Enhancing the Business of Government by Bringing Innovation to the Public Sector

Tech-powered innovation gradually comes to every vertical of national ecosystems – the financial services industry, the insurance industry, manufacturing, etc. The governing structure – the founding element of every nation – however, has been largely overlooked by entrepreneurs in both developed and developing countries. Meanwhile, the business of government is arguably one of the most complex and resource-consuming structures in a severe demand for innovation.

Many citizens believe that the public sector is incapable of such innovation because of the absence of competitive forces, lack of incentives for employees, and excessive red tape. And ordinary citizens are not alone in their concern. Government leaders and employees are quick to point toward systemic problems such as outmoded human resources systems, a budgeting process that rewards extraordinary performance by reducing future resources, and burdensome request for proposal (RFP) systems as explanations for their lack of change, noted Nikhil R. Sahni, Maxwell Wessel and Clayton M. Christensen in their analysis of conditions for breakthrough innovation in government.

Fortunately, leaders inside the public sector are slowly learning to pursue major breakthroughs without the benefit of the profit motives that drive entrepreneurs elsewhere. And the private sector is playing an immense role in pushing innovation into various verticals of government’s business, taking into consideration the complexity of governmental structure.

The federal government [US] spends almost $4 trillion a year. It has hundreds of agencies and runs more than 2,300 subsidy programs. It employs 2.1 million civilian workers, 1.4 million uniformed military personnel, and 560,000 postal workers. It is a huge organization, experts note.

A particular institution ahead of the game in reimagining traditional approach to governmental operations is Citi with its Citi Tech for Integrity (T4I) Challenge, an open innovation initiative seeking to source tech solutions that promote integrity around the world across eight pillars, of which we will pay closer attention to three particularly interesting ones:

Government transactions: financial technologies and electronic banking solutions that improve transparency and control for payments and collections, including benefit payments and subsidies.

Government transactions include various types of payments: government-to-government (G2G), government-to-person (G2P), government-to-business (G2B), person-to-government (P2G) (which at an estimated $8 trillion across the globe and $375 billion in low and lower-middle-income countries alone make up a significant part of the payments landscape) and business-to-government (B2G) payments.

Innovation in all areas of government transactions holds a promise of improved finances (driven by reduced costs and leakages), greater operational efficiency, and an opportunity to dramatically improve governance (increase transparency, address corruption, better understand consumers, etc.). Innovation adoption in government transactions is also reported to be beneficial for financial service providers, who are presented with an opportunity to strengthen existing business lines, expand to new ones and explore new business models, thereby increasing the value for current and new customer segments.

The Global Landscape Study on Digitizing P2G Payments also reports that for consumers, innovation adoption in government transactions (digitization of those transactions, in particular), is a way to transform how they interact with their government (faster, cheaper, and more convenient and transparent) and a potential pathway to financial inclusion (by opening accounts and access to digital financial services).

Information, security and identity: secure information, identities, networks and transactions involving governments that protect and enable digital solutions. Consider cybersecurity solutions.

Cybersecurity is expected to become one of the hottest industries globally by 2020, given that cyberattacks are costing global businesses ~$500 billion per year. The public sector is not immune to the threat of information hacking.

Cyber-intrusions and attacks have increased dramatically over the last decade, exposing sensitive personal and business information, disrupting critical operations, and imposing high costs on the economy, noted the US Department of Homeland Security.

Cybersecurity is a matter of special importance when it comes to the protection of the most valuable asset one has nowadays – identity (where the application of biometrics, blockchain and the concept of a unified identity are actively discussed now). The 2016 Identity Fraud Study found that $15 billion was stolen from 13.1 million US consumers in 2015, compared with $16 billion and 12.7 million victims a year earlier. In the past six years, identity thieves have stolen $112 billion. More importantly, almost 50% of the identity theft fraud was in relation to government paper and benefits fraud.

Digital solutions are believed to be able to enforce transparency and governance over sensitive information, as well as significantly reduce the processing time in the public sector, which is known for heavy paper reliance in the majority of governmental structures.

As experts from Kodak emphasize, Digitization means much more than just scanning a paper document and converting it to a digital file. A slow, inefficient paper-based process cannot be instantly improved just by moving outdated practices and processes to a new platform. A complete digital archive or records modernization model requires a strategy and implementation plan that covers every step from process redesign to digitization, technology platform, implementation and ongoing support and most of all, that the relevant information for any stakeholder can be displayed.

Analytics, reporting and transparency: Consider big data solutions and advanced analytics that detect, deter and prevent fraud and inappropriate financial transactions. Improve whistle-blower tools and auditing techniques.

The public sector is generating large volumes of data annually, requiring enhanced analytical tools and providing opportunities for governments to save a lot of public money. Experts emphasize that publicly stored data is increasingly being used by service agencies in order to improve operating efficiencies and reduce fraud, to assess compliance of organization in the public sector.

Moreover, using data compiled from hospitals, accident reports, disease center reports and social services case files, government agencies can also assess healthcare needs. Analyzing crime trends and statistical data is having a huge impact on law enforcement among other things.

Application of advanced big data analytics and reporting solutions can improve transparency and decision-making, which cuts costs, creates personalized citizens experiences, reduces tax and social security fraud among other benefits.

A set of five more pillars is not less in importance for promoting tech-powered integrity in the public sector and has limited, but certain representation in the entrepreneurial community.

Source: Citi T4I Challenge

  • Crisis management and aid: Develop fraud-and-graft-resistant crisis payment tools designed for use in remote areas, conflict zones, and during natural disasters and refugee crises. Audit and track value and data transfers, including development assistance, digitally and remotely.
  • Cutting the red tape: Minimize paper documents, cash transactions and manual processes, reducing opportunities for corruption, and minimizing bureaucracy and promoting efficiency in financial processes.
  • Culture, ethics and engagement: Educate and engage citizens in the anti-corruption agenda, and promote a low-tolerance environment that increases awareness, responsibility and standards of behavior.
  • Financial crimes and illicit activities: Apply financial technology to crack down on other illicit activities, such as nepotism, bribery and complicity in money laundering, tax evasion and the financing of terrorism.
  • Procurement: Ensure that procurement procedures are transparent, and government contracts are awarded in a fair and accountable manner.

A number of technology companies are working on one or another area of governmental operations. Examples include OpenGov, SmartProcure, Enigma, Socrata, Captricity and more. With Citi T4I Challenge, which will be launched mid-January, those companies get a chance to support more stable economies around the world by improving operational efficiency in the public sector with technological advancements.

The T4I Challenge – run by Citi and its allies, including MEDICI, the ultimate FinTech platform for collaborative innovation, IBM and PWC – aims to bring together innovators and the public sector to find solutions for pain points inhibiting effective and efficient government. The challenge is a virtual accelerator program that will invite technology innovators from around the world to create solutions to promote integrity and fight corruption.

The MEDICI Team is proud to be a part of the T4I Challenge as an ally and is deeply vested in the success of the selected T4I innovators. MEDICI connects the vibrant startup ecosystem, the world’s leading financial institutions and leading FinTech investors to boost the process of open innovation. MEDICI provides unique industry insights and startup access sourced directly from 6,000+ technology companies bringing innovation into private and public sectors globally, with deep segment analyses by domain experts across 45 FinTech sectors, supported by on-demand strategic consulting and bespoke research.

Source: Citi T4I Challenge

The program will collect submissions from financial technology startups and innovators across other fields to help public sector entities improve operational transparency and eliminate negative economic outcomes of red tape, corruption, fraud and other resource-consuming obsolete elements of the business of government.

As a landmark initiative structured as a virtual accelerator program, T4I invites technology innovators from around the world to develop and submit solutions that help public sector entities increase transparency and/or fight corruption.

As the first step in the T4I Challenge, Citi is crowdsourcing descriptive pain points that guide tech innovators toward targeted areas where integrity issues are of greatest concern (i.e., cash payments, manual operations, paper processes, AML, identity, cybersecurity, etc.) and represent an area of opportunity to apply technological solutions. Pain points will be aggregated and provided to developers in the curriculum that guides their solution development. Citi encourages companies and teams to submit detailed pain points; multiple submissions across multiple categories are welcome.