With unemployment soaring and businesses struggling to block, millions of Americans are relying on the additional benefit payments under the $ 2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act. In view of the impending shutdown of utilities and the insecurity of housing and food, an alarming proportion is still waiting for their economic reviews.
Delays in the issuing of checks, payments to incorrect or non-existent bank accounts, omissions of the additional USD 500 per child and similar errors are the result of technical and human shortcomings in the distribution of the aid that the Internal Revenue Service uses. especially outdated software systems and inaccurate data.
The United States urgently needs to learn from innovations elsewhere. The United Nations World Food Program, for example, urgently distributes vouchers and money transfers to over 100,000 Syrian refugees in Jordan via the blockchain-based building blocks platform. The program was also recently launched in Bangladesh, where an estimated 900,000 Rohingya displaced people live.
Oxfam transfers digital money to thousands of people who need help in Syria, Greece, Kenya, Australia and the cyclone-prone island of Vanuatu via SMS, an Android phone app or an NFC card – a type of contactless payment card that also acts as proof of ID .
These applications, in the case of Oxfam’s Sempo Cash and Voucher Assistance program, have been shown to pay tens of thousands of dollars at a time to many beneficiaries in minutes – at almost negligible costs. Efficient, secure, and resilient systems that have been successfully tested and implemented by the humanitarian sector are long overdue in American federal and financial infrastructure.
From refugee camps to IRS
While the numbers and challenges in America’s current crisis vary, the US can learn important lessons from solutions used in challenging humanitarian environments such as refugee camps. Due to the weaknesses of the current US distribution systems, they are unable to cope with the scale, complexity and timeframe that is now required.
The most obvious and fundamental benefit of innovative direct aid distribution solutions is the ability to send payments between parties in seconds. For digital money solutions based on blockchains, there is also an immutable record of every transaction. Information, such as details of payees, is automatically checked and updated without being tied to specific bank accounts. This would avoid the kind of problem the IRS faced last month when 300,000 deposits were incorrectly made to non-existent temporary bank accounts and other payments were not processed at all because people’s bank account information had changed or could not be accessed .
Decentralized networks move money without ever touching a commercial bank and reduce processing time from days to minutes or seconds. It is important that solutions such as those provided by Oxfam and the United Nations World Food Program prove that individuals with just one mobile number can easily and demonstrably get help from their local government or an NGO. sometimes not even that is necessary.
Get back $ 50 billion
For the United States, the first step is for the Federal Reserve to introduce a “digital dollar”. Central banks and governments around the world have accelerated the call for proposals for digital currencies supported by central banks (CBDCs). The Bank for International Settlements recently noted that the pandemic could “focus more on the call for CBDCs, highlighting the value of access to different means of payment and the need for all means of payment to be resistant to a wide range of threats. ”
CBDCs like a digital dollar would serve the 70 million unbanked Americans who are currently waiting for weeks for paper stimulus checks to arrive. US post offices in remote locations could verify proof of identity and connect customers with low-cost financial services such as check cashing, bill payments, and savings accounts. Indeed, this type of mechanism was developed further by the House of Representatives last year in a bipartisan amendment to increase financial inclusion.
Disaster relief agencies have developed their voucher programs for users without a bank account and without a connection. Similar solutions for the US benefit system would equally serve the population without banks in the US, lower fees for commercial banks and avoid the associated losses from inefficient payments.
In contrast, the financial infrastructure used to distribute government payments worldwide – ACH transfers – is expensive, slow, and bank-dependent. Some ACH payment providers charge a flat fee of between 20 cents and $ 1.50 per transaction. others calculate between 0.5 and 1.5 percent. If these costs are not waived, the U.S. government may have to spend between $ 48 and $ 359 million in capital for life-saving aid only for transaction fees, based on 128.58 million families and 110.6 million single adults who may be eligible for disbursements Question come.