DPI UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC MAIN TITLE INFRASTRUCTURE GOES (DPI) HERE IN LATIN AMERICA SUBHEADING AND GOES THE CARIBBEAN IN THIS (LAC): AREA A REGION- SPECIFIC PERSPECTIVE A WORLD BANK-IADB TECHNICAL NOTE © 2024 International Bank for Reconstruction and Development The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org DISCLAIMER This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. RIGHTS AND PERMISSIONS The material in this work is subject to copyright. Because the World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. 2 TABLE OF CONTENTS ACKNOWLEDGEMENTS 4 About ID4D 5 Executive summary 6 Glossary and abbreviations 8 1. IntroductionI 9 2.1 Defining DPI 12 2. The AI value chain 12 2.2 Advantages of DPI 15 3. The LAC context for infrastructure supporting DPI 18 3.1 Backbone Networks 18 3.2 Backhaul and last mile networks 20 3.3 Availability and affordability of end-user devices and services 21 3.4 Data storage infrastructure 22 4. Maturity of DPI across LAC 23 4.1 How DPI fits in with current LAC government priorities 23 4.2 Current DPIs in LAC 24 4.3 Value of using the term DPI 26 5. DPI with LAC characteristics 28 5.1 Fast payment systems 28 5.2 Digital identity systems 29 5.3 Data exchange systems 30 5.4 DPI use cases in LAC 31 6. Barriers and approaches to scaling DPI in LAC 34 7. Conclusions 37 Annex A: The boundaries of DPI–additional definitional clarity 39 References 41 UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 3 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE ACKNOWLEDGEMENTS T his Technical Report was prepared by David Porteous, DPI) specifically Manuel Aguilera. Christine Qiang (Director, Axel Rifon Pérez and Sharmista Appaya of the World Digital Development), Doyle Gallegos (Program Manager, Bank and Ricardo Martinezgarza, Nicolás Albornoz and Digital Development, LAC) and Peter Kusek (Program Manager, Antonio García Zaballos of IADB. The team would like to thank Digital Development, Global Unit) provided overall support the forty respondents to the survey and twenty people who and direction. participated in interviews. World Bank and IADB colleagues provided valuable inputs The team is grateful for the feedback and support received and advice: Silvana Kostenbaum, Jonathan Marskell, Julián from other peer reviewers Harish Natarajan (Finance Najles, Marolla Haddad, Niccolò Comini, Doug Randall, Competitiveness and Innovation, World Bank), and Julia Guillermo Rabadan, Luz Stella Rodriguez, Santiago de la Clark (Digital Development, DPI Business Lead, World Bank), Cadena Becerra, Georgina Marin, Chris Tullis and Ritul Gaur Guillermo Beylis (LAC Chief Economist Office), Phil Keefer of World Bank and Miguel Porrúa, Enrique Iglesias Rodriguez, (Economics Principal Advisor, IADB) and the CDPI (Center for Arturo Muente and Julia Dias of IADB. 4 ABOUT ID4D T he World Bank Group’s Identification for Development ID4D makes this happen through its three pillars of work: (ID4D) Initiative harnesses global and cross-sectoral knowledge, World Bank financing instruments, and 1. Thought leadership, research, and analytics to generate partnerships to help countries realize the transformational evidence and fill knowledge gaps potential of identification (ID) systems, including civil registration (CR). The aim is to enable all people to exercise their rights 2. Global public goods and convening to develop and amplify and access better services and economic opportunities in line good practices, foster collaboration across regional and with the Sustainable Development Goals. This is especially global stakeholders, and support knowledge exchange important as countries transition to digital economies, digital 3. Country and regional action through financial and governments, and digital societies, where inclusive and technical assistance to realize inclusive and trusted ID trusted means of verifying identity are essential to ensure and CR systems accessibility and data protection. The work of ID4D is made possible through support from the ID4D operates across the World Bank Group with global Bill & Melinda Gates Foundation, the UK Government, The practices and units working on digital development, social French Government, The Norwegian Agency for Development protection, health, financial inclusion, governance, gender, Cooperation (Norad), and the Omidyar Network. and data protection, among others. To ensure alignment with international good practices for maximizing development To find out more about ID4D and access our other publications, benefits and minimizing risks, ID4D is guided by the 10 visit www.id4d.worldbank.org. Principles on Identification for Sustainable Development, which have been jointly developed and endorsed by the World Bank Group and over 30 global and regional organizations (see http://idprinciples.org). UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 5 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE EXECUTIVE SUMMARY 1. “Digital Public Infrastructure” (DPI) is a new term 4. Although DPI is a relatively new term in Latin America referring to the basic capabilities that are building and the Caribbean (LAC), many countries in the region blocks for developing digital services at a societal have been actively building the foundations for some scale. DPI constitutes an intermediate layer between time. Most senior officials in digital government agencies the physical digital infrastructure of connectivity and from across LAC who were surveyed for this report have storage solutions, and applications built on top of the already had some exposure to the term “DPI”, albeit DPI layer. The most common types of DPI are platforms recently. In larger and higher income LAC countries, and systems for digital identification, digital payments, there are already forms of DPI in existence in all the and data sharing. This report was produced under a joint major categories of digital payments, digital identity Memorandum of Understanding between the World Bank (including forms of advanced electronic signature) and Group (WBG) and the Inter-American Development Bank data sharing although they operate at different levels of (IDB) to drive stronger results for people in Latin America functionality and usage. and the Caribbean supported by digital infrastructure • Some LAC countries have implemented DPI solutions and connectivity. based on the use of open- source software recognized 2. International understanding of what is and what is not as digital public goods like X-Road for data exchange. DPI is still evolving; but the general understanding LAC has sizable developer communities supporting among LAC digital government agencies converges to these applications, although their usage in practice current international norms. International examples of the remains limited in most cases. implementation of different types of DPI show benefits show greater efficiencies resulting in savings of cost • LAC has seen progress towards wider implementation and time for governments, businesses and citizens. The of DPI building blocks in the case of social transfer incremental benefits of full implementation of a “whole payments. In this area, LAC countries have traditionally of DPI” approach across the categories have yet to be been leaders in innovating sectoral approaches; and seen and measured, though there is reason to believe in several countries, data is now exchanged across that they may be substantial. sectors to confirm eligibility. 3. The “public” aspect of DPI highlights their goal of • Regional groupings of countries within LAC have advancing public welfare and inclusion. While DPIs also made progress towards enabling cross border can be developed by either the public or private sector, authentication and recognizing digital signatures, they focus on achieving public policy objectives. These which can support trade initiatives. These efforts objectives often include promoting economic welfare and are at an early stage, however, and require further financial inclusion, ensuring equal, fair, and transparent political commitment and increased public awareness. access to all relevant users, and providing foundational and cross-cutting support for various economic and • Open finance schemes as a form of DPI which enable social interactions. This emphasis on serving public authorized client data sharing in the financial sector policy goals differentiates DPIs from other digital and are also at a nascent stage in most LAC countries. financial infrastructures. However, Brazil’s Open Finance scheme which started in 2021 already exceeds the breadth of usage levels of longer established schemes elsewhere in the world. 6 5. While a majority of LAC countries already has a national costs overall for both governments and citizens. However, digital strategy, as a new concept, DPI does not yet to get to that point will require rationalized approaches feature explicitly in these strategies. However, newer to government procurement and budgeting. Other digital government strategies reference the need for barriers cited include low citizen trust in using digital greater interoperability and enhanced data infrastructure, services, and uneven access to reliable and affordable both key elements of DPI. A majority of people surveyed digital connectivity. believe the DPI approach brings potential benefits through 8. The report recommends the application of good practices providing a unified lens through which to rationalize core for the building out DPI in LAC, including: digital systems. a. Don’t lose sight of building out the connectivity and 6. While much of LAC has both the connectivity foundations data infrastructure layers which enable DPI and at least some of the main DPI building blocks in place, DPIs are often not yet widely used. However, there are b. Review government procurement rules and budgeting significant emerging exceptions, such as the PIX payment approaches to ensure that they don’t rule out DPI system and the federal digital authentication scheme in Brazil. These examples show that rapid adoption is c. Consider the use of open-source software where possible and can be self-reinforcing when core elements available and appropriate of DPI design are in place and well executed. d. Engage in knowledge sharing at regional and 7. Despite progress in some countries, the rollout of national levels effective DPI schemes faces a range of challenges in LAC. Most respondents cited the lack of capacity within e. Identify and develop the capacities needed in government agencies to design and implement DPI government agencies to support DPI as the biggest barrier. This lack represents a specific f. Recognize a modular, reusable approach to digital manifestation of the general shortages in most LAC infrastructure in digital government policies countries of the range of digital skills needed for DPI. Constrained government budgets limit new hiring and the g. Benchmark the “DPI-ness” of existing systems and absence of competitive pay relative to the private sector assess how this can be advanced reduces retention. Over time, DPI can help address these limitations by eliminating wasteful duplication of spend h. Remember to harness private sector incentives and and by achieving scale, thereby reducing digital service capacities to use DPI systems. UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 7 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE GLOSSARY AND ABBREVIATIONS DPI A set of shared digital systems that are G20 An intergovernmental forum comprising interoperable, built on open standards and 19 sovereign countries (including three specifications and provide access to public from LAC–Mexico, Brazil and Argentina), and private services at societal scale (source: the European Union (EU), and the African derived from G20 Declaration) Union (AU). DPG Open-source software, open data, open Govtech Specific digital systems used artificial intelligence (AI) models, open by governments standards and open content that adhere to (solutions) to provide services to citizens, as well as privacy and other applicable laws and best “a whole of government approach to public practices, and help attain the SDGs (source: sector modernization”. Digital Public Goods Alliance) ID4D Identification for Development, a DE4LAC Digital Economy for LAC: a World Bank WBG program Group (WBG) diagnostic approach for the IADB Inter-American Development Bank digital economy applied to LAC countries LAC Latin America and the Caribbean FICP Financial Inclusion and Consumer Protection, a WBG survey of policies, laws, and LMIC Low and middle-income country supervisory approaches in jurisdictions around the world RedGEALC Inter-government network in LAC for agencies promoting digital transformation. WBG World Bank Group 8 1 INTRODUCTION Digital Public Infrastructure (DPI) first came to wider public component: its X-Road software for secure data exchange attention at a session on the future of digital cooperation among government departments and citizens which has during the UN General Assembly in 2022. During 2023, been deployed in Latin America and the Caribbean (LAC). international interest in DPI grew during India’s Presidency of the G20. Following discussions in various G20-related Although India and Estonia are the most often cited country workstreams, DPI was explicitly mentioned in the resulting examples of DPI in practice2, digital public platforms are New Delhi Leaders’ Declaration. The Declaration hailed DPI as also emerging in LAC. This more general term was used in a significant evolutionary concept with the potential that: “... the 2023 World Bank Latin American and Caribbean (LAC) safe, secure, trusted, accountable and inclusive digital public Review entitled Wired: Digital Connectivity for Inclusion and infrastructure, respectful of human rights, personal data, Growth to describe digital platforms that promote inclusion privacy and intellectual property rights can foster resilience, and growth through “delivering more and better services to and enable service delivery and innovation.”1 individuals” and “supporting the efficiency, transparency and accountability” of the government.3 DPI can be considered The World Bank defines DPI as foundational and re-usable a particular category of digital public platforms that provide digital platforms and building blocks—such as digital ID, digital foundational services across a range of sectoral public payments, and data sharing—that underpin the development platforms, thereby scaffolding the potential of these platforms and delivery of trusted, digitally-enabled services across to provide developmental benefits for society. the public and private sectors. While DPI is not intended to replace sector-specific digital infrastructure, it eliminates Although a new term, DPI is therefore already present in the need for individual sectors and systems to “reinvent the many LAC nations in different forms, and with different wheel” each time for common functions. Although India has levels of usage and outcomes. Definitions of DPI are not been one of the countries most closely associated with DPI yet standardized though defining characteristics (see Box to date, the small European nation of Estonia, at the opposite 1.1) are increasingly widely accepted. This report adds to the end of the population size spectrum, is also a recognized emerging understanding of how the term is understood and DPI leader. Estonia developed a key much-admired applied being used in the LAC region today and how it may be useful in promoting approaches to societal digital transformation. 1 Clause 56, pg. 22 2 This was also the case in the LAC survey when respondents were asked to name leading examples of DPI. 3 This language originates in the World Bank’s Digital Economy for All Assessments which started in Africa but have been more recently completed also for several LAC countries (e.g., Colombia, Ecuador, El Salvador and Jamaica). UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 9 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE Box 1.1: Defining Characteristics of DPI The term DPI can refer both to: (i) the particular instance of an operational digital platform with these characteristics and/or (ii) to an approach to building and designing digital platforms that embodies the following characteristics. • Problem-solving and purpose-driven—DPI is not an end goal, but the means to an end to achieve interoperable services that work seamlessly within and across sectors. • Modular & minimalist—it provides a discrete function needed for many types of transactions and interactions; makes digitally-enabled services within sectors feasible and efficient. • Interoperability & open design—it is designed to be extensible and reusable across applications, sectors, and use cases and can be built on open standards; that is, the same plumbing can be used by all. • Complementary—it still requires sector-specific digital infrastructure (for example, sector interoperability frameworks, standards, registries, management information systems, etc.) to build end-to-end digitally-enabled services. • Public benefit—DPIs have been designed for public benefit to allow equal, nondiscriminatory access in accordance with specified governance rules. • Data privacy by design —it is designed so as to comply with laws and best practice of handling personally identifiable information. • User-centric—it is designed to enable inclusion, user choice and control, transparency, data privacy and consent. STRUCTURE AND METHODOLOGY OF To test these hypotheses, the WBG-IADB research team distributed online surveys to policy makers and leaders THIS REPORT especially in the agencies of government responsible for digital policy in LAC countries. Box 2.1 describes the sample This report produced under a joint Memorandum of coverage. Follow-up in-person interviews with a range of Understanding between the World Bank Group (WBG) people active in digital government in LAC helped extend and the Inter-American Development Bank (IADB) aims to survey insights and further investigate interesting applications help improve digital infrastructure and connectivity to drive of DPI. In addition, this report draws on extensive WBG and stronger results for people living in LAC.4 Its objective is to IADB published and unpublished research on different types highlight the state of the potential for DPI across the LAC of DPI such as the World Bank initiatives on Identification region, including understanding policymaker’s awareness for Development (ID4D), digitalizing government-to-person and acceptance of DPI, and the maturity of DPI building payments (G2Px) and Project FASTT Payments Project. blocks across the region. It aims to connect a long-standing discussion in LAC around effective digital transformation with The report is structured as follows: the next Section provides emerging global DPI discourse, and at the same time the an overview of the emerging understanding of DPI, together report explores specifically how, and where, DPI manifests with the general evidence of its benefits so far, to provide in LAC and how it can be helpful in future. an introduction especially for readers less familiar with the topic. Section 3 sets the LAC context of connectivity and The research tested two main hypotheses: data storage, the foundations of the status and maturity of different types of DPI in LAC considered in Section 4. Section i. DPI is already present in LAC even if the term itself 5 extracts some particular themes of how DPI is already is not yet in widespread use. being applied in LAC, highlighting key characteristics in LAC. Finally, Section 6 lists some needs and challenges for ii. DPI provides a useful focus to inform the next phase DPI advancement in LAC. of digital development in LAC. 4 https://www.worldbank.org/en/news/press-release/2023/08/31/world-bank-and-idb-join-forces-to-maximize-development-impact 10 Box 2.1: DPI in LAC online survey 40 people from 18 LAC countries and one regional organization, the Organization of Eastern Caribbean States (OECS) (Figure 2.1) completed an online survey of their awareness, understanding and attitudes towards DPI. A total of 87 per cent of respondents were from government agencies, mainly from agencies or ministries promoting digital transformation. Figure 2.2 shows the type of respondents by role. Over half of respondents were directors general or senior directors of their agencies. Figure 2.1: Number of respondents to survey Figure 2.2: Profile of respondents Series1 7 5% 18% 5% 1 10% 12% 20% Director general Technical expert Senior director Professional Powered by Bing © GeoNames, Microsoft, OpenStreetMap, TomTom Manager Other Methodology: An online survey was compiled in Spanish and English to test respondents’ awareness and understanding 80% of DPI and their attitudes towards its current and potential 73%applications in their countries. Drawing from WBG and 70% IADB contacts and from RedGEALC working BUILDING BLOCKS FOR HIGH-IMPACT SERVICES groups, the research team compiled a list of 80 names and contacts of people who are currently working in Government national departments 60% or agencies relevant to digital government, or who were People Private sector (e.g., PSPs) recently in relevant roles or who were close to those roles. The aim was to get sufficient coverage of LAC countries, 50% 40% with multiple respondents in a number of countries 40% as shown in Figure 2.1. During January and February 2024, each 33% person was sent an email inviting a response to the online survey. 30% 28% Applications 20% 20% Applicants Digital Based on interview responses and on the need to Registration follow up on particular topics identified, the research team compiled 10% a second Registries & list of people who were requested to have 0% a remote meeting with members of the team. 18 meetings took Registrants place during February and March Databases Dynamic 2024 with people across the region Lack of trust Lack of capacity Lack of Lack of Something Social Registries within government among citizens affordability compelling else agencies to design and private sectors use cases Standards, and oversee about digital Systems & Case Program Payment Beneficiaries solutions MIS GRM Management MIS MIS 35 DPI leveraged to … Make30G2P transfers and29 Digital Payments the use of ID for authentication Vehicles 25beneficiary identity at Verify Digital Identity onboarding and/or delivery 20 20 Tax Land Data Sharing Verify eligibility criteria 15 13 10 5 2 0 It provides a newIt focuses attention on It unlocks new finance Something else paradigm for the whole of digital and aid to support digital development development, rather than digital deployment UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN the parts 11 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE 2 THE AI VALUE CHAIN 2.1 DEFINING DPI Different types of DPI are widely recognized as core building blocks for a variety of services across sectors that involve transacting with individuals, making or receiving payments, Despite the focus and attention on DPI in the past two years, and sharing trusted data (Figure 2.1). However, the term is important questions remain about exactly what it is and is not restricted to these categories alone. For one thing, it is not. Various organizations around the globe have proposed possible to create more specific categories based on function– recent definitions (summarized in Box 3.1). While there remain for example to separate the broad category of digital ID into differences of emphasis, the main elements are converging: two: (i) systems that support the online authentication of users DPIs are the open interoperable digital systems that provide (i.e., providing confidence that the person presenting an a foundation for the delivery of important digital services at identity credential is the same person to which it was issued); large scale. But it is also clear that concepts like these–open, and (ii) trust services which include e-signature and consent interoperable, important, and even large scale– are quite mechanisms. In its classification, the Center for DPI, a think tank general and can be hard to apply in a specific case.5 and technical assistance provider based in India, recognizes yet another category of DPI: discovery and transactions, which DPI is a layer of systems on top of data infrastructure refers to the “capability to avail of any service or purchase any provided by cloud and data centers, which itself depends good across multiple apps in an interoperable manner.” with on connectivity. Figure 2.1 illustrates this widely accepted specific reference to an e-commerce environment, such as the understanding of where DPI fits in the wider digital society.6 Open Network for Digital Commerce (ONDC)7 in India. Since Above the DPI layer, sit a range of innovations and applications DPI is an emergent concept, it must remain open to further for sectoral solutions which draw on DPIs to provide services evolution of categories over time. For this paper, however, to a range of beneficiaries. we focus on the three core DPI categories described above: digital ID, digital payments, and data sharing. However, areas In LAC, 88 percent of survey respondents had already heard such as verifiable credentials built on decentralized identifiers the term “DPI” but for a sizable minority this was only in 2023, that provide a digitally-signed, tamper-proof credentials that emphasizing its newness to the region. Respondents to the individuals or entities can present to verify their identity as Spanish speaking survey were more likely than the English well as digital wallets to store and manage credentials are survey to have heard the term recently. Most respondents beginning to be brought into the DPI fold. self-assessed their level of familiarity with the term DPI to be in the middle of the scale from “very familiar” to “totally DPI definitions remain blurred but DPI must aim to provide unfamiliar”, with a wide range on either side. When offered society-wide outreach and serve public purposes. Some a choice of different definitions for DPI (drawn partly from blurring of definition is often useful to leave space for the Box 2.1 list), most respondents opted for one close to the evolution with a new concept, 8 but this risks framing DPI G20 definition above, with the Govstack definition the next so broadly that it becomes meaningless. DPI cannot apply most common choice. 5 Porteous et al “Understanding DPI”, Next Billion blog 1 October 2023 available here. In 2024, specialized DPI technical assistance agency CoDevelop announced a research project which seeks to provide clearer definition and guidance to the “state of DPI”. 6 Drawn from the World Bank (2022) paper on Digital Stacks, a previous term for DPI. 7 See https://ondc.org/ 8 David Porteous “Is DPI a useful category or a shiny new distraction?” 2023 available here 12 Box 3.1: Some Current Definitions of DPI G20 New Delhi Leaders’ Declaration (2023): “A set of digital building blocks which are interoperable, built on open standards and specifications providing access to public and private services at societal scale and are governed by enabling rules to drive innovation, inclusion, and competition in the digital economy.” Govstack Community of Practice, a network of multilateral and bilateral government agencies: DPI are “..solutions and systems that enable the effective provision of essential society-wide functions and services in the public and private sectors.” OECD: Digital public infrastructure (DPI) refers to platforms such as identification (ID), payment and data exchange systems that help countries deliver vital services to their people. UNDP: The DPI approach is about “shaping and ensuring good governance of digital building blocks to unleash an ecosystem of public and private actors that deliver digital services at the largest scale.” in The DPI Approach: A Playbook (2023) World Bank: “DPI is the foundational and re-usable digital platforms and building blocks–such as digital ID, digital payments and data sharing–that underpin the development and delivery of trusted, digitally-enabled services across public and private sectors.” Figure 2.1: Conceptualizing DPI Source: A Digital Stack for Transforming Service Delivery (2022) UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 13 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE Co Nic U Su E Ba J El S Co Dominican R Ar B Ve Gu P H Trinidad & Figure 2.2: LAC respondent views on what qualifies as a DPI Bitcoin exchange 3 14 18 Credit information bureau 11 13 11 Instant payment system operated by a private provider (e.g. Visa or Mastercard) 14 5 16 Open banking platform 24 9 2 Instant payment system operated by the central bank 29 6 1 Digital identity system 35 0 0 5 10 15 20 25 30 35 40 Yes Unsure No Source: DPI in LAC survey (2024) to any and all forms of digital infrastructure, platforms, or which of a given set of options they considered to be DPIs services. For example, almost all payment systems today are (Figure 2.2). Views were evenly divided about whether credit digital; and payment systems are considered a category of bureaus were also a form of DPI. DPI; however, not all digital payment systems are DPIs. The authors of the 2023 GPFI report on Policy Recommendations The survey also uncovers some difference of opinion as for Advancing Financial Inclusion and Productivity Gains to whether the public sector must own or operate a DPI through DPI wrestled with the distinction between (i) the system, shown in equal responses about whether a privately types of payment system highlighted as DPIs and (ii) other operated payment system could qualify. All the main emerging financial infrastructure that was not. The differences, they international definitions are clear on this aspect: the mention concluded, lay in “the cross-sectoral nature and use of DPIs of “public” in DPI does not restrict the mode of ownership to across a wide range of economic and social interactions, government owned systems, but rather refers to the public and their attributes of being designed for the digital context, interest in and public oversight of the systems, regardless being more widely accessible, and an emphasis on serving of who owns or operates them.9 The ’P’ can also refer to public policy objectives.” In other words, to be considered the aspiration to achieve society-wide scale of operations, a DPI requires explicit broader reach in intent and usage even though it may take time to reach that. Advancing public and clear alignment with public purpose. However, these interest is a rather vague goal, however. David Eaves and distinctions are more a matter of degree than category colleagues (Eaves et al 2024) have observed that in practice, differences. Further points of distinction are the differences the ‘P’ is usually understood as expressing public values between DPI and “digital public goods” and between DPI around the attributes and functions of DPI: for example, that and “GovTech” (discussed further in the Annex). it is interoperable and built on open standards (Box 1.1); or that it advances important economic and social goals like Although each LAC country defines its own DPI—including increased efficiency and inclusion. Eaves et al propose setting the specific functionalities and layers needed, and the a higher bar for defining the ‘P’ which they call ‘public value architecture behind them—three systems are commonly maximization.’ In this approach, it is not only important that accepted: digital payments, digital identity, and expressions public value is created but that the process by which it is of data sharing such as Open Finance. The LAC DPI survey created follows the norms of common good.10 probed for regional understanding of DPI, asking respondents 9 This usage is also consistent with the definition of digital public platforms in the LAC Wired Review: “[digital public platforms] may be developed for the public sector or as a public good—either by government agencies, in partnership with private companies, or through a hybrid model.” 10 See Eaves, Mazzucato and Vasconcellos (2024) 14 While the definitional discussion will continue to evolve, it applied or used even there. In India, for example DPI “has seems clear that the emerging LAC understanding of DPI been used as a platform to foster innovation and competition; generally converges with that of the rest of the world. The expand markets; close gaps in financial inclusion; boost concept seems increasingly clear at a conceptual level but government revenue collection; and improve public expenditure still requires greater clarity and understanding when it comes efficiency” (Alonso et al. 2023).11 Similarly, the X-TEE (also to application in practice. known as X-Road) shared data infrastructure saves 2 percent of GDP each year12 and an estimated 820 years of working time of Estonian citizens.13 2.2 ADVANTAGES OF DPI In general, studies usually highlight findings from the use of particular DPI systems or from particular sectors such as To appreciate the advantages of deploying DPI, it is helpful financial. It is often not easy to separate out the effect of a first to understand what changes. Figure 2.3 below contrasts digital infrastructure from the wider ecosystem in which it is the “before” situation with the “after” a DPI approach is fully operating, or from the processes of digitalization in general. deployed at a whole of society level. Before, a proliferation The need for more research on these issues is recognized. and duplication of proprietary systems provide siloed solutions However, the commonly recognized channels of DPI benefits are: for each needed service. After deployment, DPIs function as horizontal layers supporting a range of use cases rather than • Increased financial inclusion and access to essential one sectoral solution only. This change brings efficiencies services: GPFI (2023) has made the case for increased through economies of scale and enables greater effectiveness financial inclusion from the application of DPI in areas like in the delivery of important digital services. The “whole of payments, by making payments easier, faster, cheaper DPI” vision offers additional societal benefits beyond those and more convenient. Open finance, which may be created by implementing one DPI layer only. While it is yet offered through a DPI-type structure, enables the secure to be fully realized anywhere, this wider vision should be sharing of information that can expand access to credit borne in mind while building out incrementally the individual and other financial services like insurance and provide layers of DPI. However, there are still benefits to be had from the right type of products for those that have access. incremental improvements in each of the layers. In Niger, households where women received digital social assistance payments had 16 percent higher diet In practice, the advantages of DPI are often cited using diversity than those who received cash benefits (Aker et examples from countries such as India or Estonia where al. 2016). In Mozambique, beneficiaries spent less than 30 deployment has gone furthest, even if DPI is not yet fully Figure 2.3: What is different about DPI? Source: World Bank Digital Progress and Trends Report 2024 11 Alonso et al available here: https://www.imf.org/en/Publications/WP/Issues/2023/03/31/Stacking-up-the-Benefits-Lessons-from-Indias-Digital- Journey-531692 12 Case study 8 in OECD Digital Opportunities for Better Agricultural Policies 2019 available here: https://doi.org/10.1787/571a0812-en 13 Heiko Vainsalu, “How do Estonians save annually 820 years of work without much effort?” 12 December 2017 available here: https://e-estonia.com/ how-save-annually-820-years-of-work/ UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 15 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE minutes waiting for mobile money payments versus more landscape and provide better products at better prices to than one hour waiting for cash payments (World Bank, consumers. Analysis using data from 85 countries showed forthcoming). Similarly, digital authentication allows more that, during the COVID-19 pandemic, countries that had people to prove who they are online, enabling them to elements of DPI in place (such as digital databases or ID access new public and private services. Cash transfers records and data-sharing platforms) reached more than linked to digital identification in Pakistan increased three times more beneficiaries than countries that had women’s reported control over cash.14 The Government to collect new information (World Bank 2022b). of Turkiye was able to expedite the delivery of social benefits by using a common identifier and interoperable • Greater transparency: The wider provision of reliable data bases, reducing the time to apply for social benefits and relevant information enables citizens to hold public from days to minutes, and the time to deliver benefits bodies and agencies accountable; it also reduces the from months to days.15 potential for corruption leading to leakage and waste. • Enhanced efficiency and reduced friction: DPIs bring Foundational DPI can also create benefits within social efficiency benefits at multiple levels. First, as a result sectors like education. For example, India has seen how of the use of appropriate DPIs, citizens and firms can robust digital authentication can help monitor teacher access documents through one portal and reduce the presence and reduce fraud arising from salary payments to need to file the same information multiple times. The “ghost” teachers who fail to show up. Digital authentication implementation of the “once only” principle for the can help to reduce exam fraud for online learning as well as. provision of documentation to the state has been clearly The ability to store and share the secure verifiable credential demonstrated in Estonia and has become a basic principle resulting from completing a training course provided by of DPI. India’s eKYC system reduced the cost of compliance DigiLocker benefit both employees and employers during for financial providers in new account opening from US$12 hiring, removing the need to send or verify paper credentials to 6 cents.16 Second, governments can reduce the cost that can be easily faked or lost. of operating duplicated siloed systems by relying on DPI benefits are likely to show up at the macroeconomic level, reusable components. In Singapore, eKYC, facilitated by especially when a ‘whole of DPI’ approach is adopted. For the Singpass consented data-sharing service, reduced now, these benefits can only be measured at certain layers. the time to complete digital transactions by 80 percent For example, McKinsey has argued that increased access to (OECD 2022). In Zambia, financial service providers saved digital identification will unlock as much as 6 per cent more up to US$50 to acquire each customer online using the GDP in 2030 for emerging economies. Dalberg and the UNDP Singpass digital ID (Cooper, Marskell, and Chan 2022).17 (2023) extrapolate the macro benefits of applying DPIs relative • Accelerated innovation and disaster response: Sharing to a set of next-best technologies across 70 low and middle- infrastructure can support innovation in the design of new income countries (LMICs). They estimate that applying DPI products and services in the public and private sectors. in the finance sector could accelerate economic growth in In India, private third-party application providers such as these countries by 33 per cent by 2030. In the justice sector, Google Pay and Amazon Pay offer services built on top bringing efficiencies to current systems would significantly of the Unified Payments Interface (UPI). There is evidence increase the number of people with access to the formal mounting in the UK and Brazil of how open finance system. And in climate, DPI could mitigate CO2 emissions schemes (which are examples of DPIs in the category of and accelerate emission control efforts by enabling “carbon data exchange) enable new entrants and new products to be developed.18 This can enhance the competitive 14 Clark et al “Using Biometrics to deliver cash payments to women: early results from impact assessment in Pakistan” ID4D Evidence Note 2022, available here: http://documents.worldbank.org/curated/en/099155004142238180/P1763410d1e1af00108e170e5754d04fed9. 15 World Bank 2023 16 Siddarth Dixit “India’s digital transformation could be a game changer for economic development” June 20, 2023 available here: https://blogs. worldbank.org/en/developmenttalk/indias-digital-transformation-could-be-game-changer-economic-development 17 OECD 2022 “Singapore’s National Digital Identity—Singpass.” Observatory of Public Sector Innovation (blog), November 16, 2022 cited in 2023 Digital Trends Report 18 A summary of the 2023 Open Banking (UK) Impact Report is available here; this CGAP Blog in October 2023 summarizes research on the adoption and impact so far of Open Finance in Brazil. 16 offsets and trading, land mapping, and weather information 1 signaled full agreement and 5 complete disagreements. and monitoring – founded on building and sharing open No one fully disagreed with this statement, and only a small datasets and coordinating cross-border efforts.” minority (12.5%) were unsure or leaning negative. There is little disagreement therefore about the potential advantages Although most widely cited DPI examples come from outside of DPI in LAC or elsewhere. However, the LAC region faces LAC, most respondents in the LAC survey acknowledged that barriers to unlocking these benefits (addressed in Section 6). developing DPI was likely to produce benefits. In response to the statement, “I think that there are benefits to taking a DPI approach”, their answers averaged 1.6 on a scale where UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 17 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE 3 THE LAC CONTEXT FOR INFRASTRUCTURE SUPPORTING DPI DPI depends on underlying physical infrastructure providing digital connectivity and data hosting. The extent and 3.1 BACKBONE NETWORKS functionality of this infrastructure will affect the nature, reach and spread of DPIs. Figure 2.1 depicted how DPI is built on A backbone network connects the different regions within a top of a connectivity layer and a data infrastructure layer. country. These networks typically employ high-capacity fiber- Connectivity is a prerequisite condition for wide-spread, optic cables to facilitate rapid exchange of digital information far-reaching digital services of any kind, while data hosting over long distances. However, deploying backbone networks infrastructure is an important enabler for services like DPI can be complex. Firstly, laying down fiber optic cables often that require data computing and hosting. involves significant investment and planning, especially when crossing diverse terrains such as urban areas, mountains, LAC has many of the foundational elements in place for remote regions, or protected areas. Additionally, securing effective DPI though there is wide diversity across countries. rights-of-way, obtaining permits, navigating regulatory In both of key layers—connectivity and data infrastructure— the frameworks, and traversing complicated geographies can LAC region overall has a relatively strong position compared pose challenges during deployment. Figure 3.1 below shows with other emerging and developing regions. But there the presence of fiber optic networks in the world. remain unserved and underserved regions that need to be addressed, particularly in rural, low income, highly dispersed, Figure 3.1 maps the large quantity of fiber cable infrastructure sparsely inhabited areas, where commercial service providers deployed in populated areas of LAC, showing its relatively cannot justify the investment. Universal connectivity requires strong position compared with other emerging and five main elements: developing regions. However, parts of this infrastructure now need replacement and upgrading to avoid obsolescence • Backbone networks and to accommodate growing needs. In addition, difficult • Backhaul networks LAC geographies (such as the Amazon Basin, the Andes and desert regions) have hindered deployment, leaving sparsely • Last mile networks inhabited areas unserved or underserved. Figure 3.2 below • User devices identifies the percentage of households and public institutions such as schools or clinics located farther than 10 kilometers • Affordability= from a fiber backbone network. On average, 17% of LAC Most plans, policies, projects, and regulations focus on the households (although as high as 37% in Nicaragua) and 25% first three of these elements. However, to reach universal of public institutions (58% in Ecuador) are located farther coverage, connectivity must also include the availability of than 10 km from a fiber network, making the provision of end-user devices and the affordability of these and of the broadband connectivity difficult, costly and unprofitable and services themselves, particularly for the less privileged. For thus uninteresting to commercial service providers. Public DPIs and end-to-end digital services to become universal involvement and investment are required, either directly or within each country or region, the five main elements of through Public Private Partnerships (PPPs). connectivity must be universal. 18 Figure 3.1: Fiber-optic networks worldwide Source: https://bbmaps.itu.int/bbmaps/ Figure 3.2: Percentage of households and public institutions more than 10 km away from fiber backbone networks 70% 60% 50% 40% 30% 20% 10% 0% Argentina Costa Rica Ecuador El Salvador Guatemala Guyana Honduras Jamaica Nicaragua Panama Dominican Republic Trinidad & Tobago Bahamas Barbados Belice Bolivia Brasil Chile Colombia Haiti Mexico Paraguay Peru Suriname Uruguay Venezuela Source: Prepared by IDB Key: percentage of households (red) and public institutions (blue) Bitcoin exchange 3 14 18 Credit information bureau 11 13 11 Instant payment system operated by a private provider (e.g. Visa or Mastercard) 14 5 16 Open banking platform 24 9 2 Instant payment system operated by the central bank 29 6 1 Digital identity system UNLOCKING THE POTENTIAL 0 35 OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 19 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE 0 5 10 15 20 25 30 35 40 3.2 BACKHAUL AND LAST Pacific (EAP) (which includes China, Japan and South Korea), again reinforcing LAC’s relatively strong position compared MILE NETWORKS with other emerging and developing regions. However, there is great variation among LAC countries as shown in Figure Mobile data is the dominant mode for last mile connection 3.3 below. The great variation in mobile connectivity across to data across the LAC region, as is the case in most regions LAC countries is even more apparent within countries. For around the world. Mobile data networks require backhaul example, Figure 3.4 compares mobile network coverage networks that connect them to the fiber backbone network. across Honduras with that across Colombia. However, even The GSMA’s Mobile Connectivity Index includes indicators in countries like Colombia in the top ranks of connectivity measuring the state of infrastructure, affordability and in the region as shown in Figure 6, there is a shortage of consumer readiness in countries around the world. According backhaul and last mile infrastructure in rural, low income, to this Index, the LAC average is close to that of East Asia and topographically challenging and sparsely inhabited areas. Figure 3.3: Mobile Connectivity Index for LAC countries 2022 0 10 20 30 40 50 60 70 80 90 Uruguay Brazil Chile Mexico Panama Costa Rica Colombia Argentina Peru Bahamas Paraguay Ecuador Trinidad and Tobago Dominican Republic Belize Bolivia Venezuela Barbados Suriname El Salvador Guyana Saint Vincent and the… Saint Lucia Guatemala Jamaica Honduras Nicaragua Haiti Source: GSMA Mobile Connectivity Index 2022; LAC average=61.8; global average=55.45 20 Figure 3.4: Mobile network coverage in Honduras and Colombia Honduras Colombia Source: https://www.ookla.com/ookla-for-good/open-data#interactive-map 3.3 AVAILABILITY AND digital centers operated by local entrepreneurs provide last mile access across the country to citizens unable to access AFFORDABILITY OF END-USER government services directly.20 DEVICES AND SERVICES But telecommunications services remain too expensive in LAC. To achieve universal connectivity and increase access to Making end-user devices and broadband services available digital services and DPIs, greater affordability of both devices and affordable, particularly to the poor, is an integral part of and internet access are vital. With LAC, the average basic connectivity. No purpose is served if broadband connectivity fixed and mobile broadband subscriptions represent 18.7 per is available but unaffordable to the wider population. The cent and 3.8 per cent of GNI per capita respectively21, much Broadband Commission’s 2025 Advocacy Target 02 recommends more costly than the recommended target. As an example, that “By 2025, entry-level broadband services should be the National Survey on Availability and Use of Information made affordable in low- and middle-income countries at Technologies in Homes (ENDUTIH) in Mexico shows that 32.5 less than 2 per cent of monthly Gross National Income (GNI) per cent of respondents that are non-users of the internet per capita”.19 Likewise, without affordable access devices, lack the economic resources to purchase a device or to pay potential users cannot benefit from digital services. While for internet service, or both.22 The situation is likely similar all smartphones are the most convenient way to access online across LAC.23 Furthermore, even in those households with services in general, access to DPIs can be designed to allow access to a device and to internet service, commonly only users to have feature phones or other indirect means of access one child at a time could attend their on-line classes during which increase their inclusivity. In Bangladesh, for example, the COVID pandemic because their parents could not afford additional devices. 19 https://www.broadbandcommission.org/advocacy-targets/ 20 Recognizing the blend of digital and physical at these touchpoints, this has been dubbed “Phygital Public Infrastructure”—see the article by Anir Chowdhury: https://govinsider.asia/intl-en/article/bangladeshs-phygital-public-infrastructure-bridges-dpi-theory-and-practice; 21 https://publications.iadb.org/publications/spanish/document/Informe-anual-del-Indice-de-Desarrollo-de-la-Banda-Ancha-brecha-digital-en-America- Latina-y-el-Caribe-IDBA-2021.pdf (page 50) 22 https://www.inegi.org.mx/programas/dutih/2022 23 Other interesting results from ENDUTIH are that 17.5% are not interested or don´t need Internet, 17.0% don´t know how to use it and 17.8% are not allowed to use Internet, results that highlight another important issue: lack digital literacy and skills, an issue that is as important as the five elements of connectivity. UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 21 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE 3.4 DATA STORAGE Using public cloud services raises additional considerations for public agencies especially. Paying ongoing fees for usage INFRASTRUCTURE of these services rather than incurring the capital expenditure of building dedicated data centers can be attractive for cash Like other digital services, DPIs require real time processing flow reasons for private users. However, governments in some and storage of large quantities of data and exchanging the countries prioritize allocating funds for capital investment over data among many different public and private entities. In current spending, making paying for public cloud services addition, DPIs typically require high levels of information seem less attractive. security because of the sensitive nature of data such as The location of data hosting and cross-border data flows biometric, demographic, and financial being processed and raises legal issues and policy concerns in a number of LAC of the essential nature of operations. countries. While in some LAC countries like Colombia 25 Data centers which can meet these requirements are therefore government promotes the use of public cloud services, in important enablers of DPIs. The data center infrastructure other countries data privacy or data residency laws impose across LAC is now developing fast. LAC countries hosted limitations or restrictions on the use of public cloud, especially 521 connected data centers in 2022, 10.5 per cent of the if these services are hosted beyond the country’s borders.26 global total, which reflects a many fold increase from 2010 Addressing these concerns requires a clear approach to when LAC hosted only 0.5 per cent of the world’s centers.24 classify different types of data based on risk and sensitivity with proportionate location and transfer rules. Concerns about DPI operators have an increasing range of choices regarding data security in the public cloud also constrain adoption for their data hosting needs. Typically, today they own or lease mission critical applications: 65 per cent of respondents to their own dedicated data centers. While having control of a recent survey of data center owners and operators said facilities may appear to offer greater security, it also requires that this is why they do not host mission critical applications having specialized capacity to manage them. Another option is in the public cloud.27 to co-locate dedicated servers in shared data center facilities managed by specialist firms. As their need for data storage Another option for DPI data needs is a hybrid cloud solution. and processing grows, DPI operators face further decisions. Hybrid cloud “ is a mixed computing environment where They may choose to build their own new data centers but this applications are run using a combination of computing, storage, requires large initial investments and a lead time of several and services in … public clouds and private clouds, including years to achieve full operational status. Using public cloud on-premises data centers”.28 This approach overcomes the hosting services operated by national, regional or ‘hyperscale’ limitations of private data center while addressing the real global companies offers another route to scale up capacity and perceived risks of public cloud services. Enabling the in a short time frame. growth and expansion of DPIs will likely require a full range of cloud storage solutions--private, hybrid and public. 24 Source: calculated for LAC countries based on data provided in the PeeringDB database https://www.peeringdb.com/ 25 https://www.mintic.gov.co/portal/inicio/Sala-de-prensa/Noticias/103896:Se-amplian-y-facilitan-las-opciones-para-que-entidades-del-Estado-se- suban-a-la-nube - https://www.colombiacompra.gov.co/tienda-virtual-del-estado-colombiano/tecnologia/servicios-de-nube-publica-iv 26 Brasil: Lei Geral de Proteção de Dados (Lei Nº 13.709/2018); Argentina: Ley 25.326 de Protección de Datos Personales; Mexico: Ley Federal de Protección de Datos Personales; Uruguay: Ley Nº 18.331 de Protección de Datos Personales. 27 https://uptimeinstitute.com/resources/research-and-reports/uptime-institute-global-data-center-survey-results-2023 The survey was conducted online from February 2023 to April 2023 and collected responses from more than 850 data center owners and operators, as well as nearly 700 vendors and consultants 28 https://cloud.google.com/learn/what-is-hybrid-cloud 22 4 MATURITY OF DPI ACROSS LAC This section explores how far the DPI concept has taken of 33) LAC countries had in 2022. These strategies typically hold in the LAC region. cover themes like connectivity, open data, and interoperability. Some countries have since refreshed their digital strategies such as Colombia in early 2024 and Brazil plans to do so 4.1 HOW DPI FITS IN during 2024. It is increasingly common for newer strategies WITH CURRENT LAC also to prioritize greater data use for public services and innovation through promoting national data infrastructure, GOVERNMENT PRIORITIES as is the case in Argentina, Brazil, Chile, Colombia, and Peru. Data exchange infrastructure is not only a major category DPI momentum in LAC is clearly accelerating. Although of DPI, but it lies at the heart of the ability for different DPIs DPI is not yet reflected explicitly as such in national digital to be combined and to interoperate. Colombia’s National strategies, respondents from almost two-thirds of surveyed Data Infrastructure Plan (PNID) (see Box 4.1) provides for the countries indicated that they already had government policies to Presidential appointment of a National Data Coordinator, encourage some forms of DPI, while another quarter indicated as well as for explicit monitoring and evaluation of progress that such policies were expected soon. Respondents from under the plan. the remaining countries indicated that while there were no such policies, there should be. The Network for Latin American Digital Government Agencies (RedGEALC) working groups demonstrate how However, as a new concept, DPI is not yet reflected explicitly national digital priorities relate to DPI. The RedGEALC in stated digital priorities of LAC governments. These are was established in 2003 under the auspices of a secretariat typically set out in national digital strategies which most (24 housed at the Organization of American States and has been Box 4.1: Colombia’s National Data Infrastructure Plan The National Data Infrastructure Plan (PNID) is a national data strategy that defines the public data infrastructure and the actions necessary for its management, implementation and sustainability. The National Plan was developed by three national Government structures–the Ministry of Information and Communications Technologies, the National Planning Department and the Administrative Department of the Presidency of the Republic–and involves ongoing coordination between the private sector, academia and civil society. A Presidential Decree (1389 of 2022) established a clear model for public data governance at three levels: (i) strategic (through Presidential appointment of a National Data Coordinator), (ii) tactical (with Chief Data Officers, technical groups and technical support); and (iii) operational. A Presidential advisor with substantial private sector experience was appointed in 2023 as the first National Data Coordinator. The Coordinator’s role is to monitor, encourage and guide implementation of the plan. In addition, a list of quantitative and qualitative indicators for monitoring implementation are made publicly available and updated through https://infraestructuradatos.gov.co/798/w3-channel.html. UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 23 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE Figure 4.1: RedGEALC working groups Touch on DPI Source: https://www.redgealc.org/ funded by the IADB, among other organizations. RedGEALC it not” fashion. Having a spectrum allows for evolution and provides a capacity building and knowledge exchange change over time. However, the information base does not platform for its member states. Much of the work of the yet exist in LAC which allows for this to be done. network is undertaken through working groups in areas of shared interest that develop annual work plans. While DPI In the absence of a comprehensive accepted definition or is not explicitly referenced yet, the DPI agenda touches as a definitive listing, existing approaches rely on self-identification. cross-cutting theme in at least three of the current working In the Global DPI Repository, for example, G20 countries are groups—interoperability, digital signature (as a category of able to self-identify and list those systems which they believe DPI) and public software which promotes digital public goods qualify. In the LAC DPI survey, we asked respondents to (DPGs) which may be building blocks in DPIs (see Annex for self-identify whether DPIs existed in each of the categories more on the relationship between DPGs and DPI). provided in their countries. Although the survey question provided the definitions for each stated in the Box 4.2 below, In addition to this continental view, individual countries have respondents’ answers depend on their level of knowledge and signaled interest in DPI in different ways: understanding. Wherever possible, responses were probed in interviews. In addition, WBG ID4D assessments and WBG • The Digital Economy Working Group of the G20 under Digital Economy for LAC (DE4LAC) are available to provide the Brazilian Presidency in 2024. Brazil has signaled its external validation in some of these countries. Where this is intent to focus especially on digital identity and data interoperability.29 • LAC G20 members Brazil and Argentina have both Box 4.2 Definitions provided in the LAC DPI cataloged certain of their systems as DPIs in the Global survey as guidance to respondents DPI Repository established under the Indian G20 presidency alongside other G20 DPI projects. Payments: An operating payment scheme which is available • From LAC, Guatemala and the Dominican Republic have 24/7, open to different categories of PSP, and enables so far signed on to the 50 in 5 DPI initiative launched in instant transfers to any account holder late 2023 which commits signatories to launching DPI within five years. Other countries have signaled interest Digital ID: An operating ID scheme which enables any in signing. user in the country to authenticate their identity on-line across multiple applications. 4.2 CURRENT DPIS IN LAC Signature and consent (trust services): An operating Public Key Infrastructure (PKI) scheme which enables Section 2 made clear that the definitions of DPI do not users to provide advanced digital signatures which are yet provide complete clarity over when a particular digital enforceable and equivalent. system or platform is in fact a DPI. In many ways, it would be more helpful to assess candidate DPIs on a spectrum of Data exchange: An operating scheme which enables the characteristics of ‘DPIness’, rather than in a binary “is it or is secure sharing of data for re-use across multiple agencies or parties. 29 See Wilson Center blog, 24 February 2024, available here 24 Table 4.1: LAC DPI systems identified Country Payment Digital ID Data exchange Instant payments Online Advanced digital authentication signature# Argentinaa * Bolivia * Brazilb * Chile * Colombiac * Costa Rica Dominica ** Dominican Republic Ecuador ** El Salvadord Guatemalae ** Hondurasf México ** OECS (Organization of Eastern Caribbean States)g Panamá * Paraguay * Peruh * Saint Lucia ** St Vincent & Grenadines Trinidad and Tobago * Uruguay * KEY: Operational Operational (confirmed by follow up or 3rd party source No data (self-asserted) cited where published) Not yet but planned No (self-asserted) (self-asserted) Source: LAC DPI survey responses and own analysis. Note: *: online digital identity exists according to ID4D Global Dataset 2021; **: online digital identity did not exist in 2021 (Metz et al 2024) #: for more country specific data, see col I.42 in WBG GovTech Maturity Index Dataset a https://www.dpi.global/globaldpi/argentina_list b https://www.dpi.global/globaldpi/brazil_list c https://openknowledge.worldbank.org/entities/publication/88948415-77f6-41fb-a8c0-5d8d415134b5 d https://openknowledge.worldbank.org/server/api/core/bitstreams/e3900631-86aa-533a-b8ad-36e1faec9e21/content e https://www.usaid.gov/digital-development/guatemala-deca f https://www.usaid.gov/digital-development/honduras-deca g https://www.usaid.gov/digital-development/eastern-and-southern-caribbean-digital-ecosystem-country-assessment h https://www.usaid.gov/digital-development/peru-digital-ecosystem-country-assessment UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 25 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE possible, a darker green shade is shown in Table 4.1 below. participants will differ from digital identity provided directly Note also that the question was about existence of a DPI in by a public agency, even if common norms like transparency each category, not about how widely it is used. of decision making apply. Our survey and analysis show that a wide range of potential Sound data governance measures are essential for the secure DPI systems are likely available across LAC (from the and effective operation of DPIs. Data governance involves predominance of green in the Table above). The tan-colored defining rules for processing and using data, which is a key cells show that in most of the remaining cases, plans are aspect shaped by national laws and internal protocols. DPIs underway to fill the gap. As expected, the presence of a full must incorporate robust data governance frameworks that suite of DPI instances correlates strongly with country size and ensure the privacy and security of personal data through income level, with smaller Caribbean and central American technical, operational, and legal measures. In the LAC countries less likely to have the suite operational today. region, where data protection laws and practices may vary, implementing comprehensive data governance is vital to However, more detailed analysis is needed. Not all ID, building trust and ensuring compliance with regional and payments, and data sharing systems are created equal. A international standards. more detailed evaluation is required to determine the degree to which the above meet key criteria of a DPI, including Multi-stakeholder involvement is critical for the success of DPIs. openness, interoperability, modularity and availability to Effective governance of DPIs requires the inclusion of various public and private sectors. stakeholders in the decision-making process. This includes ensuring access and representation within the governance In addition, good governance is crucial for DPIs to achieve structure, fostering public-private partnerships, and engaging their purposes and comply with societal laws and norms. community-based approaches. In LAC, diverse stakeholder DPI governance includes both external elements of national engagement can help tailor DPIs to meet local needs and policy objectives and mandates, as well as internal governance contexts, ensuring broader acceptance and utilization. By arrangements. These arrangements define how DPI operators involving multiple stakeholders, DPIs can better align with and schemes are owned, managed, and make decisions. public interest objectives and enhance their relevance and Effective governance ensures that DPIs operate efficiently impact across different sectors. The scope of this report does and fairly, aligning with the principles of transparency and not allow the issue of governance to be addressed in any accountability. Consideration of governance is needed not depth across the variety of types of DPI and LAC countries, only at the design phase but throughout the DPI lifecycle if but the importance of the issue suggests that it be prioritized DPIs are to be effective and efficient. for further analysis in LAC. The governance models used in DPI around the world and in LAC vary widely. The Interim Report of the UN DPI 4.3 VALUE OF USING Safeguards Initiative30 identified 6 different DPI governance models, ranging from government-led to private sector-led THE TERM DPI and community-based, and may include multi-stakeholder and public-private partnership approaches. There is certainly The spread of the term “DPI” appears to be welcomed in “no-one-size-fits-all blueprint” for DPIs.31 Rather, the governance LAC. Given that DPI is already present in LAC even without approach has to be intentionally designed and maintained extensive use of the term DPI, how useful is it to introduce the to fit the local context as well as the nature of each DPI new term? In the DPI survey, respondents generally answered especially in diverse regions like LAC: the governance of “useful”. Their average response of 2.1 on a scale where 1=very payment systems which rely on payment providers as direct useful; 3=not sure/not proven; 5=very little useful suggests 30 Interim Report April 2024 available here: https://1945836565-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FcO6RX QuE2L2kjyKRy5qr%2Fuploads%2FJ0ITERlMuhGml4MFyctp%2F24.04.27_Leveraging%20DPI%20for%20Safe%20and%20Inclusive%20Societies_ V2.pdf?alt=media&token=3468859c-7067-4918-aecf-5d1d313d9336 31 This is one of the conclusions specifically from a general review of governance in retail payments systems published by WBG in 2021 available here: https://documents1.worldbank.org/curated/en/539601630306074694/pdf/Governance-of-Retail-Payment-Systems-Keeping-Pace-with-Changing-Markets. pdf 26 10% 0% Lack of capacity Lack of trust Lack of Lack of Something within government among citizens affordability compelling else agencies to design and private sectors use cases and oversee about digital solutions Figure 4.2: How the DPI approach is seen as helpful 35 30 29 25 20 20 15 13 10 5 2 0 It provides a new It focuses attention on It unlocks new finance Something else paradigm for the whole of digital and aid to support digital development development, rather than digital deployment the parts Source: LAC DPI survey; multiple choice possible general openness to using the new term.32 When probed the whole rather than the individual parts”. This expectation where respondents saw value in the term, the highest number anticipates substantial benefits from applying a ‘whole of of respondents chose “provides a new paradigm for digital DPI’ approach, not only from improving individual layers. development” (see Figure 4.2). A significant number also The few who opted for “something else” and supplemented acknowledged that DPI emphasizes “the need to consider their answers emphasized the importance of DPI in delivering basic essential services. 32 The wording of the survey question was: “If the goal is to promote inclusive digital development in your country, how useful do you think it is to use the term DPI?” UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 27 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE BY USER (G&C) BY SCALE Govtech systems Digital public Systems used platforms to enable effective 5 Large scale digital provision of platforms owned and government Gov enterprise Other payment often operated by services to systems IFMS schemes private sector citizens DPI WITH LAC CHARACTERISTICS Tax MIS systems payment e-commerce platforms gateways This section highlights distinct LAC DPI implementation themes and characteristics. Even though the term DPI is not 5.1 FAST PAYMENT SYSTEMS yet in widespread usage, the previous sections have shown Fast payment systems both how LAC already has the foundations in place for DPI Several LAC countries have had instant, or near instant, Online authentication retail payment systems for a long time. Mexico’s Sistema development and substantial progress on core DPI building digital registries blocks. DPI in LAC has several distinct characteristics, each de Pagos Electronicos Interbancarios (SPEI), for example, e-signature data of which is further developed in a subsequent subsection. dates back to 2008, although it only became available 24/7 exchange systems in 2015; and then in 2019 added functionality to support BY FUNCTION • Fast payments are increasingly widespread although mobile phone payments at participating merchants, branded DPI take-up is uneven. CoDI (Cobra Digital). Chile’s TEF Online has been available Large scale systems • Global DPGs like X-Road are being widely used as noted, an instant since 2010. As identified by whopayment can system by itself building blocks in LAC. does not necessarily benefitqualify from as a them DPI. Additional criteria are openness and inclusivity of usage. The World Bank’s FASTT • Cross border digital authentication is already in place Payments Project lists several criteria that qualify a system between some countries. as a “fast payment system”: near instant availability of funds, • A DPI approach is already helpful to support social 24/7 availability and openness to widespread participation. transfer schemes, an area in which LAC has long been Although a number of systems across the region now share considered a global innovator. these characteristics, the rates of usage per capita vary widely (see Figure 5.1). Figure 5.1: Transactions per head per month (2022*) 16 14.2 14 Monthly transactions per head 12 10 8 6 5.2 4 2.3 2 0.4 0.23 0.1 0.03 0 Brazil Chile Mexico Peru El Salvador Argentina Colombia Note: El Salvador figure is for 2023, calculated using the average Transfer365 volume data reported by BCR for the year. Source: Countries other than El Salvador: ACI Prime Time for Real Time 2023 available here 28 Launched in 2020, Brazil’s PIX is one of the most recent systems require careful balancing of interests: systems free instant payments systems in the region. PIX has seen to use like CoDI may not provide sufficient incentives for rapid takeup, making it one of the fastest growing payment incumbent financial institutions to participate wholeheartedly. systems in the world at present.33 As Figure 5.1 shows, it is the most widely used: in February 2024, PIX reported 147 million registered natural persons as users out of a total 5.2 DIGITAL IDENTITY SYSTEMS population of 217 million.34 PIX is one of a new generation of retail payments systems worldwide in which the central Digital identification systems still lag in LAC. This is so even bank plays an active role in all three capacities of overseer, though many LAC countries now report that over 90% of the scheme owner and operator. El Salvador’s Transfer365 system adult population are registered in identity databases and an is another example. Introduced in 2021, Transfer365 allows equally high proportion of births certified.35 Almost all (28 out users to initiate transfers to other financial accounts using of 33) LAC countries reported having a national ID system in their mobile phones. Currently availability of funds for the place in 2022 and maintained the registries in digital format.36 recipient is within three minutes so it is yet not considered This achievement follows concerted enrolment drives in the ”instant”, although there are plans to accelerate the speed past 10 years in a number of LAC countries. However, the of transfers. However, Transfer365 does already offer retail number of countries with a reliable and widely-used digital cross-border payments linking central American countries ID for verification and authentication for in-person and online and the Dominican Republic. transactions is much lower: only seven out of 26 LAC countries reported having this available in the 2022 Global Financial The differential uptake of fast payments in LAC underlines Inclusion and Consumer Protection Survey.37 the point that DPI usage is not automatic. For end users to adopt at scale requires clear value propositions, ubiquitous Over the past decade, the WBG’s ID4D diagnostics have deeply availability and trusted processes. These are necessary even if analyzed identity ecosystems. Diagnostics completed for six central banks mandate the participation of financial institutions LAC countries38 have uncovered some common problems: to achieve critical mass, as the Central Bank of Brazil did for a fragmentation of ID systems across different authorities; a larger financial institutions in PIX. This all takes sustained lack of coordination between identity agencies that control ID effort and investment over time, together with clarity of registers but are not responsible for how they are used; and vision for how a system functions as a DPI. Brazil’s PIX would lack of capacity in digital government agencies responsible rank highly on a scale of ‘DPI-ness’ which takes into account for digital identity profiles. Most of the six countries now offer the type and range of use cases, the openness to different some form of online authentication for government services, categories of participants and the use of modular elements although usage is generally low. Brazil is one exception and common standards. This suggests that the more a digital where almost all state-level ID systems accept the federal system is designed to function as an DPI, with all the key authentication system for online authentication, creating a characteristics, the more likely it will gain widespread usage. powerful foundational digital identity to access 4500 digital services from over 1000 public agencies. In 2023, the Gov. Other factors, including who pays and how for the system, BR digital ID reported 153 million users, with 250 million also affect DPI uptake and sustainability. PIX is free to use for authentications happening each month.39 payment initiators although merchants pay a commission on funds received but it is still cheaper than available alternatives. Trust services including e-signatures are often regarded as Transfer365 is not free but has substantially reduced the cost digital ID since they rely on some form of digital authentication. of making cross-border transfers in El Salvador. However, the Almost all (29 of 33) LAC countries have passed regulations incentives around participation and usage in digital payment providing for e-signatures which can be equivalent to 33 More background on PIX is available in this 2023 IMF Paper: “Pix: Brazil’s Successful Instant Payment System” available here https://www.elibrary.imf. org/view/journals/002/2023/289/article-A004-en.xml 34 BCB: https://www.bcb.gov.br/en/financialstability/pixstatistics for individual users 35 ID4D dataset 2021 36 Govtech Maturity Index Database 2022, columns I-40, I-41 37 Available here: https://www.worldbank.org/en/topic/financialinclusion/brief/ficpsurvey 38 These are: Mexico, Peru, Bolivia, Brazil, DR, Colombia 39 Source: https://www.dpi.global/globaldpi/gbr_digital_id UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 29 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE non-digital forms, although only 19 report having the Public Key Infrastructure (PKI) to support this; and of those, only 5.3 DATA EXCHANGE SYSTEMS 12 said in 2022 that both the law and infrastructure were operational.40 Even when advanced e-signatures are operational LAC governments have increasingly implemented digital and available, usage is typically low. systems to support secure data exchange at least among government departments. Governments have adopted Cross-border recognition of digital signatures is growing. different approaches: examples include a centralized platform In 2022, 23 RedGEALC member states signed a declaration approach in the case of Uruguay led by digital government to promote cross border recognition of digital signatures agency AGESIC; and federated approaches in Colombia among them. This declaration included the establishment and El Salvador. 43 Under federated approaches, data is of a regional list of trusted service providers from each exchanged directly between entities which are part of the signatory country. The list is a technical instrument that can exchange scheme without going through an intermediary. facilitate recognition but does not replace the need for legal The use of standardized protocols assures the integrity and recognition through legislative due process. confidentiality of the exchange. Similarly, a next stage in the promotion of cross border digital Digital public good software has been deployed quite activity involves providing for cross border authentication of widely especially for these government data exchanges. citizens. The Governments of Argentina and Uruguay each have As noted earlier, digital public goods (DPGs) can provide their own digital identification systems, called “Authenticar” building blocks for DPI systems. At least four LAC countries and “ID Uruguay”. A pilot project under the auspices of have deployed X-Road software to support decentralized RedGEALC in these two countries will enable people from data exchange systems among participating departments in one country to transact digitally in the other using the same defined data ecosystems. X-Road was developed in Estonia forms of identity and with the same security. In a presentation but is now available as an open-source solution through the made at the RedGEALC meetings in Santiago in November Nordic Institute of Interoperability Solutions, a partnership 2023, officials from each country presented the prototype of platform for IT collaboration between several Nordic countries. the Ciudadano Digital Rioplatense project, supported by an IADB grant under the Regional Public Goods Initiative.41 Cross Among the LAC countries reporting deployments of X-Road border authentication enables Uruguay citizens to identify at different levels of government are: themselves on a government portal in Argentina using forms of digital identities issued in Uruguay. Other groups of LAC • Colombia: The Colombian National Digital Agency countries, such as the Alianza del Pacifico of countries along chose X-Road as an interoperability technology for the Pacific coast, are also piloting cross border authentication. the government in 2018, although it is used by only a few departments. While most forms of national digital authentication to • Argentina: First implemented at a provincial level date rely on checking against centralized databases of in Neuquen, X-Road is now considered part of the identity attributes, there is increasing interest worldwide in Argentinian government roadmap for Interoperability decentralized forms of identity. Often called self sovereign of Data and services. identity, these approaches allow each person, or ID subject, to store their own attributes in their own personal data stores • Brazil: Two Brazilian states, Mato Grosso and Amapa, have and authorize access on request to authenticate. Cities in LAC implemented X-Road for data interoperability although including Bogota, Buenos Aires and Monterrey have already it is not used by the federal government. shown interest in applying this approach.42 • El Salvador: The national Secretariat of Innovation chose to deploy X-Road as part of their Tenoli platform allowing government agencies to exchange data using the internet. 40 Govtech Maturity Index Database 2022, column I-42 41 The functionality project is showcased in this informational Youtube video. 42 A regional workshop on the topic was held in Bogota in December 2023-- https://www.caf.com/es/actualidad/noticias/2023/12/caf-en-alianza-con- fundacion-iov-impulsa-la-identidad-digital-auto-soberana-como-infraestructura-publica-digital-para-la-region/ 43 RedGEALC 2021 p.9 30 As an open-source software solution supported by communities in the LAC region and beyond. The region is also known as Series1 of developers worldwide, X-Road can be extended and 7 a pioneer in innovative delivery systems for social transfers applied in different contexts. Colombia, Argentina, Brazil and including the use of social registries and digital payments. Mexico are four of the top six most active X-Road communities Social assistance applies to a considerable portion of the LAC in the world by number of members according to X-Road population: according to the World Bank’s ASPIRE database World Map. X-Road features alongside other open-source of social protection, around one third of people were direct or software on IDB’s Code for Development (Code4Dev) catalog, indirect beneficiaries 1 of social assistance programs in 2022. a broad range of open-source software. Code4Dev also connects developers in the region willing to collaborate on Digitizing these schemes has become a priority for many the development and use of open-source software relevant reasons: to better identify eligible people and reduce to the needs of LAC societies. As Annex A explains, DPGs leakage, improve efficiency and reduce the cost of delivery, like these are one option to use in deploying DPIs, although and enable quick responses to shocks. Figure 5.2 below as software, they are not themselves DPIs. depicts the delivery systems which typically support social assistance, including the registration processes, dynamic social registries and a range of management information 5.4 DPI USE CASES IN LAC systems (MIS) with case management tools. Underneath this layer of sectoral solutions, DPIs provide foundational building blocks. DPIs bolster what the World Bank has called The LAC region is a source of innovation in the design and Powered by Bing “next generation G2P” services through ensuring that social programs. delivery of social assistance© Early GeoNames, Microsoft, conditional OpenStreetMap, cash TomTom protection schemes do not need to create and maintain new transfer programs originated in Mexico and Brazil in the late systems for enrolment, authentication and payments but can 1990’s and have since been widely studied and replicated rely on what is already available. In addition to delivering Figure 5.2: DPIs as building blocks in the social transfer sector BUILDING BLOCKS FOR HIGH-IMPACT SERVICES People Government Private sector (e.g., PSPs) Applications Applicants Digital Registration Registries & Databases Registrants Dynamic Social Registries Standards, Systems & Case Program Payment Beneficiaries MIS GRM Management MIS MIS DPI leveraged to … Make G2P transfers and Digital Payments the use of ID for authentication Vehicles Verify beneficiary identity at Digital Identity onboarding and/or delivery Tax Land Data Sharing Verify eligibility criteria Source: World Bank 2024 UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 31 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE Box 5.1 Examples of DPIs enabling LAC social assistance schemes Data sharing: To target beneficiaries of the Ingreso Solidario program, which provided emergency cash transfers during Covid, the National Planning Department of Colombia cross checked the data from the social registry (known as SISBEN). Cross checking took place against a set of administrative databases, including beneficiaries of other programs and data from outside the social protection agency, such as data on who was banked and who was not, as well as data from mobile network operators. Costa Rica has also been improving efficiency of social assistance delivery, implementing a mechanism where the Treasury delivers directly into the beneficiaries’ bank account of their choice. Brazil’s Emergency Aid (Auxílio Emergencial) program was established under the Ministry of Citizenship during Covid-19 and assisted over half the population in a short period. To achieve this, data from 17 different databases were cross checked, including company salary reports and prison registers, to target initial eligibility, and thereafter to maintain monthly verification checks. Brazil’s Ministry also created databases to track fraud and also shared data with the Internal Revenue Agency for income tax declarations. In a G2PX webinar reporting on learning from this experience, Brazilian authorities specifically identified the process of data sharing and integration as important ingredients for success. Digital identity: Chile already has a single sign-on system to government services enabling civil servants to authenticate themselves to access all program information about beneficiaries, including health records where relevant. Brazil has used a digital authentication system to cross-check against Cadastro Unico, co-managed by the Caixa (the front end) and the Ministry of Citizenship (the backend). Remote digital authentication also allowed the rapid opening of basic bank accounts for beneficiaries in various places, including Colombia. Digital payments: Brazil’s Emergency Aid payments were made directly into virtual debit card accounts set up by the Caixa, a state-owned bank. Known as Digital Social Savings (PSD), these accounts gave recipients mobile access to Brazil’s fast payment system PIX, mitigating the lack of having a physical debit card for point-of-sale transactions. This functionality through a DPI enabled them to make payments and transfer money quickly and at no cost from the accounts without needing first to withdraw cash, which would have placed great pressure on cash handling systems. While some countries like Brazil and Chile use a state bank as an efficient and scale payment provider for the cash transfers, in other countries, digital payment schemes open the possibility of allowing beneficiaries to choose their financial provider. For example, in 2022, Colombia piloted a customer choice scheme in which 40,000 Jóvenes en Acción beneficiaries could elect into which financial account to be paid through the payment system. Notes: a Brazil´s Auxilio Emergencial: How digitization supported the response to COVID-19, G2Px webinar December 2021 available here: https://www. worldbank.org/en/events/2021/12/15/Brazils-Auxilio-Emergencial b This process has been fully described in Lara De Arruda, Pedro; Lazarotto De Andrade, Marina; Falcao Silva, Tiago; Teixeira Barbosa, Diana; Morgandi, Matteo. The payment system used by Auxílio Emergencial, the introduction of the digital social account, and the banking of more than 100 million people in 9 months. World Bank Latin American and Caribbean Studies. Washington, DC: World Bank. available here. social transfers, DPIs can also support related needs–for DPI systems can inter-operate to create additional value for example, digital authentication enables the remote opening their users. A leading example is the connection between of payment accounts for beneficiaries who lack accounts to open finance schemes, an application of data exchange in receive transfers. Also, data sharing schemes allow eligibility the financial data space, and fast payment systems. As a cross checking against other databases which can both recent World Bank Focus Note states: “Fast payments and identify eligible missing beneficiaries and eliminate ineligible claimants. Some of these elements are already present in LAC today (see Box 5.1). 32 open banking services are natural complements, and their through a decree initially mandating only information sharing integration generates synergies that can enable the more by financial institutions. The scheme progressed rapidly to rapid adoption of both.”44 introduce payment initiation as a next phase between late 2021 and early 2023. The Central Bank has mandated a Open finance seeks to enable users to share their financial standardized Application Programming Interface (API) for data with third parties more securely and efficiently. But payment initiation using PIX. as part of encouraging competition and innovation in the financial sector, open finance often also provides for payment The Brazilian Open Finance scheme has experienced very initiation services. These services allow a user to initiate and rapid adoption: two years after its start, 16 per cent of authorize a payment transaction from their account using a Brazilian adults had used open finance as of September third-party service specialized in providing a convenient and 2023. Half of all adults were already aware of the scheme user-friendly interface especially for merchant payments. As according to a nationally representative survey in 2023.46 a result, users can initiate fast payments from other sites, By comparison, the UK’s Open Banking scheme, considered increasing the convenience and usability of these payments one of the world’s most successful, reached 11 per cent of as substitutes for cards or cash. Also, payment initiation the British population within four years from its start.47 The services help secure the user interface since sensitive data Open Finance Brazil Annual Report for 2022 reported 16 is not shared with the merchant to not subject it to the data institutions already active in payment initiation, although 91 breach risk. were registered to play this role (of a total of 886 participating institutions in Open Finance). API calls for payment initiation Despite increasing interest, open finance schemes are still rare averaged around 2 million per week during the last quarter of in LAC,45 in most cases existing as a regulation or proposed 2023. This number is small relative to API calls for information policy rather than yet as active practice. The exception is the which average around 2 billion per week but is growing. Central Bank of Brazil‘s Open Finance scheme initiated in 2021 44 Open Banking in the context of Fast Payments. World Bank Payment Systems Development Group, Focus Note August 2023, available here. p.2 45 Only three (Ecuador, Mexico and Paraguay) of 13 LAC jurisdictions reporting to the Global FCIP database in 2022 reported having adopted Open Banking which is the more sector-specific form of Open Finance applying to bank-held data only 46 Open Finance: Lessons from Brazil, CGAP webinar November 2023 available here 47 OBIE Impact Report 2023 available here UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 33 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE 6 BARRIERS AND APPROACHES TO SCALING DPI IN LAC While DPI systems already exist in many LAC countries, not digital skills, where LAC countries are no exception to the all are yet widely used. This is in part because many systems general skills constraint faced around the world. The blend are relatively new, although this is not necessarily a reason for of skills and experience required to manage data and digital 5% low usage. The examples of usage of both the PIX payment services on a large scale is quite specific and in high demand system and open finance scheme in Brazil show that digital in both private and public sectors. However, the general 18% adoption can indeed be very rapid with appropriate design digital skills shortage is exacerbated in the public sector 5% and a usage enabling ecosystem. However, apart from the where pay scales cannot match rising private remuneration. relative immaturity of DPI in much of the LAC region, there A second dimension is the importance of having adequate are other barriers which impede adoption 10% and usage. and sustained implementation capacity when government takes responsibility for building and operating DPI, beyond The LAC DPI survey asked about the greatest barriers to a role in design or oversight only. DPI deployment and adoption (Figure 6.1). 12% 20% Overcoming lack of human capacity will require concerted Lack of government capacity represents a significant obstacle. efforts on various levels. International sharing of experience Three out of every four respondents cited “lack of capacity will help, and respondents almost universally indicated an within government agencies to design and oversee” DPI. In interest in obtaining Director general Technical expert more information about DPI through a follow-up interviews, numerous dimensions to the capacity range of channels. However, survey respondents tended to Senior director Professional issue became apparent. The first is a general shortage of agree that lack of skill to execute was a bigger barrier than Manager Other Figure 6.1: Most cited barriers to the deployment of DPI in LAC 80% 73% 70% 60% 50% 40% 40% 33% 30% 28% 20% 20% 10% 0% Lack of capacity Lack of trust Lack of Lack of Something within government among citizens affordability compelling else agencies to design and private sectors use cases and oversee about digital solutions Source: DPI in LAC Survey 2024 35 30 29 25 34 20 20 lack of knowledge.48 At a country level, work has started to Overcoming coordination failure is linked to government define competences and develop the training and support capacity. Since DPIs, by definition, provide solutions across to meet them. In late 2023, Colombia published a profile government departments, coordinating and prioritizing for Chief Data Officers in public sector agencies to define requires strong leadership. In some countries, recognition competencies required in this role, laying the groundwork for of the importance of high-level coordination has led to skills building.49 Implementing this approach will take time; appointment of senior advisors who combine experience and will depend on the flow of digital skills into government with political access. Colombia, for example, appointed an agencies and the ability to retain them. experienced businessperson in the Presidency to fill the role of the first National Data Coordinator through a 2022 For some agencies, lack of capacity was a financial as much Presidential decree. as a human constraint. Governments across the region are fiscally constrained.50 While fiscal constraints limit government The second most cited set of barriers relate to absence of spending overall, Finance Ministries tend to underfund DPI-like citizen trust in digital services. Digital trust is not easy to investments because they do not fully appreciate their potential measure, let alone to maintain and build in the face of the return. Digital government agencies expressed the hope that rising threats of online scams and cyberthreats. In common the rising profile of DPI will lead to more understanding and with instant payment systems elsewhere, Brazil’s PIX has support from Finance Ministries. A few interviewees also experienced rising fraud, for example.53 A 2022 representative suggested that government budgeting practices create survey of consumer experience worldwide including two incentives which may exacerbate the problem; that is, for some countries in LAC (Brazil and Mexico) found that 33 per cent line departments, using DPIs reduces their capital expenditure of people had been a victim of a data breach, with 82 per (associated with their own software and hardware purchases) cent of those experiencing a negative consequence.54 The while increasing their operating expenditure. Where DPIs are same survey reported relatively high levels of digital trust made available to line departments without charge, this may in these two countries compared with others in the sample. reduce their budget allocation overall. Digital government However, this finding is somewhat different from what would agencies promoting DPI need to work with Finance Ministries be expected from the country rankings in Digital Planet‘s to ensure that they understand the return on investment; and Digital Trust Index 2020. The parties involved in relying on that existing budgeting procedures do not constrain adoption. or providing digital trust in Brazil and Mexico (two of the four LAC countries covered by this index) showed a lower-than- The costs to build and operate DPIs may be recoverable average level of55 through imposing participant fees, user charges or levies. Survey respondents indicated some ambivalence over Whatever the general levels of trust across countries, the whether DPIs should operate on the basis of cost recovery Thales Consumer Digital Index found that government or not.51 Whether and how DPIs charge, or allow participants was generally among the least trusted sectors for digital to charge, end users will affect the extent to which end user exchange, while the financial sector was among the highest. affordability, the third most cited barrier category, becomes In the LAC DPI survey, respondents split evenly over whether a barrier to adoption. For DPIs that perform core public and their citizens would trust privately-operated DPIs. A low trust social functions (for example, delivery of social benefits), environment clearly creates headwinds for DPI adoption ensuring that such costs are not passed on to the end users and usage. However, through consistent application and is essential for digital inclusion.52 enforcement of security and privacy.56 DPIs can also play a role in building awareness and trust. This has clearly been the 48 From responses tending to agree with the attitudinal statement: ”In this country, the biggest challenge with a DPI approach is in the execution, not the understanding”. 49 Available here: https://infraestructuradatos.gov.co/798/articles-210402_recurso_1.pdf 50 Wired Review, World Bank 2023 51 Responses averaged 2.6, almost at the neutral middle, of the five-point opinion scale offered to them. 52 See Principles on Identification for Sustainable Development: http://documents.worldbank.org/curated/en/213581486378184357/Principles-on- Identification-for-Sustainable-Development-Toward-the-Digital-Age. 53 FASTT (2023) Fraud Risks in Fast Payments available here 54 Thales Consumer Digital Trust Index 2022 available here: https://cpl.thalesgroup.com/data-trust-index 55 Digital Planet 2020 available here 56 23 of 33 LAC countries had implemented data protection laws in 2022 (GTMI 2022). However, the proportion of LAC countries with operational agencies is lower: only 15 had a functioning data protection agency, while 4 said in 2022 that they were working on setting one up. UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 35 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE case in general with Brazil’s fast growing digital payments and Finally, a number of respondents mentioned that political open finance schemes, despite the surge in incidents. The swings could undermine long-term commitment to execute. flip side of this is the concern that, if not well implemented It is notable that some, though not all, of the most active and if compromised, large centralized DPIs could undermine DPI deployments in LAC to date stem from central bank citizen trust. Survey respondents indicated some concern initiatives. Central banks are often better equipped to take about this risk, but not at acute levels.57 a longer-term view of building infrastructure than allowed by typical electoral cycles. Because of autonomous staffing Some survey respondents mentioned affordability as a barrier policies, they may also be better able to attract and retain core to DPI deployment. Affordability concerns could refer to the skills than government departments. This is not to suggest DPI service, when a charge is levied for use; or more likely, that central banks are always well suited to building and to the lack of affordability for smart phones and broadband operating retail infrastructure; but it does point to the need internet access required for DPI usage as we saw in Section to have realistic understanding of the time frames to sustain 3. In either case, affordability clearly needs to be taken into consistent efforts to build and operate it. Some interviewees account in DPI design. expressed the hope that greater political understanding and acceptance of the increasingly widely accepted merits of DPI could help to insulate the implementation of a DPI approach from political turbulence. 57 Responses averaged 2.4 on the scale of 1 to 5, tending slightly towards concern, where 3 would be neutral. 36 7 CONCLUSIONS Interest in DPI is high within LAC countries; and the LAC DPI implementation will require new skills, structures and understanding of the term “DPI” is converging with that in capacities in many LAC governments. It will also require the rest of the world. The evidence gathered supports the sustained attention and resources over time. Building trust two initial hypotheses with which this research started, namely: in digital services and DPI will require better research, more advocacy and, most important of all, good citizen-centric • Individual DPI systems are widely though unevenly solutions. Accumulating evidence from around the world available in LAC even if the term DPI itself is not yet in suggests some good practices which can advance DPI in widespread use. LAC (Box 6.1) • DPI is considered likely to provide a useful focus to inform Ultimately, DPI will see increased adoption when citizens feel the next phase of digital development in LAC. that the technology will work for them, and if it fails, that they However, in LAC—as in the rest of the world—DPI schemes will be protected by adequate guardrails. Early indications often exist more on paper than in practice; regulation from successful DPI schemes in LAC and beyond create the alone does not create a well functioning DPI. Even where realistic promise that pursuing a DPI approach can unlock DPI schemes do exist, usage often remains low relative to substantial benefits for governments, citizens, businesses expectations and to the size of population. Many barriers and societies as a whole. need to be addressed to enable substantial uptake. Successful Box 6.1 Good practice principles for building effective and trusted DPI in LAC • Don’t lose focus on building out the connectivity and data infrastructure layers: Reliable, accessible and affordable broadband access is an essential pre-condition for the benefits of DPI to be widely experienced; moreover, increased cloud storage infrastructure—whether private, hybrid or public—will be required to handle increasing volumes of data generated by DPIs, so cloud policies should be carefully reviewed. • Review procurement rules and budgeting approaches to ensure that they don’t rule out options for DPI: Alternative implementation models such as DPI-as-a-service should not be ruled out because budgeting approaches favor capital expenditure (over operating expenditure) or procurement rules that restrict use of open source solutions. • Consider open source software where available and appropriate: While open source software in the form of digital public goods is not available or appropriate in all cases, as open source options grow in their range and robustness, they should not be ruled out when selecting software for DPI systems. • Engage in knowledge sharing at multiple levels: DPI is a fast evolving area globally, as well as within LAC. Existing networks like RedGEALC for digital government agencies in LAC offer ways of exchanging information at a continental level. At country level, promoting wider discussion and understanding of plans for DPIs can help businesses and citizens appreciate their benefits; and as a result, adopt them more fully. UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 37 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE • Identify and build the capacities needed in government agencies to support DPI: Government roles in DPI range from catalyst and overseer to builder and operator. These roles require staff with new soft and hard skills. Competency profiles like the one Colombia developed for Chief Data Officers can lay the groundwork for building these skills. • Recognize a modular, reusable approach to digital infrastructure in digital government policies: most LAC digital government policies already name interoperability as a key goal; increasingly, they also include enhanced data exchange and sharing but should recognize the benefits of a modular, reusable DPI approach to get there. Updating and revising digital government strategies offers an opportunity to create consensus around prioritized use cases which would benefit from an infrastructure approach. A “Whole of DPI” approach may carry additional benefits but should not detract from making incremental progress on DPI layers. • Benchmark the “DPI-ness” of existing systems and assess how they can be enhanced: since DPI is not a binary concept but rather a spectrum of desired attributes, consider an inventory of existing DPI systems for their degree of “DPI-ness” in order to assess how they can evolve by intentionally taking on more attributes over time. • Remember to harness private sector incentives and capacities to use DPI systems: Align incentives with the private sector for uptake and usage of DPI systems. This includes encouraging private sector participation and innovation in the digital economy. Additionally, ensure that the private sector can build on top of DPI, leveraging the foundational infrastructure to develop new services and applications that drive further digital transformation. 38 ANNEX A: THE BOUNDARIES OF DPI–ADDITIONAL DEFINITIONAL CLARITY Section 2 described the main elements of the evolving DPI is not a subcategory of govtech but rather a related but understanding of DPI worldwide. This Annex builds on this broader concept. Govtech refers both to specific digital by clarifying further the relationship between DPI and two systems used by governments to provide services to citizens, pre-existing terms–digital public goods and govtech–to avoid as well as more broadly to “a whole of government approach confusion with them. to public sector modernization”.58 There is clearly overlap of the approaches in that some govtech systems may qualify as DPIs. Digital Public Goods (DPGs) are to DPIs as bricks are to But the difference comes at the level of the approaches: while houses. As defined by the UN-hosted DPG Alliance, DPGs govtech is about the ”whole of government”, DPI is about the refer to “open source software, open data, open AI models, ”whole of society“ with the intent to support solutions which open standards and open content that adhere to privacy and are not only about government services to citizens. While other applicable laws and best practices, do no harm, and DPIs may provide services to citizens, they therefore have a help attain the SDGs.” The relationship between DPGs and broader mandate and purpose than digitizing government DPIs is therefore that open software and open standards can services. A boundary test is whether a system provides only be used to build DPIs; but DPIs can also involve the use of services between a government and its citizens. If so, it is proprietary solutions. likely a govtech system; if it also allows for use cases for 3rd Figure A1: DPI and associated terms ‘govtech’ and ‘digital public platforms’ BY USER (G&C) BY SCALE Govtech systems Digital public Systems used platforms to enable effective Large scale digital provision of platforms owned and government Gov enterprise Other payment often operated by services to systems IFMS schemes private sector citizens Tax MIS systems e-commerce payment platforms gateways Fast payment systems Online authentication digital registries e-signature data exchange systems BY FUNCTION DPI Large scale systems identified by who can benefit from them 58 As defined in the World Bank Govtech program available here UNLOCKING THE POTENTIAL OF DIGITAL PUBLIC INFRASTRUCTURE (DPI) IN 39 LATIN AMERICA AND THE CARIBBEAN (LAC): A REGION-SPECIFIC PERSPECTIVE 16 parties, it is likely DPI. This test opens the possibility that a businesses); for digital public platforms, it is their scale system which starts as a govtech solution could evolve to regardless of what they deliver and to whom; and for DPI, become a DPI over time. However, govtech solutions that their public function and benefit. remain limited and focused on point solutions may not be inferior solutions. DPI is not simply a grown-up version of While the meaning of the term DPI is becoming clearer over govtech, but more of a sibling in the suite of approaches to time, a sharply binary approach to definition–which implies digital transformation. the ability to demarcate cleanly and clearly between what is and is not DPI–is certainly beyond current understandings. Figure A1 shows the areas of overlap between DPI and govtech Rather, it seems more fruitful to view DPI as positions on a solutions and digital public platforms, a term already used spectrum of choices regarding digital infrastructures. 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