Payments Infrastructure and the Performance of Public Programs: Evidence from Biometric Smartcards in India

Assessing the impact of using biometric smartcards on welfare programs

This paper evaluates the impact of biometrically-authenticated payments infrastructure on public employment and pension programs in the Indian state of Andhra Pradesh. It uses a large scale experiment that randomized the rollout of the new secure authentication and payment infrastructure system over 158 sub-districts and 19 million people. It also measures the impacts, both positive and negative, of a large-scale rollout of biometric payments infrastructure integrated into social programs. The paper covers the following sections in detail:

  • Poverty reduction programs and the challenges involved in the programs with a focus on the Mahatma Gandhi National Rural Employment Guarantee Scheme and Social Security Pensions;
  • Process, need, and impact of smart-card enabled payments;
  • Methodology, data collection, and estimation of regression models crucial to the research;
  • Effects of Smartcard-enabled programs with a focus on effects on payment process, bribes and leakages, program access, and heterogeneity tests;
  • Cost effectiveness and welfare impact of using the new system.

The study concludes that the new system delivered a faster, more predictable, and less corrupt payments process without adversely affecting program access. Overall, it suggests that investing in secure authentication and payments infrastructure can significantly add to "state capacity" to effectively implement social programs in developing countries.

About this Publication

By Muralidharan, K., Niehaus, P. , Sukhtankar, S.