【ADB】Exploring the Different Financing Models for Digital Public Infrastructure and Why They Matter

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David Eaves, Associate Professor in Digital Government, UCL Institute for Innovation

and Public Purpose

Mansi Kedia, Senior Fellow, Indian Council for Research on International Economic

Relations

Exploring the Different

Financing Models for

Digital Public Infrastructure

and Why They Matter

brief

policy

Key Points

• Despiteincreasinginstances

ofdigitalpublicinfrastructure

(DPI)deployment,thereislittle

publicinformationonhow

differentDPIsarefinancedand

practicallynopubliclyavailable

estimatesonhowmuchitcosts

toimplementaDPI.

• FinancingofDPIsisa

complexissueinvolving

decision-makingonpublic

policyobjectives,operations,

stakeholdermanagement,and

governance.

• FinancingofDPIscanbe

understoodusingthestrategic

triangleframeworkthat

weavestogetherthreekey

elementsofanypolicypriority:

(i)publicvalue,(ii)operational

feasibility,and(iii)supportor

politicalfeasibility.

• Policydiscussionsonfinancing

ofDPIsshouldincludeboth

capitalandoperationalcosts

ofaDPI.

• TheG20shouldbuildknow-

howonfinancingmodelsfor

DPIs,includingfinancingDPIs

forlow-incomecountries,and

encouragetheacceptanceof

differentfinancingchoices

adoptedbycountries.

No. 2024-6 (April)

Bank Institute

ISSN 2411-6734

DOI: https://doi.org/10.56506/

VYDL5566

This work is licensed under a

Creative Commons Attribution-

NonCommercial-ShareAlike 4.0

International License.

1. Introduction

Digitalpublicinfrastructure(DPI) isa new conceptualmodelfor services—such as

identity,monetarytransactions,credentialmanagement,anddataexchange—that

are essential to participating in society and markets in the digital era.1 With the

rightgovernanceandfinancing,DPIscanimprove“knowyourcustomer”provisions,

facilitatingaccesstoprivateandpublicservices,andimproveaccesstobankingand

financial services. During the COVID-19 pandemic, countries with DPIs were able

to deposit money directly into the bank accounts of target populations quickly,

efficiently,andwithreducedriskofleakage.2Thereissignificantandgrowinginterest

bycountriesaroundtheworldinDPI.Howitscomponentsareadoptedandfinanced

carriesbothrisksandopportunities.

DPIs have two key conceptual elements. As infrastructure, they cut through the

siloedapproachofdesigningandimplementingdigitalsolutionswithinteroperable,

society-scale programs that shift innovation and competition to activities that

take place atop it. For example, a single electrical grid, by standardizing voltage

and amperage, eliminates competition around the delivery of power but creates

vast competitive markets around items (like appliances) that use power. As public

infrastructure, DPIs prioritize access and inclusion over profits, similar to how

electricityandwaterareprovisionedinmuchoftheworld.

Because DPIs are a combination of software, standards, and policy, they can be

replicatedandadoptedbycountriesmorequicklythantheirphysicalinfrastructure

counterparts. For example, the Modular Open-Source Identity Platform, a digital

public good3 born out of Aadhaar, India’s homegrown digital identity programme

1 Eaves, D., and J. Sandman. 2023. What Is Digital Public Infrastructure? UCL IIPP Blog. April. https://

medium.com/iipp-blog/what-is-digital-public-infrastructure-6fbfa74f2f8c(accessed10April2023).

2 India’sWorldClass DigitalInfraWorth EmulatingbyManyNations.Outlook. April 2023.https://www.

outlookindia.com/business/india-s-world-class-digital-infra-worth-emulating-by-many-nations-imf-

paper-news-276531(accessed6Jun2023).

3 Digital Public Goods Alliance (DPGA) Registry. https://digitalpublicgoods.net/registry/modular-open-

source-identity-platform.html(accessed23May,2023).

ADBI Policy Brief No. 2024-6 (April) 2

(oneoftheworld’sleadingDPIs),isbeingimplemented

inseveralothercountries,includingSriLanka,Ethiopia,

Morocco,thePhilippines,Guinea,andTogo.4

Giventherapidspreadofthisnewtypeofinfrastructure,

how DPIs are financed is quickly becoming a complex

issue that encompasses questions of objectives,

operations,stakeholdermanagement, andgovernance.

Importantly,financingdoesnotrelateonlytotheinitial

capital,butrecurringcosts relatedto maintenanceand

upgradingthesystem.Thelifetimeinvestmentismuch

morecriticalthanthefundingrequiredforsettingupa

DPI,madereadilyavailablebygovernments,multilateral

organizations, and philanthropic institutions. Indeed,

while there are important lessons that can be drawn

fromphysicalinfrastructureprojects,theremayalsobe

limits.Softwaredoesnotalwaysadheretotheprinciple

ofhighupfrontcapitalcostand(relatively)lowongoing

operational expenses. Quite the opposite, ensuring

ongoing interoperability, addressing cyber threats,

andmanagingincreased adoptionand scalecancause

operationalcoststoexceedcapitalcosts.

2. A Framework for Financing DPIs

Financing DPIs can be explored through a conceptual

framework based on the strategic triangle proposed

byscholarMark Mooreforpolicydesign andanalysis.5

The framework suggests three key components for

any successful policy: (i) public value; (ii) operational

feasibility including financial, legal, technical, and

managerial; and (iii) support or political feasibility.

Therefore,financingasacorecomponentofoperational

feasibilitycannotbeseparatedfrompublicvalueorthe

primary objective of a DPI. Importantly, even similar

DPIs need not necessarily be conceived for the same

objectivesorpublicvalue.Forinstance,twocomparable

digitalpaymentDPIs,India’sUnifiedPaymentInterface

(UPI)and Brazil’sPix,wereconceptualizedfordifferent

primary objectives. For UPI, it was to accelerate the

adoptionofdigitalpaymentsandaddresstheproblem

of financial exclusion; while for Pix, it was to catalyze

marketcompetitionandinnovationindigitalpayments.

Operationally, UPI is funded and supported by a

consortiumofbanks,whilePixisfundedandsupported

byBancoCentraldoBrasil(Brazil’scentralbank).While

UPI is currently free of cost for all categories of users,

Pixchargesatransactionfeeformerchanttransactions.

These are two distinct financing models that align

with specific stated goals—one led by an industry

consortiumthatenablesprivate-sectorparticipationto

improvefinancialinclusionandtheothermandatedby

the government to enhance market participation and

competitionusingatransactionfeemodel(Figure1).

Thereisathirdmodeloffinancingthatisgovernment-

ledfortheinitialcapitalaswellasthroughthelifecycle

of the DPI. For example, Aadhaar has been entirely

funded by the government since its launch in 2009.

4Sanzgiri, V. 2022. Six Countries Take Up IIIT-B’s Aadhaar-Like Digital Identity Programme. Medianama. July. https://www.medianama.

com/2022/07/223-six-countries-take-up-iiit-bs-aadhaar-like-digital-identity-programme/(accessed10April2023).

5 Moore,M.H.2013.PublicValuePropositionsandtheStrategicTriangle.HarvardUniversity.https://scholar.harvard.edu/markmoore/publications/

public-value-propositions-and-strategic-triangle(accessed23May2023).

Figure 1: Strategic Alignment for Digital Payment DPIs

Source: Authors, Adapted from Moore (2013).

Support:

Government

patronization and

regulated entities

UPI

(India)

Public Value:

Digital payments

and financial

inclusion

Operational

Feasibility:

Industry consortia

Pix

(Brazil)

Public Value:

Driving

competition and

innovation in

digital payments

Operational

Feasibility:

Government-led

private sector

participation

Support:

Government

mandated

stakeholder

participation

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摘要：

DavidEaves,AssociateProfessorinDigitalGovernment,UCLInstituteforInnovationandPublicPurposeMansiKedia,SeniorFellow,IndianCouncilforResearchonInternationalEconomicRelationsExploringtheDifferentFinancingModelsforDigitalPublicInfrastructureandWhyTheyMatterbriefpolicyKeyPoints•Despiteincreasinginstanceso...

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