Thursday, October 16, 2014

Use of Government ID cards for Emergency Payments

What good is disaster funding if the people targeted for the funds cannot get it? Government ID cards can serve as emergency cash during disasters regardless of the state of the infrastructure supporting payment systems.

A natural disaster may destroy checkbooks, cash, and payment cards. However, people generally tend to hold on to their government issued ID cards from habit. When governments declare an emergency, it is possible to give a value for payments originating from a government ID.

The cost of adding a magnetic stripe to an ID is miniscule compared to the potential suffering alleviated by the action. Additionally the ID might contain a punch-out token for cases when loss of power or communications prevents the initiation of payment from card accepting devices. The value of the tokens will be set during the declaration of the emergency. Each token will contain the unique identifier that ties the token back to the citizen using it.

Governments can configure the emergency payment system differently so it meets the requirements of differing policy makers. For example, some governments may invalidate the tokens if not redeemed within a specific time. Other governments may forbid the purchase of specific goods or services (although enforcement of such bans may prove to be quite difficult). 

After the disaster the government can recoup the payments through various methods such as sending a bill to the user, or (if the address no longer exists) charge the citizen when they come to renew their ID. In some cases government will never recover the emergency payment but their citizens will have food, shelter, or clothing. The alternative, looting, rioting, and general mayhem cost governments far more.  It also prevents payees from gouging people by limiting the price charge for specific items (although in practice enforcing a not-to-exceed price will be difficult at best).  

Governments may be tempted to charge for the potential use of emergency cash before issuing the ID. This practice quite likely will cause the political failure of the government ID emergency solution because it will seem like a new tax without cause.

Preparing for emergencies before they occur is a critical government function. Preventing hunger and the other ill effects of natural disasters also falls under the authority of government. Using a non-emergency function such as id issuance seems a reasonable approach to mitigate the suffering caused by nature’s wrath.

Next Blog: A review of current innovations in payment systems

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