How payments tech will supercharge government digitisation

Anyone who has ever stuffed a stack of cash in an envelope, and then lined up at a government office to hand it over, will immediately agree that today’s ease of paying digitally is unparalleled.

From applying for an electricity connection to renewing a business licence or registering a property, digital government has transformed the way public sector agencies operate and engage with their citizens.

In the UAE, where public revenue is expected to hit AED57.55 billion this year – more than half of which is expected to come from fees – about 40 percent of the population already use government digital services more than once a week.

These are strong numbers, which put proof to the narrative that the success of government digital transformation is pivotal to the economy.

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Just as a business enhances its bottom line by reducing costs and increasing revenues, the near-zero marginal cost curve of digital government platforms has optimised public sector services over the years.

The coronavirus pandemic-driven acceleration in online and mobile transactions has now set the stage for the next era of government digitisation – with payments technologies spurring the development of new digital economic opportunities.

Growing efficiencies

Governments are typically the largest users of any country’s payment systems.

A pre-coronavirus global study by Visa predicted that by 2032, cashless payments could generate over US$27 billion in additional economic activity for Dubai and increase employment by 1.1 percent, while saving nearly $500 million from administrative efficiencies.

But with the need to provide digital government services going from nice-to-have to a necessity overnight, we expect this number to rise significantly.

The UAE already provides nearly 3,730 federal and local online services through its official portal and continues to add more. 

The public sector must build on the momentum of 2020 and create better-integrated user experiences

Nandan Mer, CEO, Network International

Much like in the retail sector where changes in consumer shopping behaviour (a growing trust and preference for cashless payments and buying online) are unlikely to reverse post-pandemic, demand for more digital-first experiences in government will increase, too.

Additionally, with corporate tax scheduled for implementation in the UAE next year, increased usage of e-payments would bring ease of tracking and transparency to the financial system, while reducing the size of the ‘grey’ or ‘black’ market in cash. This in turn helps the government recover higher levels of tax revenue to deploy into socio-economic initiatives. 

New digital economic models

But enabling digital transactions is more than just increasing acceptance of digital payments.

Even as the coronavirus compressed years of digital change into weeks, now is an opportune moment for the public sector to build on the momentum from 2020 and create better-integrated user experiences.

This next wave of digital government can advance the UAE’s smart city story by breaking down government silos and unifying services with digital payments and user data.

Such an approach would enable different public sector entities to leverage common components and datasets to build new digital economic models.

Big data from payments can be turned into bigger and smarter data to help policymakers make decisions, particularly with regards to government fees, know-your-customer verification services (e-KYC) and budget planning.

Mapping government payments with citizen journeys can help with deeper understanding of payment flows and trends, and such insights can help drive optimal collections as well as tailor payment experiences to offer rewards, microfinance options and other benefits.

In addition to boosting efficiency and economic activity, a unified, interoperable digital payment ecosystem would also contribute towards increasing financial inclusion – much like the UAE’s Wages Protection System (WPS) brought a large unbanked demographic into the mainstream.

Homegrown advantage

As a homegrown success story, it’s an exciting time for Network International alongside other payments industry players, particularly as market dynamics change with the tech-savvy Gen Z population. 

The global digital economy contributes between 6 to 8 percent to global gross domestic product (GDP). 

In comparison, the UAE’s digital economy already contributes more than 4.3 percent to GDP (about AED100 billion or $27.2 billion), with expectations that this rate will increase. 

We’ve come a long way from the days of people queuing with cash. But better is still to come.

Nandan Mer is group CEO, Network International