Government agencies now have access to an unprecedented amount of opportunity to change how they organise finances, expenses, payments and monetary policy that will not only drive innovation, but also cost efficiency and transparency.

The amount of innovation that has occurred in the payments space, from mobile payments to more sophisticated and secure wholesale finance technology, is now at a place where governments are able to leverage that innovation with tailor-made solutions.

These solutions include options such as configurable virtual credit cards which can be designed for a specific one-time purpose. This provides both flexibility and a reduced risk of fraud, but more importantly enhanced data and improved reconciliation.

Bridging the analogue overhang

As the private sector continues to modernise its payment systems, government agencies are still relying on many legacy systems and policies built for analogue financial infrastructure. According to Mastercard vice president of commercial payment solutions, Grant Johnstone, a lack of IT development and integration is also holding them back.

“All governments want to know and leverage what’s happening with digitisation, but when it comes to the readiness levels and implementation, we are finding they don’t necessarily have the resources or expertise to implement those types of strategies,” Johnstone says.

“Those are just some of challenges we’re seeing.”

Additionally, he said increased interchange regulation to be introduced next year will affect the structure and offerings of card programs that are used by government, and this may mean that some rebate programs and other benefits may no longer be available.

As governments often require complex systems for managing finance, the opportunity for public-private partnership has been more challenging. However, in an age of unparalleled innovation, this trend is starting to change.

Effective and affordable innovation

Now, private services are creating dedicated systems for all levels of government to digitise and manage their payment systems as well as integrate with legacy processes. At a time when government finances are under careful scrutiny, the ability to modernise these systems in a cost-effective way is an attractive proposition.

Mastercard has pushed ahead in this area, creating a dedicated public-private partnerships driven team dedicated to finding solutions for governments at all levels, from municipal to federal.

While Mastercard offers a range of services including sophisticated data analytics and merchant reporting, Johnstone says the rise of a strong virtual card solution in procurement is perhaps the most beneficial development for governments.

Virtual cards fight fraud

Payments made using virtual cards offer the same functionality as physical cards, but allow transactions to be made directly within financials software or secure applications. Importantly, Mastercard’s virtual card numbers are single use only — which means they become useless if copied or are entered by unauthorised users.

“This is a true virtual card number solution,” Johnstone  says, stating that some alternative offers re-use card numbers after a certain amount of time. Using a true virtual card eliminates the possibility of number recycling and ensures a greater degree of assurance and security.

“We also have dedicated consultants who work with government agencies that can do comprehensive analysis of their expenditure, like a health check-up. This is a relatively new service in market,” he says.

Moving towards electronic, secure payments at all levels of government will not only produce cost savings, but will make financial systems within government even more transparent. That stability, Johnstone says, will help governments operating in a modern financial system that is already seeing huge leaps in innovation.

“There’s just so much opportunity for government now,” he says.