Secure Digital Payments: Improving Public Welfare Programs KARTHIK MURALIDHARAN W ITH PAUL N IEHAUS & S A N D I P S U K H TA N K A R HIGH COSTS OF DELIVERING GOVERNMENT TRANSFERS S E C U R E PAY M E N T S A S S TAT E C A PA C I T Y • S EVERAL G ROUNDS FOR O PTIMISM A S WELL AS S KEPTICISM Optimism – – – – • Reduce leakage; improve payment experience Expand feasible set of anti-poverty policies Leapfrog literacy constraints to Financial Inclusion Will be a “game changer” for governance (former FM) Skepticism – – – – – Complex implementation challenges Subversion by vested interests Exclusion errors Reduced incentives for officials to implement programs Cost effectiveness based on untested assumptions THE AP SMARTCARD PROGRAM A N A M B I T I O U S P R O J E C T T H AT R E Q U I R E D M A N Y PA R T N E R S T O S U C C E E D J-PAL Global, CEGA, Omidyar Network, Unique Identification Authority of India (UIDAI), Government of Andhra Pradesh R O L L O U T WAS R AN D O M I Z E D AT S U B - D I S T R I C T L EVEL IN 8 D ISTRICTS WITH 2 0 MILLION PEOPLE A S S E S S I N G I M P L E M E N TAT I O N • GoAP achieved 50-60% coverage in rolling out carded payments over 2 years • Some relevant US Comparisons • – Replacing checks with EBT in Social Security took 15 years – Healthcare.gov Evaluation based on “as is” evaluation under realworld implementation (and corresponding challenges) – Several ‘process’ insights shared with Govt. of India SIGNIFICANT POSITIVE PROGRAM I M PA C T S O N S E V E R A L D I M E N S I O N S OVERWHELMING SUPPORT FOR THE PROGRAM SSP NREGA New system 93% New system 91% Old system 3% Old system 3% Neutral 6% Neutral 4% I M PA C T • • • Govt. of AP – Almost scrapped program in mid 2013 – Results presented by PS & CS to CM to continue program Govt. of India – Some uncertainty about program continuation with new govt. – Results presented to PM/FM multiple times Broader Impact – Several public lectures in India (chaired by top officials) – Op-eds by us as well as others – Results used widely by other stakeholders in FI/DBT I GAHL LC O T S CO LIVERING O VH ER I MSPA TFODFEA B E TGTOEVRE-RI M P LEENM DS N NM T ETNRTAEN F ERRE SG S ? SIGNIFICANT POSITIVE PROGRAM I M PA C T S O N T H E R U R A L E C O N O M Y T R A N S F O R M I N G T H E W E L FA R E S TAT E ? • Secure payments allow two classes of interventions – – • Most policy-relevant area may be food security – – • Implement existing policies better (AP Smartcards) Replace distortionary subsidies w/ income transfers (food, energy) Default of PDS plagued with leakage; can cash transfers do better? Both beneficiary preferences & nutrition impacts need to be determined Our work in Bihar and (now) Rajasthan directly speaks to this – – – Offer randomly-selected HH the option of exchanging in-kind entitlements for an experimentally varied cash transfer In pilots - ~80% of HH in Bihar prefer cash; take-up rate is ~60% at even half the value of the subsidy! Nutrition impacts will be seen in the full study Powerful way of politically de-risking the process of policy experimentation S U M M A RY • Secure payments can have transformative impact on the delivery of anti-poverty programs in developing countries – • But, implementation details really matter Theoretically-grounded rigorous empirical evaluation (and iterative feedback into design and implementation) can be a critical complement to the technology itself – – – – – – Rapid feedback on implementation, impact, and voter preferences Insulate against policy-making by anecdote Grounds marketing hype in reality (OLPC, Micro-finance) Better design can mitigate against heterogeneity Growing policy-maker demand for evidence at highest levels Exciting times to be innovating and evaluating in this space