Sustainable aid payments: how fintech is coming to the aid of those in need

By Denise Johansson, Co-Founder and Co-CEO of Enfuce, one of Europe’s leading payment processors

As people’s finances take repeated poundings from turbulent market forces and rising living costs, aid organisations face even more challenges as donations are put on pause due to pressure on household budgets. Many economists forecast that money donated to charities will depreciate by 8.5% by the end of 2022 due to inflation.

In an uncertain world, many aid organisations are already struggling to get money to where it’s needed, because the world is changing faster than they can keep up with. Global instability, conflict and climate disasters are increasing, as shown by the ongoing desperate situation in South East Asia as a result of unprecedented monsoon floods this year. Globally, more than 80 million people have been displaced from their homes, and those figures came before the 2022 conflict in Ukraine claimed thousands of lives, and forced millions to flee to other countries.

Whether it’s through conflict or climate emergencies, without access to funds, and with the destruction of food supply lines, people’s lives depend on humanitarian assistance that can be delivered quickly and securely. The sad fact is that the amount of cash assistance in humanitarian operations has increased from $2 billion in 2015 to nearly $6 billion by 2019, and is set to rise even further due to recent events.

Against an already bleak backdrop, the current financial instability couldn’t come at a worse time for the people who depend on those donations to survive – while aid organisations also need to cut costs without affecting the flow of aid to those in need. Technical limitations, damaged infrastructure and high costs of using traditional disbursement systems can also restrict the ability of aid organisations to get money into people’s hands.

Financial aid needs quick, safe and paperless distribution

Even today, many global aid disbursement programmes are still using cash or paper vouchers – hardly efficient, or even sustainable with the current push towards meeting ESG initiatives. Simply put, cash and paper vouchers are not secure, either in distribution or receipt. First of all, the sheer logistics make it difficult to deliver, especially in hard-to-reach areas, where physical infrastructure has been severely damaged.

There is also a hugely personal element which many organisations overlook. Aid recipients may have a fear of appearing vulnerable, or have stigma about waiting in line for cash. When those in need are desperate to buy food, clothing or hygiene products, being denied because they don’t have formal identification credentials is a devastating indignity. When they have suffered so much already, it’s vital to give aid recipients dignity and privacy.

While it’s vital that aid programmes can identify and verify recipients, delays of a few weeks are common in disbursement programmes that don’t have integrated payment, data and ID capabilities.

Increasingly, schemes like the World Food Programme (WFP) are providing cash-based transfers via prepaid cards, which can be used to purchase essentials. Prepaid aid cards, branded with the familiar logos of payment schemes like Visa, look like any mainstream credit and debit cards, affording the recipient not only dignity, but also the opportunity to make purchases any card-accepting location, and empower them with financial inclusion.

But as plastic cards move into digital wallets, fintech solutions are making it possible for aid disbursement programmes to give even more flexibility, efficiency and dignity to aid recipients – and solving the identity, distribution, cost and sustainability challenges all at the same time.

It’s been predicted that almost half of the world’s population will be users of digital wallets by the end of 2022, and will comprise 52.5% of global transaction value by 2025. People now have the convenience of using mobile apps to receive and send money, and to register for a growing number of services that can help to improve their daily lives.

Fintech solutions can solve inefficient aid payment processes

Cloud-based aid distribution, facilitated by today’s innovative fintech offerings, can help people in the most urgent need, safely and speedily, by sending aid funds straight to the recipient’s phone – instantly, securely and ensuring that they can become financially included.

Aid disbursement programmes delivered through digital wallets can reach marginalised or remote populations where the only tool aid recipients have is a mobile phone. Funds can be loaded into wallets over-the-air, spending controls can be implemented by aid organisations remotely, and recipients can receive notifications to keep them updated.

Aid organisations can speed up recipient identification and registration, and ensure fast distribution at scale in challenging operating environments, such as remote rural locations or during public health emergencies. Technology also makes it possible to have more accurate, near real-time monitoring enabling aid organisations to adjust their programmes if necessary.

The need for scalability is mission-critical. Unforeseen events, climate disasters, outbreaks of unrest or violence can intensify without warning. The longer these situations continue, more people are put at risk. With cloud-based card and digital wallet platforms, large-scale transfers can be made in real-time, without compromising on security, because recipients have already been verified.

As more recipients are enrolled in such programmes, and as transaction volumes rise, cloud-based platforms can scale effortlessly to cope with increased usage, and can also add new services (such as contact channel notifications, transaction alerts, remittance functions and so on) remotely and effortlessly.

Financial inclusion is aided by digital ID

Where aid recipients might not have official ID documents or records, it’s vital that these people aren’t excluded from receiving aid. Here, digital or card platforms have the potential to enable recipients to be registered and verified with biometrics.

Although technology can create opportunities to give more people financial relief, there are risks and operational challenges to overcome. Aid recipients may be concerned about their privacy, and how their personal data will be stored and used. The dangers of personal data falling into the ‘wrong hands’ in unstable areas could be life-threatening. It’s crucial that any payments or aid programme puts people-centred security at the core.

Any card or mobile-based disbursement programme needs to comply with data protection regulations like GDPR, anti-money laundering laws and know-your-customer requirements, and payment industry mandates like PCI DSS. This includes ensuring recipients have a choice in relation to third parties that have access to their data, such as financial service providers.

Humanitarian aid delivered via prepaid cards and digital wallets are proving to be more important now than ever, and I have witnessed with pride how Enfuce’s experts have created a payment card from scratch in less than eight weeks, rather than the four months common with other programmes.

Enfuce’s First Aid card, launched in May 2022, has been designed to help aid organisations mass distribute funds immediately and safely – and in a way that’s fully compliant with regulatory demands. This is a huge help to aid organisations that need to get funds to people quickly and securely, and can give organisations full control of how funds are distributed and spent. This includes issuing cards and any associated mobile app branded with the organisation’s name, and enabling the organisation to decide how much money is loaded on the card and where it can be used.

Mobile and digital technologies can transform humanitarian aid delivery, improve operational speed and security, promote financial inclusion, and most importantly, give aid recipients the means, and dignity, they need to begin rebuilding their lives. Aid organisations and payment solution partners should explore innovations not for the sake of using new tech, but to benefits people’s lives in practical and meaningful ways.