Benefit distribution in Payments for Ecosystem Services (PES) and REDD+ involves the disbursement of cash or in-kind incentives to local participants that opt to manage their land in ways that increase or maintain ecosystem service provision. For decades, existing benefit distribution approaches have been debated by academics, and presented challenges for conservation practitioners. In passing through long chains of project actors, payments incur high transaction costs and are susceptible to elite capture and corruption. A new type of financial technology (FinTech) –‘mobile money’– could offer a novel and available solution to these challenges, at what is now a critical stage in PES and REDD+ implementation. Mobile payments (made via cell phones) have been used successfully in development projects related to micro-credit, micro-insurance, and aid relief, and this commentary considers their possible advantages and drawbacks for PES/REDD+ schemes. Several countries e.g. Cambodia,
China, Tanzania, and the Philippines demonstrate both high PES/REDD+ uptake, and high mobile money penetration. In certain circumstances benefit distribution via FinTech may lower transaction costs, enable higher frequency payments, and provide new socioeconomic benefits. It could also improve the privacy, transparency, traceability, and security of disbursements, contributing to more efficient and equitable PES and REDD+ schemes.
The paper introduces financial technology as a novel option for enhancing benefit distribution in PES and REDD+ schemes. FinTech could facilitate higher payment frequencies, help tailor payment amounts to individual participation levels, and greatly reduce the number of middlemen that monies must pass through to get from ecosystem service buyer to seller. While the latter could conceivably reduce elite capture, corruption, and high commissions charged by project intermediaries, there are risks associated with removing project actors from the benefit distribution hierarchy, such as centralizing power and removing levels of oversight at local governance levels. Mobile payments would likely
reduce ex-post transaction costs associated with administering payments, but can do little to abate other types of transaction costs. FinTech may be most suitable for cash payments made to individual participants, improving the confidentiality of recipients that may be receiving different payment amounts, while reducing the politics and whims associated with intra-village and intra-household disbursement. Importantly, mobile money could also involve in-kind and community-level modes of payment. The approach may be more suited to PES because it is a highly flexible tool with (except for a few countries) little need for state government oversight, unlike REDD+. Cell phone ownership, network infrastructure, the number of mobile payment platforms, and the number of mobile money accounts assigned to each platform, all increase year on year. This is especially true in many of the developing countries with high REDD+ and PES activity. The technology requires field-testing, and future research could explore how mobile payments can be integrated into existing or new PES/REDD+ schemes, to determine for example, the extent to which transaction costs, payment preferences, and socioeconomic benefits, might change. There remains no consensus on, a lack of transparency with, and mixed successes for, existing benefit distribution mechanisms. Mobile payments offer an innovative and available opportunity to address these issues, while potentially improving the effectiveness and equitability of payment disbursement, at what is a critical time for PES and REDD+ implementation.
