Digital Payment Mechanisms: A Guide to Social Protection Projects During Pandemics

In Latin America and the Caribbean, the financial inclusion rates of the population are growing, but they are still low compared to the advanced economies. The present health crisis, caused by COVID 19, has economic effects since many people stopped receiving income as a consequence of the social distancing measures adopted by the countries of the region. One of the measures being taken to mitigate these effects is the delivery of resource transfers, either in cash or through direct deposit in bank accounts. However, the congregation of people at payment points should be reduced, so measures should be taken to avoid in-person payments at bank branches.

In this guide, we propose a series of inputs that aim to facilitate the identification of the most appropriate digital payment mechanism for the context of each intervention and support the preparation of projects that include digital payment mechanisms. For this purpose, i) a brief review of the empirical literature on digital payments is proposed, ii) a presentation of the different types of digital payment mechanisms, with their characteristics, similarities and differences, iii) a typology of countries in the region that helps to think about the most suitable payment alternative and iv) a series of key considerations to take into account to determine the most appropriate digital payment mechanism for the project and context and select a provider.

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