Authors: Paul Adams, Hussam Razi, and William Blackmon  

Across the globe, governments and donors are racing to build Digital Public Infrastructure (DPI)—digital identity systems, instant payment platforms, and secure data sharing mechanisms designed to revolutionize people’s lives. The World Bank, Gates Foundation, and United Nations Development Program have championed these systems as transformative tools that can help millions access financial services previously out of reach.

The vision is compelling: digital IDs that reduce barriers to opening bank accounts, instant payment systems that enable transactions across any banking institution, and secure data sharing that helps excluded individuals access better credit products. Individuals and small businesses can open new accounts quickly, accept payments seamlessly, manage their finances more effectively, and build financial health. DPI’s potential impact goes beyond just financial services to a broader set of transformative outcomes across other sectors, such as climate, justice and education. 

The promise is real, but so are the potential risks. To maximize the potential of DPI and minimize the risks, it is now more important than ever to monitor the performance of these systems and rigorously measure their impact. 

Digital Public Infrastructure in Financial Services

DPI combines three interconnected layers: digital identity systems, instant and interoperable payment systems, and trusted data sharing mechanisms. In the financial services sector, these components promise to revolutionize the pathways to inclusion and prosperity. For example, electronic know-your-customer (e-KYC) processes can remove barriers to account opening, while instant payment systems enable transactions between individuals and businesses, regardless of their banking institutions. Safe, secure, and consented sharing of transaction data can fuel competition and innovations and help excluded individuals access better designed and more suitable credit and insurance products. Overall, when working well, these systems can enable individuals and businesses to manage finances, weather shocks, plan ahead, and build financial health, and more broadly, drive economic growth.  

What We Know, and What is Still Missing?

Current evidence on how these systems are actually impacting people is scarce. Some studies show a correlation between the adoption of instant payment systems and financial inclusion, income growth, and service innovation. Our own recent research brief with the Toulouse School of Economics summarized the available rigorous causal evidence already generated in this space. It shows increased uptake of sophisticated products like insurance and investments as a result of wider proliferation of instant payment systems. Similarly, instant payment systems appear to drive income growth and reshape market structures, catalyzing private sector innovation while reducing costs. Additionally, previous IPA research demonstrates that digital identification for loan repayments in microfinance can improve repayment rates. 

While DPI holds significant promise, it also comes with risks. These can be risks to safety, such as privacy concerns; risks to inclusion, such as unequal access; and risks of structural vulnerabilities that emerge from how systems are designed, implemented and operated. Research is essential for recognizing, unpacking, and addressing these risks. It not only helps us understand DPI’s real-world impact but also provides guidance for developing design principles that support its responsible and inclusive implementation and use.
Through the work of IPA and others, the evidence base is growing, but we still lack rigorous causal evidence on fundamental questions around DPI’s impacts on consumers and businesses, governments, and markets, in addition to its unintended consequences such as fraud, identity theft, and exclusion. Some research questions around these three topics include:

Impacts on consumers and businesses 

• How can instant payment systems be leveraged to benefit micro and small businesses, and what impacts are open finance frameworks having on improving the financial health of these businesses?
• How should we design pricing, governance and safeguards to balance operational viability, consumer welfare and innovation?
• How can we minimize exclusion of individuals and businesses from DPI, especially women and other vulnerable groups? 

Impacts on governments

• Can DPI support better revenue mobilization, primarily from the micro, small, and medium enterprise (MSME) sector through formalization of businesses or easier tax reporting?  
• Can social protection programs benefit from DPI by improving government-level efficiencies while enhancing recipient welfare? 

Impacts on markets

• What is the impact of cross-border instant payment systems integrations on overall remittance flows, adoption of formal remittance channels, and the cost of remittances, for both individual-level transactions and cross-border trade?
• Can DPI fuel competition in the financial services sector to enable innovation?

IPA's Contribution: Evidence for Better Policy

As digital public infrastructure implementations take center stage in the global development agenda, we still know relatively little about the impact DPI is creating. To maximize DPI’s impact, we need a continuous cycle of monitoring, learning, and rigorous evaluation that produces actionable evidence for governments, regulators, and the private sector to refine their approaches. IPA’s current programs on interoperable payment systems and consumer protection are doing just that. Our research in over 15 countries includes rigorous impact evaluations that measure the impact of instant payment systems and open finance on financial inclusion for individuals, micro and small businesses, and overall economies. Our work also measures the impact of interventions aimed at curbing consumer protection failures, from anti-fraud information campaigns to tools to help borrowers select suitable loan products.

The stakes are high: poorly implemented DPI can exacerbate existing inequalities while well-designed systems, grounded in empirical research, can genuinely transform economic inclusion. The next few years will be critical to understanding ‘what works’ in DPI implementations, along with any unintended consequences. Careful research, employing cutting-edge scientific methods, will be key to driving the DPI agenda forward.