How Digital Technology Can Deliver Government Services More Cost Effectively

From the issuing of ID cards and permits, to the dispensing of subsidies and the collection of taxes, Latin American and Caribbean governments manage between five and 20 transactional services per person each year. These services are often slow and cumbersome, requiring citizens to make multiple trips to government offices and using up large amounts of their time. As a result, government services have become a focal point of corruption, as citizens try to short circuit the painstaking process with bribes. Indeed, according to Transparency International, a non-government organization dedicated to good government, a third of Latin Americans paid a bribe to access a public service in 2017.

Digitalization can help ease these burdens, reduce costs, and promote cleaner government. Digital public services are on average 74% faster than their in-person equivalents, reducing incentives for bribery, and 95% cheaper for public institutions to deliver.

Digitalization Can Improve Services While Reducing Costs

These and other benefits can be seen clearly in a recent report in which we analyze three cases of how digitalization can improve service delivery in Peru, Chile, El Salvador and Jamaica while generating cost savings for their societies. Our specific numerical figures come from the case of Peru.

Consider the application of biometric technology, which allows governments to use physical characteristics such as fingerprints or iris scans to identify citizens. This digital form of authentication can reduce waiting times at government offices, reduce the paperwork involved in a transaction, and increase the accuracy of transactions like transfer payments. In its most sophisticated form, it can even eliminate the need to go to a government office.

A study in India on the use of biometric systems to identify recipients of subsidies found that the use of smartcards to deliver two large social programs eventually enabled beneficiaries to collect their payments 20% faster. It also reduced corruption by generating more accountability for those that distribute the subsidies while eliminating payments to ineligible people or to fictitious beneficiaries. A cost-benefit analysis found that each $1 dollar invested generated a return to society of $3.9, and would lead to a net present value of $7 million in Peru if there was a one-year, nationwide rollout for all those eligible. There is a caveat, however. Implementation of such systems is complex, and costs may vary depending on the context and coordination across the institutions implementing them.

Raising Awareness of Government Services

The first step in any citizen-to-government transaction is making citizens aware that the government service exists and that they have an obligation to interact with it. WhatsApp messages, phone calls, and other tools can be an effective way to promote this awareness and increase citizen take-up. In a recent study, for example, three IDB researchers teamed up with the Electoral Tribunal in Panama to send text messages to a randomly selected group of citizens whose ID cards were set to expire between January and August 2020. The messages reminded the citizens of the cards’ expiration dates, and increased the likelihood of ID renewal from 59% to 72% and timely renewal from 25% to 39%. Every dollar invested to set up this system generated a potential return of $2.1.

The same research also found that including a link in the text messages to begin the ID renewal process online also generated a significant increase in the probability of renewal. But this increase was lower than that for people who just received a text message. The problem was that a poorly designed platform required users to upload a photo of themselves, while prohibiting “selfies.”. This, in turn, caused many users to abandon the process mid-way. Had that problem been overcome, the report suggests, the platform could have generated a return to society of $3.1 for every dollar invested.

A Self-Reinforcing Dynamic for Services Through Technology

Such difficulties may only be the teething problems involved in employing relatively new systems: in prioritizing and implementing those technologies that work best and are most cost-effective. As more transactions come online with common and universally friendly interfaces, citizens may eventually turn to the digital option by default, rather than seeking non-essential in-person encounters when interacting with government services. Both governments and citizens would then reap ever greater returns on the overall investment. They would achieve solid fiscal and economic gains, as well as greater transparency, more accountability, and less corruption