Confronted with deepening socioeconomic divisions amid the Covid-19 pandemic, some Southeast Asian officials have recognized a “once-in-a-century” opportunity to digitize public assistance in hopes of fast-tracking emergency relief checks. The push for digital and financial inclusion in the current crisis could be good news for the un- and under-banked in one of the world’s most digitally connected regions, though data governance regimes will need to innovate alongside emerging technologies.
Battling back Southeast Asia’s largest outbreaks, the Philippines and Indonesia have both scaled up cashless payment initiatives in recent months. The coronavirus’s high transmissibility and the rapid onset of its economic effects have presented a logistical challenge to conventional channels of welfare distribution. Under-registration of workers and bureaucratic fiascos have caused confusion over whether wage subsidies have reached their intended recipients.
In the Philippines, just one-eighth of low-income families received earmarked aid from the Department of Social Welfare and Development (DSWD) as of mid-July. Dozens of local officials have been accused of siphoning money off from the multimillion-dollar cash distribution scheme for themselves.
Meanwhile, in Indonesia, Finance Minister Sri Mulyani has blamed red tape and a lack of data on citizens for slow aid disbursement. As of late August, just 20 percent of the country’s stimulus budget and 7 percent of small business loan relief and subsidies had been spent.
After fumbling the initial rollout of wage subsidies for informal workers, the Philippine government announced partnerships with digital payment firms PayMaya and GCash. Despite major delays, the DSWD was able to reach nearly all targeted beneficiaries in the second tranche of household subsidies through text messages.
The financial technology arms of traditional banks have also teamed up with prominent Southeast Asian e-commerce platform Lazada to support micro-, small-, and medium-sized enterprises through a new program.
Reviving the Philippine economy—in which up to 40 percent of the workforce is unregistered—will require expanding access to credit and loan guarantees for informal firms as well. For its part, the Indonesian government is working with e-wallet platform DANA to deliver coronavirus cash assistance, having already signed contracts with digital payment firms Gopay, LinkAja, and OVO, e-commerce players Bukalapak and Tokopedia, and education technology companies Mau Belajar Apa, Pintaria, Pijar Mahir, and Sekolahmu. With eyes trained on improving digital literacy, Indonesian communication and information minister Johnny G. Plate announced the ministry will accelerate five priority programs to expand 4G coverage nationwide within the next two years.
Both expeditious and contactless, electronic cash transfers are uniquely positioned for success in Southeast Asia where the e-payment market already reaches more than 150 million registered users in the Philippines, Indonesia, Malaysia, Myanmar, Thailand, and Vietnam.
A Google, Temasek, and Bain & Company study conducted last year estimates the market is poised to exceed $1 trillion in transaction value by 2025. In the wake of the pandemic, this projection could be conservative.
In the Philippines, 6 of the top 10 fastest growing financial technology companies are involved in the payments space. Its central bank has expressed a desire for the sector to play a key role in shaping the post-pandemic economy and to host the government’s direct lending programs. The regulator wants at least 70 percent of all adults in the Philippines to adopt digital transaction accounts by 2023.
According to the latest survey by the National Council for Financial Inclusion and Kantar, which was conducted in 2018, most Indonesians have no experience with e-money. But smartphone ownership and internet penetration more generally are good measures for potential access to digital banking.
Not only are smartphone skill levels high among the public; Indonesia’s online population is expanding at the fourth-highest rate in the world. Nevertheless, public trust, access to the unbanked, and reliable digital regulatory frameworks will be key to fulfilling Southeast Asia’s financial technology potential. Over 70 percent of the Philippines’ adult population is unbanked, but the government and telecommunication companies can recruit users where technology platforms otherwise cannot. Starting this October, the Philippine Statistics Authority will prioritize registering unbanked low-income households in PhilSys, a new National ID system aimed at facilitating social assistance and access to banking services.
However, information technology and human rights experts are concerned that Covid-19’s time and budgetary pressures will lead bureaucrats to cut corners on cybersecurity safeguards. The PhilSys project will rely on invasive biometric data such as fingerprints and iris scans, raising the risk of undue surveillance over marginalized populations with low digital literacy.
The Philippines’ data protection infrastructure has developed significantly after the introduction of the 2012 Data Privacy Act which somewhat resembles the European Union’s General Data Protection Regulation. Indonesia, however, continues to delay parliamentary talks on its own legislation—a process that has dragged on since 2014. Scaling up and digitizing social assistance programs equitably will not only require guardrails against exploitative emerging technologies but will also demand closing the digital divide between men and women.
Women everywhere use and access digital technology less often than men. As the pandemic disproportionately threatens to destroy the livelihoods of women—particularly in the informal sector—taking a gendered approach to digital and financial inclusion in a post-pandemic era will be essential.
For now, cash is king in the Philippines and Indonesia. But while the rest of Southeast Asia deals with relatively small coronavirus outbreaks, the two most populous countries are fighting to control runaway infection rates. Even after the disease subsides, both governments will need to restructure welfare to be more efficient and to offer more coverage for the long haul. Laying the foundations of adequate data privacy regimes and setting all-inclusive digital literacy targets would be promising first steps.