (female agents, p. 28), Kenya (HSNP choice model, p. 30; HSNP GRM, p. 39), Zambia (GEWEL choice model, p. 35), Indonesia (PKH awareness gap, p. 36), Philippines (4Ps chatbot, p. 38).

Methodology

This report presents a framework synthesized from existing World Bank Group knowledge, publications, previous work, and expert contributions from various internal groups (CGAP, Digital Development, Finance, Gender, Governance, Social Protection & Jobs) and external consultants (p. iv). It does not present findings from new primary research but rather consolidates best practices and principles.

Key Conclusions & Recommendations

Modernizing G2P payments is a complex journey, not a linear path, requiring substantial reforms and investments, particularly in digital public infrastructure (p. 45). Success hinges on:

• Whole-of-Government Coordination: Essential across agencies making payments, those managing infrastructure, and between public/private sectors (p. vi, 45).
• Strategic Roadmap: Countries need to assess their current state, define their ideal scenario based on the framework’s principles, and develop a prioritized, sequential roadmap for implementation (p. 2, 45).
• Recipient-Centricity: Keeping recipient needs, convenience, choice, inclusion, and protection central to design and implementation is paramount for achieving long-term development outcomes (p. v, 9).
• Leveraging Shared Infrastructure: Prioritizing the use and development of interoperable digital public infrastructure (ID, payments, data sharing) is crucial for efficiency and scale (p. 10).
• Focus on Transaction Accounts: Moving towards payments into fully functional transaction accounts with recipient choice is key to unlocking financial inclusion benefits (p. 11, 34).
• Intentional Inclusion: Actively addressing barriers, particularly gender gaps, through tailored design, communication, and complementary measures is necessary to avoid exacerbating inequalities (p. 12, 41-43).

Stated or Implied Applications

The framework applies directly to the design and modernization of various G2P payment streams:

• Social assistance payments
• Pensions
• Sectoral subsidies
• Public sector wages (p. 1, 5)

The report suggests the developed infrastructure and principles could be leveraged for:

• Person-to-government (P2G) payments, such as social insurance contributions (p. 46).
• Payments made by non-governmental organizations (NGOs) and development partners, further strengthening the digital ecosystem (p. 46).