Public-Private Partnerships Bring Government Payments Into the Digital Age

“Citizens expect that their government is an efficient steward of its financial resources; provides financial information that is accurate; and offers financial interactions that are modern, seamless, inclusive and secure.” — Federal Financial Management Vision, 2022

When we think of efficiency and cutting-edge technologies, government payments may be the farthest thing from our minds.

Maybe you read the above quote and chuckled a bit, waiting for your tax refund to come in the mail — or perhaps hit your bank account, weeks or months after having filed your return. Through ACH, of course.

But the scale and breadth of these payments are staggering when it comes to those financial interactions — the disbursements from the Treasury Department, the payments made to government agencies by families and individuals for parking tickets, legal fees, child support and so on.

During the pandemic, there were hundreds of millions of payments sent to hundreds of millions of recipients, representing trillions of dollars. Prepaid cards were a staple and supplemented direct deposit and paper checks, especially for people who lived and worked outside traditional banking channels.

Millions of Payments and Billions of Dollars 

Those roughly 500 million payments and about $829 billion in aid were all sent in a very short period of time.

Ronda Kent, senior account executive at Visa and former U.S. federal disbursing officer, and Eva Robinson, managing director at JPMorgan Chase, told PYMNTS’ Karen Webster that the great digital shift has created less room for error among government agencies.

Lives depend on the economic relief disbursed at the federal, state and local levels.

“Governments do have a desire to innovate, and they’re looking for ideas,” said Kent.

Indeed, the Bureau of the Fiscal Service has set an ambitious goal (among many) of delivering 99% of eligible Treasury-disbursed payments electronically by 2030. The Biden Administration, through executive order, has recently renewed its focus on improving the overall customer/user experience for those making or receiving payments to or from the Federal governments.

Research from Forrester shows that satisfaction with government payments rates at about 63 out of 100 — no real showstopper, but then again, this is the highest level in years.

Kent and Robinson said that collaborative private/public efforts can be complemented by nonprofits, which Kent noted have a good understanding of the needs of their constituents.

It’s imperative, said Kent, to make sure that the delivery is as important to the experience as anything else.

And against that backdrop, she said, “we have to make it our goal to reduce the use of paper checks.”

Modernizing government payments is about more than just cutting down on the paper chase. Friction occurs in multiple places.

The key task at hand, said Robinson, is to move away from legacy systems and embrace technology that will help get those payments out the door — but also help maintain the integrity around those payments.

The agencies are tasked with meeting statutory requirements, ensuring that recipients are not left in compromising positions.

Kent noted that Visa has seen many of the requests for proposals from state governments looking for payment services.

“We’re starting to see an uptick in proposals that are looking for innovation,” said Kent. And, increasingly, agencies are expressing interest in the potential of FedNow, Visa Direct and other innovations that will go well beyond simply asking constituents to find routing numbers listed on their checks.

There’s at least some cue that the agencies can take from the consumers’ own experiences within a commercial environment, said Robinson. An increasing percentage of the population is becoming digitally savvy, and Internet access is expanding throughout the nation.

“This establishes the standards by which they measure their expectations for their government interactions,” said Robinson. Agencies such as the Social Security Administration have been instituting scorecards to measure demand and performance.

Visa’s own research, said Kent, found that 83% of respondents who received funds in 2020 were satisfied with their payment methods (90% of direct deposit recipients and 70% of prepaid card recipients said the same). In one interesting finding, 75% of paper check recipients in the company’s survey of state and government paper check recipients said that they described themselves as either unbanked or underbanked.

As Kent stated: “Understanding the differences between your own assumptions of what constituents need versus what they actually need is very important. The customer service demands are very high.”

Dig down a bit deeper, and those relatively high satisfaction levels hint at just how hard it is to change the hearts and minds of the general populace.

Robinson and Kent stated that, in order to spur a wider embrace of digitization and electronic payments, education and communication are key, especially in clearly depicting the value in switching from, say, paper checks to instant disbursements down the line.

“Breaking the inertia has to come from the top,” said Robinson. She noted that the recent Biden executive order represents a signal that the digital movement is important.

“It’s a huge, collaborative effort,” she said. Kent noted, too, that there are incentives for the government to get electronic payments more fully in the field, chiefly through efficiencies and shorter supply chains that come with eliminating the paper.

Looking ahead, Kent and Robinson noted that the changing demographics are setting the stage for electronic disbursements, including digital wallets. More government agencies are adopting the portals (such as with healthcare) and omnichannel approaches geared toward giving consumers choice. Along the way, the government will have to keep battling fraudsters, chiefly through education. As Kent noted, “we’ve been warning people for years the government does not send you emails.”

By better integrating services and payments, said Kent, payments no longer need be an isolated event, but can be part of the entire journey of applying for benefits.

As Kent said, of the great digital shift that looms for government payments: “It will stick, though it may take time. And it always takes a little time when it comes to governments.”