SOCIAL ELECTRONIC CARDS: INTERNATIONAL EXPERIENCE

In a growing number of countries, Social Electronic Cards (SEC) are being used as an advanced way of delivering benefits both in cash and in kind to beneficiaries. SECs help to facilitate transaction records and reduce transaction costs and potential opportunities for fraud. In addition to these advantages, some potential country-specific benefits have been identified such as: increased accountability of in-kind benefits recipients, the possibility of fraud history creation similar to credit history, harmonization of benefits, etc. With the aim of identifying the main challenges and pre-conditions for the successful introduction of SECs, we reviewed the international experiences of SEC implementation in developing countries as well as mature economies (USA, Australia, New Zealand) and Russia.

Various kinds of SECs are being used around the world, including i) bank cards that simply deliver monetized benefits, ii) discount cards that confirm the right of their holders to get a discount, and iii) smart cards, which are a rather sophisticated way of delivering monetized or non-monetized benefits that permit control over the usage of funds. The most widely used is a transportation discount card that enables eligible passengers to either have free access to the public transportation system or to pay a discounted rate for their journeys.

The gains achieved through the adoption of SEC technology in different countries are manifold. SECs provide user authentication which makes the system less attractive to potential fraudsters. The transportation chip cards, when compared with paper or magnetic tickets, offer extra security from fraud. For the users, cards provide convenience (a recipient can access money while away from home) and greater security (the balance is safe if the card is lost). The most advanced SEC technology can be found in the USA, where the idea of card usage came from the government’s desire to control how state benefits are spent. Thus smart cards used in the WIC programme can be charged with the full amount payable and loaded with a list of essential goods that the recipient can buy.

Neighbouring Russia also offers an example of successful SEC usage. Introduced in 2002, the Moscow Social Card is currently available to all Muscovites entitled to benefits, and offers access to public transportation and financial, social and medical security services. The card provides fraud protection, particularly in the black market area of trading transit coupons and creating a common electronic register of benefit recipients.

In Ukraine, initiatives to introduce SECs in Kyiv in 2006 and 2007 were unsuccessful. The project was finally implemented in 2008 in Odessa using local budget funds. The cards used for the program are effectively smart-cards with a special function for payment of subsidized goods and services. A major challenge to the introduction of the cards was the low participation rate of the population. Only 20% of those eligible responded to the first offer, which can be partially explained by the low value of benefits offered.

Based on the experiences described above, we may conclude that:

1. Electronic social cards can be successfully introduced at both the local and national levels. Providing transportation benefits through electronic cards is crucial for the effectiveness and success of their introduction at the local level. When introduced at the country level, the value and variety of benefits provided through one card becomes important. Thus to increase the attractiveness of SEC, the cooperation of several benefit-providers with a reliable processing system and other entities involved is required. A separate analysis is required to analyse the technical particularities of introducing the SEC as well as evaluating its costs and benefits.
2. Due to the limited experience of electronic card usage among the most vulnerable groups in Ukraine, cardholder awareness may become a major issue, and may require a carefully designed information campaign.