The Future of Digital Payments for Governments

Today, you would be hard-pressed to find a retailer that did not offer a form of digital payment. The digital payments sector is well-established and expected to explode in the coming years. A study from Juniper Research has found that the number of unique digital wallet users will exceed 4.4 billion globally in 2025, rising from 2.6 billion in 2020. Not only is this the customer expectation, but it also helps the merchant provide and track customer purchasing patterns and can help mitigate the risk of fraud and cyberattacks. It’s a win-win.

On the other hand, public entities have been slower on the uptake. Between concerns with personnel resources, budget, compliance, and cybersecurity, governments, for example, have historically been skeptical of the value that digital payment options would bring to their municipality.

 

Digital Payment Solutions

Fast forward to this year, government leaders are more excited to explore digital payment options. Most cities have either begun to dip their toe in the digital payments waters or have dived headfirst and are exploring options for expansion. Let’s take a closer look at the roadblocks to adoption and what’s at stake for elected officials and constituents.

For a while, concerns about credit card fees and older processing infrastructure might have slowed a government’s embrace of digital payment options. But that landscape is changing fast. Increased constituent demand for a more seamless online experience and capable tech stacks helps government agencies accelerate the move toward digital payments.

Digital payments also give governments more data that can help them form a holistic view of all customer transactions and enable them to create a more seamless experience. This, e.g., means that constituents can log in to one portal and see all due payments. They can also choose to opt-in for automated text reminders about payment dates.

While digital payments might promise a seamless experience and a path to modernization, there is one obstacle government agencies need to overcome: security of personal information.

 

Overcoming Security Issues With Digital Government Payments

Governments hold some of the country’s most sensitive data and it’s easily their top priority to ensure this information is kept safe. Many local governments have been cautious about adopting digital payment options due to concerns about cybersecurity and damaging data leaks. Despite these challenges, government agencies must find a solution.

Most importantly, they need to pay attention to security to:

• Ensure adherence to compliance measures. Payment Card Industry (PCI) and National Automated Clearing House Association (NACHA) standards dictate how businesses collect, store, and work with sensitive constituent information. Any digital payment solution will have to check off these boxes.
• Uphold the public’s trust. Constituent confidence is directly related to the feeling of safety when making digital payment transactions. Attention to security will fortify defenses and help to develop and retain constituents’ confidence.

To navigate this concern with caution, government entities should register a trusted payments partner who can protect constituent data while ensuring seamless digital payment offerings.

Fortunately, there are many technologies available to prevent hacks and provide secure payments. Governments should ensure the digital solutions they adopt include cybersecurity protections like end-to-end encryption, multifactor authentication, and tokenization.

From there, they’d also need to establish clear lines of communication with constituents to help them understand the measures in place and the security of their data. Not only does this bolster constituent trust, but two-way communication can allow constituents to flag phishing schemes and scams they receive from fraudsters. Scammers that pose as government entities to gather payments are unfortunately common. With an open line of communication and these security must-haves in mind, governments can act against fraudsters and stop them from doing more damage.

 

Resource Allocation: Digital Payments Pay Off

Resource allocation is a significant concern for most government agencies. The adoption of cutting-edge technologies to prevent hacks may be an obvious expense for a large e-commerce brand, but government purchases are under more extreme scrutiny and necessitate a longer approval process. However, there are clear benefits to the adoption of digital payments. In many cases, the technology, e.g., pays for itself in the long term.

With more digital integrations, like a user-friendly customer portal and automated text messages to remind residents of upcoming payments, constituents are more likely to pay their bills on time. As a result, your town can limit resident frustration around late fee charges and save resources on resolving complaints and issuing late notices.

The pandemic made digital and touchless experiences vital for immunocompromised residents and critical for the health of all. It’s important to note, however, that maintaining traditional payment methods is also crucial to accommodating all demographics and needs. With more tech-savvy consumers and a younger, digitally fluent population, the option of digital payments helps create a more seamless and positive experience for more people.

The increased digitalization also lessens the need for personnel to manage payments, allowing governments to reallocate staff to more strategic and impactful departments and missions. What’s more, the move to digital means that tracking constituent payment and behavior will become significantly easier. Government leaders can even leverage the data to further improve the constituent experience and bridge a closer and more fluid connection with residents.

All said, elected officials have a real motive to meet this demand from constituents, and the reasons for government entities to hesitate to adopt the latest and greatest in digital payments solutions are quickly vaporizing. The ability to implement and carefully manage these solutions will be important to maintain constituent goodwill, generate revenue, and provide greater accessibility now and into the future.