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Five government-backed digital payment initiatives

As with many other aspects of everyday life, digital payments are increasingly being adopted by government organisations in an effort to make transactions with citizen and businesses simpler and quicker than ever before.

Some government organisations are also developing digital payment initiatives in an effort to boost the overall uptake in national and international economies.

There are numerous examples of government and public sector organisations making use of digital payments. Here are five interesting case studies:


European real-time payments

The European Central Bank (ECB) rolled out the first pan-eurozone instant payment service last November, with Spain’s CaixaBank making the first payment to France's Natixis. The service is a challenge to popular digital wallets from US players Google, Apple and Amazon, as well as China's Alibaba and Tencent, which offer contactless, super-fast online payments.

The TARGET Instant Payment Settlement (TIPS) service allows consumers and businesses across the 19 countries that make up the euro area to transfer money in seconds, without the delays associated with real-world transactions. It’s a single, borderless solution that can be accessed via smartphones, PCs and in-store payment points.

Ahead of the launch, ECB head of market infrastructure and payments Marc Bayle de Jesse said banks in the eurozone are under pressure, and TIPs will provide a way for them to compete with digital players.

The ECB said TIPS will initially be open to any person, bank or business in the eurozone but could be expanded to other countries and currencies in the future.


UAE integrated payment system

The UAE government is working towards a new integrated digital payment system, with the Ministry of Finance meeting with various senior local and federal officials to review the strategic plan for the new system, which is scheduled for implementation in 2020.

The system is intended to build on the success of the eDirham system, which facilitates electronic payment and collection of revenue for both government and non-government, and is now in its second generation after initially launching in 2001.

The system currently in development will be supported by all national banks in the UAE as part of a larger effort to protect the country’s financial system and ensure the sustainability of fees and service revenues for the federal government.


Sweden’s e-krona

Sweden’s central bank is working on a pilot project to develop an electronic currency as part of efforts to develop secure payment systems to support a cashless economy. The initial focus will be to develop an e-krona that “constitutes a prepaid value without interest and with traceable transactions”, according to the bank’s second electronic currency review.

The pilot project will investigate how to create an e-krona that can be loaded on to an app or a card to be used for payments. The bank will also examine what legal changes will be needed to introduce an e-krona that is also connected to an account at the central bank.

Sweden is well on the way to becoming a cashless economy: Credit and debit cards are now by far the most common mode of payment while mobile payments have become as common as cash. In 2018, only 13 per cent of Swedes paid for their most recent purchase in cash, down from 39 per cent in 2010.


EU-backed platform to tackle financial exclusion

The EU has funded a digital platform to provide a secure and instant method of payment that will enable the unbanked population to participate in the global financial economy.

Based on Poland, the Billon project addresses the limitations of existing systems, which are often centralised and have high maintenance costs that are passed onto customers as bank fees. The platform will use a blockchain-based instant pay-out system and distributed ledger technology to create free current accounts that are able to make low cost payments with real currencies.


E-money salary payments in Japan

The Japanese government is reportedly considering allowing firms to pay salaries in electronic money as the country prepares to open up to more foreign blue-collar workers in April.

These workers are expected to face hurdles in opening bank accounts as they lack domestic assets and transaction histories. In addition to e-money that can be added to prepaid payment cards and smartphones, deposits to prepaid cards and smartphone apps will be considered. Cryptocurrencies are likely to be excluded, however.

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Five government-backed digital payment initiatives
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