Nkosi Moyo, Head of Global Payments at Crown Agents Bank outlines the most common challenges facing NGOs in delivering financial aid along the last mile, as well as identifying solutions to ensure reliable delivery of emergency payments.
Financial aid is critical for supporting communities and individuals during times of crisis. However, delivering this vital financial assistance to those in need is challenging for international NGOs.
The toughest element is generally the last mile – that is, the final movement of funds from the financial hub to the recipients. This issue is often exacerbated in hard-to-reach markets which lack communications and financial infrastructure.
Challenges in delivering last mile payments
Some of the most common challenges when delivering last mile payments to hard-to-reach markets include:
● Identity access – Payments are highly regulated, regardless of the amount being transferred and rely on KYC checks on beneficiaries as standard. This creates a hurdle in areas where beneficiaries don’t have access to formal identity verification tools. The World Bank predicts over one billion individuals around the globe lack access to compliant identity verification.
● Financial access and inclusion – Certain regions may lack access to traditional financial services. For example, individuals may not have access to a local branch to withdraw funds. They may also lack fit-for-purpose communications/networks infrastructure, possibly as a result of damage due to crises such as natural disasters or armed conflict, making it difficult to connect to the global banking system and receive payments.
● De-risking – Risk appetites amongst international banks have receded in recent years. They have begun moving away from hard-to-reach markets and those of a perceived higher level of risk, to focus on more reliable, those with a perceived lower level of risk, markets in developed economies. As a result, the vital infrastructure and financial services access they provide are leaving with them, making transactions even more difficult.
Amid times of crisis, these challenges are only exemplified, as the physical infrastructure used to support these payments and access to such markets, may be damaged, compromised or lost.
The role of fintechs in supporting crucial payment flows
Playing the important role of assisting developing markets to leapfrog infrastructure deficiencies and other challenges, fintech and paytech companies are a key stakeholder in the last-mile payments area. Solutions that we have seen that have a significant impact include:
● Mobile money – Digital payments tools allow anyone with a phone with internet connection to access financial services via mobile wallets. They offer frictionless, reliable settlement and can bypass the burden of insufficient infrastructure. Although, there is still a cultural aspect preventing widespread adoption – cash is culturally enshrined as the preferred means of payment in many regions.
● Prepaid cards – Prepaid cards can address many last mile payments challenges. Individuals’ biometric profiles are captured and issued to a card that is tied to a particular biometric environment. These prepaid cards are loaded with funds and act similarly to debit or credit cards. They can be used offline and provide flexibility and access to those underserved by traditional mediums. They also don’t require ID, nor do they need proof of address and can be of use in areas that lack sufficient communications infrastructure.
Technology for human aid
The complex and challenging environment of last-mile payments needs innovative and fresh solutions.
It’s critical that the wider financial industry comes together to form crucial partnerships, and expand alternative payments methods that can allow for secure and reliable settlement in challenging scenarios.