By Hamilton McNutt and Sarah Bailey
1 Executive Summary
In times of crisis and disaster, cash transfers can be an effective, efficient and dignified way to meet humanitarian needs. In the ten years between 2005 and 2015, humanitarian operations providing cash transfers increased from a negligible amount to nearly $1 billion. One result of this expansion is the growing interest in working with humanitarian agencies among payment service providers. The increase in the size and financial volume of humanitarian cash transfer operations provides opportunities to deliver cash transfers in more efficient and accountable ways by utilising economies of scale and capitalising on the expertise of financial service providers, technology companies and humanitarian agencies.
In 2017, the European Civil Protection and Humanitarian Aid Operations (DG ECHO) developed guidance on large-scale cash transfers, with the objective of ensuring that ‘assistance gets to beneficiaries more effectively, efficiently and directly, in a manner that is appropriate to the context and the phase of a crisis’. A key feature of this guidance is that it divides the delivery of payments (known as Component B) from the other main elements of programme implementation, such as targeting, communication with beneficiaries and coordination (known as Component A). A third component (Component C) focuses on monitoring and evaluation. The guidance envisions that different partners will implement different components, drawing on their comparative advantages.
The separation of payment delivery from other components represents a change in past practice, whereby each humanitarian organisation vetted and contracted payment services separately, leading in some cases to inefficient duplication in the selection and management of financial service providers. A separation of duties could also help reduce the need for all humanitarian organisations to acquire the skills and systems to work with financial services providers by relying on institutions (private sector or humanitarian) that already have the expertise to assess and implement payments in a humanitarian operation.
DG ECHO commissioned a Preliminary Market Consultation (PMC) to gain a better understanding of how to operationalise Component B. The PMC assesses the feasibility of DG ECHO directly contracting payment services at a regional or global level through a tender, whereby the provider would be responsible for payments to beneficiaries in large-scale, DG ECHO-funded humanitarian cash transfer programmes (either globally or in specific regions). The PMC analyses the extent to which different types of service providers could deliver cash effectively and efficiently, including cost implications and the level of interest of providers in responding to a global or regional tender. While this PMC examined a wide variety of payment service providers, the primary focus was on products that could deliver payments into multiple markets through a single contractual relationship with DG ECHO.