Global, June, 09 2015 -
Navigating the challenges of e-transfers
It seems like each week, a new natural or man-made disaster is dominating global headlines. And it’s not your imagination: it’s getting worse. One common tool for responding humanitarian agencies is cash transfers, which empower recipients to purchase what they most need while supporting local markets. And though these agencies used to rely on handing out cash in envelopes, many are now exploring new, digital options that could get vital funds to recipients more quickly and securely.
But according to Sara Murray, manager of the E-Transfer Learning Action Network (ELAN), “With a multitude of new electronic cash transfer (e-transfer) products available — like mobile money and electronic remittances — the decision about how to best deliver cash can get pretty complicated.” The ELAN, created by Mercy Corps with support from the MasterCard Center for Inclusive Growth, aims to provide some clarity. It is guided by an advisory group that includes the International Rescue Committee (IRC), the Norwegian Refugee Council (NRC), Oxfam, the Cash Learning Partnership (CaLP) and MasterCard. As Murray describes it, the program was created to help humanitarians navigate the rapidly changing landscape of payment technologies, and to provide a space for the private sector to understand these agencies’ needs and respond with appropriate products and services.
Murray and Rosa Akbari, Technical Adviser at the IRC, spoke with NextBillion Financial Innovation about the challenges and opportunities of digital cash transfers, and how they can benefit recipients, humanitarian organizations and the private sector.
James Militzer: What are some of the ways humanitarian agencies and the private sector have failed to understand each other's needs in humanitarian aid situations, and how could better mutual understanding help in terms of cash transfers?
Sara Murray: Emergency responses require quick decision-making and contracting. Humanitarian response teams are often setting up partnerships with e-transfer providers under tight timeframes and with limited information. We sometimes lack information about available products, and may not know the right questions to ask about service provider capacity. The private sector may still be reeling from catastrophe and not understand how humanitarian programs will differ from their usual clients and business models.
This situation can (and often does) result in delays and bumpy deployments. For example: an e-transfer provider may not be prepared for beneficiaries who can’t enter PIN numbers on their own. This can overwhelm their customer support hotlines and slow down their agents, leading to delays for both normal customers and aid recipients. Or humanitarian agencies may not realize that SIM cards distributed to beneficiaries can be deactivated if not used for a month or two, leading to deactivations of cards (and implementation problems). Better understanding of the realities on both sides could help us identify potential constraints and prepare for them before they become stumbling blocks to getting aid to people who need it.
JM: Describe the business case for private sector partners' participation in humanitarian cash transfer initiatives - are there benefits that will continue beyond the immediate aid delivery period?
SM: The private sector will ultimately have to determine the business case, but humanitarian cash transfers (and demand for appropriate transfer products) are growing exponentially. The World Food Program (WFP)’s numbers are interesting to look at as one of the largest agencies in this space. Their cash and voucher program grew from US $10 million in 2009 to US $837 million in 2013 and they transferred cash or vouchers to almost 9 million people in 2014. Other humanitarian actors, including the Red Cross movement, IRC, Oxfam, Mercy Corps and Action Against Hunger (to name a few) are also growing their cash programs and seeking new digital cash and voucher products.
I know there is tremendous appetite for new solutions. For example, WFP just released an interesting Request For Information, for electronic transfer solutions that are deployable globally, implying a continued interest and potential increase in e-transfer use. Beyond the delivery of immediate assistance, humanitarian cash transfers may link recipients to new financial services and may serve as an opportunity for financial service providers to grow their client base.
Rosa Akbari: Obviously in areas where private sector platforms can link into existing financial institutions’, then there's potential to sustain services. The very large hurdle I see, however, is that none of the cash transfer platforms I've seen promoted to NGOs are open source. The ultimate hope for any of this tech to live beyond the lifespan of a program is by having the ability to easily transition ownership over to local organizations, government ministries, etc. From an organizational standpoint, the pricing models of these systems do not encourage enterprise-level use. While functionally, they can support multi-country/program use, the cost structures are still project-based.
JM: What are the main advantages/disadvantages your research has found for cash, e-vouchers and mobile money solutions to humanitarian aid? Did a clear winner emerge, based on this research, as the best choice of the three?
SM: Not yet – I think all three will continue to have a valid role in humanitarian responses in the coming years. As always context – and program objectives – are key. Many agencies, including Mercy Corps, prefer to deliver cash (or e-cash) whenever possible, since it affords the most flexibility to recipients. But e-vouchers are playing an important role where purchases are restricted to meet program objectives, or where cash is not possible due to security, market or infrastructure constraints.
RA: Programmatically, vouchers seem to be the last resort – though donor/contextual constraints sometimes force it, I think everyone would much rather provide real cash in local currency (be it via mobile money, pre-paid ATM cards, or otherwise). Operationally, vouchers are the easiest to stand up (I think) as they’re closed loop – i.e.: nearly all operations outside of the local merchant network (where the vouchers can be spent) are self-contained to the implementing organization. There is, for example, no negotiation with a bank or follow-up with a mobile money provider in case service is down. Mobile money cannot be the default, but it’s always an option to explore if it exists. However, its reach is still urban-focused and despite the buzz, I don’t think it's as successful or prolific as I once thought. So after doing cursory feasibility assessments, mobile money has been consistently taken off the table as an option in many places we've worked, due to stretched capacity during a crisis, both on our side and/or money agents’ side.
When it comes to mobile money, I'm now more interested in countries that have passed the 'over-the-counter' hurdle (i.e.: those where mobile money users store and use electronic value on their phones, rather than cashing it out immediately through agents). These countries are few and far between, from what I can tell, so issues of liquidity, agent access, etc. are still very present. The more likely people are to keep cash digital, the more value I see in pushing mobile money. Otherwise, in a very simplified comparison – mobile money becomes like SMS-vouchers, with the risk of the product (i.e.: cash) not being in stock.
As for cash – in envelopes at mass scale – it is difficult and unsafe, though still sometimes the prevailing transfer method. Using informal value-transfer systems like hawalas is an interesting agent model, akin to mobile ATMs in a way. The ideal case for e-transfers— where technology is vetted, streamlined, and linked to existing financial providers — is prepaid ATM cards. We obviously don’t have the luxury of that as an option in most places we work, though.
JM: Are there other problems revealed in your research that the ELAN will address?
SM: Absolutely. As discussed in the Cheaper, Faster Better? study on new technologies in cash transfers in the Democratic Republic of Congo (DRC), we want to help humanitarians make more informed decisions about transfer mechanisms. There is a lot of learning that is happening at individual agency levels, and we are trying to aggregate this and share it for the benefit of the wider community. We’re doing this by sharing case studies and hosting trade fairs and webinars (for example, this one on prepaid cards, presented by the Red Cross movement). We will also soon be releasing an “inspiration brief” for the private sector that highlights priority areas for product development in e-transfer programming.
We are also focusing on improving understanding around using cash transfers as a pathway to financial inclusion – another issue highlighted in the DRC study. The ELAN will soon release a “Financial Services Primer for Humanitarians” that includes reflections from six humanitarian and payments sector agencies.
JM: How do you think humanitarian cash transfers will be different 10 years from now? Will they be mostly digital? Will mobile money approaches have overcome the challenges you highlight?
SM: With the rate of investment and innovation in this sector, I would be surprised if we are still delivering physical cash 10 years from now. I’m sure that mobile money will grow, but we may also see significant advancements in card-based models and hybrids.
RA: For mobile money, humanitarian transfers will be different only if infrastructural developments are made to support the digital ecosystem prior to crisis – which I think will have to be government or at least regionally led. Because cash programming is still considered relatively new, we are so focused on the point that “cash is good” and “how can we deliver cash using technology.” There seems to be a gap in thought, however, in that we presume cash transfer technology is always going to ease implementation, lower cost, etc. Technology can have a tendency to overshadow basic logic around sound programme design, though. (This is not unique to cash programmes, but of most programmes exploring new integrations of technology.) So ideally in 10 years, we’ll better understand the impact of cash, the protection issues that arise around cash transfers, etc. – essentially, more around the factors that inform quality cash transfer programme implementation, not just on the technology that supports the transfer piece.
As a sector, I’d also hope in 10 years time our decision-making capacity around cash transfer methods is inclusive of technology, but not misguided by it. Field coordinators having to partner with banks, technology firms, mobile network operators — this is all fairly new territory. The more experience we have working with private sector partners (and the myriad cash transfer products they already offer), the better equipped we’ll be to improve the efficiency and effectiveness of cash programmes.