Digital Public Infrastructure (DPI) is emerging as a transformative force in financial inclusion. The UN defines DPI as a set of shared digital systems for providing digital identity, digital payments, and consent-based data that are secure and interoperable, built on open standards at a societal scale, and governed by applicable legal frameworks and enabling rules. As nations embrace the shift towards digital economies, DPI’s foundational elements of digital ID, data sharing, and digital payments become crucial.

Though strong technology infrastructure is necessary for enabling DPI, it is insufficient. Successful DPI also requires a well-rounded approach that integrates effective regulation, infrastructure, and governance to ensure the benefits of digital advancements reach everyone, including underserved populations.

This blog post explores the elements of regulation, infrastructure, and governance and their role in enabling effective DPI. I start with an overview of DPI’s promise of enabling financial inclusion.

The shared infrastructure provided through DPI may foster financial inclusion through its potential to:

• Reduce transaction costs: When passed through to end users, lower costs can increase the accessibility of digital payment solutions. This could particularly benefit low-income groups.
• Increase accessibility: Through digital channels, services can reach geographically isolated communities.
• Simplify processes: Streamlined procedures, such as know-your-customer (KYC) requirements and account openings, can reduce barriers to adoption and encourage the uptake of financial accounts.
• Enhance user experience: Intuitive interfaces lead to higher user adoption rates.

DPI’s interconnected components of digital ID, data, and digital payments also create a multiplier effect that amplifies the positive impacts on financial inclusion beyond what payments or digital ID alone could achieve.

Three enabling pillars increase how effectively the payments layer of DPI can contribute to increased access and usage of financial services. These pillars are legal and regulatory framework, infrastructure and ancillary services, and governance and coordination.

1. Legal and regulatory frameworks

The legal and regulatory schemas governing digital payments are essential for creating a safe and equitable environment. These frameworks specify the role different payment service providers and other stakeholders play while upholding consumer rights and fostering competition.

Key legal and regulatory considerations include:

• Regulation of nonbank service providers, including fintechs. The rise of mobile payment operators has raised awareness of the need to bring fintechs under the financial regulatory umbrella without suppressing innovation. Like banks, these entities need robust guidelines to ensure compliance with consumer protection and anti-financial crime measures.
• Data protection and privacy: Comprehensive data laws safeguard the personal identity information managed by digital payment providers.
• Financial integrity: Effective practices, such as rigorous know-your-customer (KYC) protocols, are crucial for combating fraud.
• Competition: Promoting a competitive environment and preventing monopolistic practices enhances service quality and creates an ecosystem that includes providers focused on underserved groups.
• Consumer protection: Regulations should ensure transparency regarding service fees and usage and enable recourse in the event of fraud or misuse, thus empowering consumers in the digital space.

2. Infrastructure and ancillary services

DPI depends on a set of support systems—including network infrastructure and ancillary services—that ensure people can access digital services and that the functionality of the services can grow beyond what traditional service providers can deliver. Investment in inclusive infrastructure is essential for reaching marginalized communities such as remote villages.

Crucial services include:

• Connectivity: Widespread and affordable mobile connectivity and internet access are fundamental. Without it, underserved communities cannot participate in the digital economy.
• Mobile phone penetration: Mobile devices, particularly smartphones, are one of the most reliable ways to access essential financial and information services, especially in regions lacking traditional computing facilities.
• Financial market infrastructure: Efficient systems that facilitate secure and reliable transactions—such as fast payment systems and credit reporting—are vital to fostering trust within the digital ecosystem.

3. Governance and coordination

Governance serves as the backbone for sustainable digital transformation. Defining clear roles and responsibilities within various institutions and establishing formal cross-sectoral decision-making bodies is essential. It also facilitates intergovernmental collaboration, which can help minimize the complexities associated with DPI implementation.

Effective governance models consider a nation’s political, economic, and cultural context, leading to tailored approaches. Examples of effective governance models include Norway’s National Joint Solutions, Denmark’s MitID, and IndiaStack, each demonstrating different approaches to public-private collaboration and framework design. Zambia’s DPI framework, spearheaded by the Smart Zambia Institute, also showcases strong political will and a focus on enhancing e-governance.

The Global Partnership for Financial Inclusion (GPFI) underscores the following governance principles:

• Public-private collaboration: Strong partnerships among government entities, financial institutions, and technology providers are key for effective DPI. Working together, public entities and the private sector can develop innovative solutions to inclusivity challenges, further enhancing the reach and effectiveness of digital services and ensuring offerings operate seamlessly and reach diverse audiences.
• Regulation and oversight: Balancing innovation and risk management through adaptable risk-aware regulatory frameworks is critical.
• Inclusive design: Ensuring that all demographic segments can access and benefit from digital services must be built into DPI designs.
• Data governance: Enforcing strong data protection measures is necessary to enhance trust and improve security in digital services.
• Risk management: A proactive approach to risk management addresses operational and consumer protection challenges.

As DPI reshapes the landscape for delivering public services, governments and private sector actors must embrace a collaborative approach that champions responsible design and sustainable investment strategies to create a more equitable economic future for all.

To fully realize the inclusivity potential of DPI, stakeholders must prioritize laying the foundations through enabling policies and regulations, establishing the infrastructure and ancillary services to address end-user demand, and designing governance frameworks that ensure safe, inclusive access and service delivery for all. By committing to these principles, nations can harness the enormous potential of DPI to enhance financial inclusion and build a more equitable society.