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Lost in translation: Unlocking the potential of private sector partnerships in cash assistance

Humanitarians and payment companies working together can design products and services that meet the needs of crisis-affected people. However, could a lack of understanding between humanitarian organisations and payment companies be hindering innovation?

10 June 2024 — By Rory Crew

I’m talking to a payments company, trying to gauge what capacity they have to offer humanitarian cash practitioners. After 20 minutes, it hits me – we’re talking about different things. To them, payments meant shops and swipes of a debit card, while for me they were the transfers that humanitarian organisations made to recipients. After sharing a quick lesson in humanitarian cash and voucher assistance (CVA), we landed on a common term of “bulk cash disbursements.”

Most cash assistance interventions involve the private sector

There are often calls for humanitarians to work more with the private sector, the underappreciated reality is that the private sector is already a major player in humanitarian cash interventions, albeit often operating behind the scenes. In 2022, $7.9 billion was transferred as cash or vouchers to crisis-affected people. Most of which relied on the private sector for the delivery of the cash. Indeed, I can only think of one example where an organisation’s staff decided to distribute cash themselves.

A great example of this is RedRose’s delivery channels which enabled them to distribute cash in Ukraine. Without the partnerships with RedRose, humanitarian’s cash responses would have been slower and smaller.

So, while as humanitarians often say we’re not very good at talking to the private sector, the good news is that we’re already doing it! The not-so-good news? Humanitarians haven’t fully tapped into its potential –  leaving a lot of value on the table.

Trust and understanding are fundamental to any partnership

Two things are fundamental to any partnership, trusting relationships and a shared understanding of each other’s worlds. Here’s the challenge – humanitarians struggle to navigate the complex world of payments, with its diverse players offering seemingly similar services. On the other hand, payment companies are not familiar with the unique characteristics of humanitarian cash and voucher assistance interventions. This isn’t surprising, as the ways of working of humanitarian organisations differs significantly to the gig economy of tech companies and chains of shops that they typically serve.

“At Thunes/DT One, we are committed to working with humanitarians to understand and address the needs and challenges across the sector. By offering a bundled suite of instantaneous cross-border cash / non-cash assistance like micropayments and wallet & mobile top-ups, we empower aid organizations to deliver essential support directly to those in need, quickly and reliably, maximizing the impact the support has on for crisis-affected populations.”

Christophe Bourbier, Global Head of New Ventures, Thunes

While the private sector is eager to engage with CVA and develop innovative solutions, a lack of understanding of the challenges humanitarians face results in products and services that often miss the mark. A classic product-market mismatch.

Now for the inspiring part, progress is already being made, with humanitarians well on their way to forging fruitful private sector collaborations! They have the relationships, $7.9bn and growing is a strong foundation, and several payment organisations such as Onafriq, Mastercard Foundation, Crown Agents Bank, and Visa are actively working with humanitarians to bridge the knowledge gap.

Momentum is building around private sector engagement in payments

The further good news, the momentum is building. Beyond individual collaborations, there’s a wider movement to bridge the gap. For example, Visa and Devex’s collaborative research on digital aid delivery emphasises the power of intersectional partnerships to solve problems in today’s interconnected world.

“Banks and financial service providers (FSPs) need to move money to generate profit, while NGOs aim to distribute funds to aid recipients as quickly and efficiently as possible. So, what’s causing the disconnect?

“The issue lies in the fact that 99.9% of global cash transactions are not related to aid, placing NGOs at a disadvantage when negotiating transactional fees. Banks and FSPs are reluctant to manage millions of individual, low-value beneficiary accounts due to the high costs and low returns.

“But with new technologies, such as the EyePay® Network, NGO’s funds can remain in the account until they are withdrawn individually. This approach provides services to the unbanked, generates revenue for FSPs and allows NGOs to improve financial oversight and resource allocation—a win-win for everyone involved.”

Simon Reed, Deputy Director, IrisGuard UK

At CALP, we’re actively contributing to this progress. We’ve explored the potential of payment aggregators and convened a dedicated payment solutions working group. This group brings together CVA implementers and private sector actors to share knowledge and experiences. By fostering this collaboration, we’re working towards a future where both sides can leverage their strengths to deliver impactful humanitarian assistance.

Over the next few weeks, CALP is diving deeper into how we can maximize the existing engagement with the private sector.

Time to unlock the potential

Improved efficiency and effectiveness are a crucial step to unlocking the untapped potential that cash assistance has on the people who need it the most – a fact never more relevant than today when humanitarian budgets are being cut left, right and centre and needs are as high ever.

We all have a part to play in unlocking these improvements. If you’re interested in advancing this work, please join our Payments Solution Working Group.