Session 6 - Governance Challenges in Digital Public Infrastructure: Evidence from Financial Services Integration

Key Takeaways

• Regulatory Silos Fail to Capture DPI Complexity: Traditional sectoral boundaries prove inadequate for governing interconnected identity, payment, and data systems. Effective oversight requires coordination across financial regulators, identity authorities, and data protection agencies that existing frameworks struggle to facilitate.
• Comprehensive DPI Correlates with Inclusion: CCAF research reveals substantial improvements in credit access, government transfer effectiveness, and emergency fund availability in jurisdictions with mature three-component DPI systems. However, these benefits remain contingent on addressing persistent digital divides.
• Natural Monopoly Dynamics Create Governance Tensions: DPI’s network effects and interoperability requirements generate market concentration concerns, with participants highlighting conflicts of interest when central banks serve simultaneously as infrastructure operators and regulators.
• Technological Evolution Poses New Regulatory Challenges: AI integration, blockchain adoption, and digital wallet expansion introduce governance uncertainties that existing DPI frameworks cannot adequately address, risking fragmentation of global interoperability.
• Digital Sovereignty Shapes Infrastructure Choices: Countries increasingly view DPI ownership through national security lenses, affecting vendor selection and cross-border data flows in ways that could fragment technical standards and limit international cooperation.

Session Overview

Digital Public Infrastructure promises to transform financial inclusion globally, yet the governance frameworks needed to realise this potential remain fragmented and incomplete. The September session of our Community of Practice on DPI Measurement examined new evidence from Cambridge Centre for Alternative Finance (CCAF) revealing how traditional regulatory approaches struggle to govern the convergence of identity, payments, and data systems that characterise modern DPI deployments.

The session brought together practitioners from financial institutions, regulatory bodies, and technology providers to explore a fundamental question: how can governance frameworks evolve to support DPI’s inclusive potential while managing the risks of market concentration, vendor lock-in, and digital sovereignty concerns? Drawing on CCAF’s analysis of 113 jurisdictions worldwide, participants examined both promising correlations between comprehensive DPI deployment and financial access, and the complex coordination challenges that threaten to undermine these benefits.

Understanding DPI’s Regulatory Architecture

The governance challenge begins with mapping what regulators are attempting to govern. CCAF researchers presented their taxonomy categorising DPI into three interconnected components that directly shape financial ecosystems: digital identity infrastructure enabling verification and eKYC processes; payment systems supporting real-time, interoperable transactions; and data sharing frameworks facilitating consent-based information exchange. This framework revealed that while 113 jurisdictions have deployed at least one component, comprehensive three-component systems operate in nearly half of surveyed countries.

Participants identified cascade effects that traditional regulatory frameworks cannot accommodate. Electronic identity verification streamlines banking onboarding and supports data sharing across institutions while reducing compliance costs—yet requires unprecedented coordination between identity authorities, financial regulators, and data protection agencies. Payment infrastructure integration with existing financial market infrastructure shifts risk profiles and liquidity models in ways that demand new oversight approaches.

Brazil’s PIX implementation exemplified these complexities. Integration with the real-time gross settlement system reduces systemic risk but increases liquidity demands, requiring central bank coordination across multiple policy domains simultaneously. As one participant observed, these interdependencies transform DPI from a technical infrastructure challenge into a fundamental governance question about how regulatory authorities coordinate across traditional boundaries.

Measuring Impact: The Evidence Base

Cambridge researchers developed DPI maturity scores for 113 jurisdictions, creating the first systematic assessment linking comprehensive digital infrastructure to financial inclusion outcomes. Countries with higher DPI scores consistently demonstrated superior performance on credit card ownership, digital payment usage, and government transfer effectiveness. Particularly striking were improvements in emergency fund access, suggesting integrated systems enhance financial resilience beyond basic access metrics.

These quantitative findings gained texture through participant observations from implementation contexts. Brazil’s PIX transformation enabled small businesses to accept digital payments for previously uneconomical transaction amounts by eliminating fees. Yet this formalisation brought informal vendors into tax systems, leading some to opt out of digital payment acceptance entirely—illustrating how inclusion metrics must account for both adoption and rejection patterns.

Evidence from emerging markets revealed additional complexity. Despite strong DPI deployment, mixed patterns emerged for mobile money usage and remittance flows. Participants attributed these variations to persistent digital divides—infrastructure gaps, literacy constraints, and connectivity challenges that sophisticated technical systems alone cannot address. India’s advanced digital identity infrastructure sometimes complicates rather than simplifies government transfers, particularly when beneficiaries unknowingly hold multiple accounts linked to single identity credentials.

Cross-Boundary Governance Challenges

The governance complexities identified through CCAF’s research manifest differently across jurisdictions, yet common patterns emerged from practitioner discussions. DPI components create overlapping regulatory jurisdictions that existing frameworks struggle to manage effectively. Digital identity systems require coordination between identity authorities, financial regulators, and data protection agencies. Payment infrastructure demands alignment across central banks, telecommunications regulators, and competition authorities.

Market structure questions proved particularly contentious. Participants highlighted how DPI’s network effects and interoperability requirements create natural monopoly characteristics, raising concerns about vendor lock-in and market concentration. Brazil’s central bank serves simultaneously as PIX’s regulator and operator—a dual role that several participants identified as creating potential conflicts of interest that regulatory separation might address.

Private sector involvement generated additional tensions. Participants questioned whether profit-driven entities can adequately serve public infrastructure functions that must prioritise inclusion over revenue generation. The discussion revealed fundamental disagreements about ownership models, with some advocating for purely public operation while others emphasized the innovation benefits of private sector participation.

Canadian participants offered instructive coordination models through federal, provincial, and territorial collaboration via Ministers and Deputy Ministers Tables on Digital Trust and Cyber Security. European frameworks demonstrated how binding decision-making processes and formal documentation facilitate cross-border regulatory alignment, though participants noted the substantial complexity and resource requirements of these approaches.

Emerging Technologies and Evolving Risks

Technological developments add layers of complexity to already challenging governance landscapes. AI integration in financial services—from credit scoring to fraud detection—raises algorithmic bias and transparency questions that existing DPI frameworks struggle to address. Blockchain and tokenisation offer potential for transforming financial intermediation but introduce governance uncertainties around scalability, interoperability, and regulatory oversight.

Digital wallet expansion compounds coordination challenges. As wallets integrate identity verification, payment processing, and data management functions, they risk creating new vendor lock-in forms that could undermine DPI’s public infrastructure objectives. Participants expressed particular concern about concentration among major technology providers whose cloud infrastructure increasingly underpins national DPI systems.

Digital sovereignty concerns intensify these technological governance challenges. Countries increasingly view DPI stack ownership through national security rather than technical efficiency lenses, affecting vendor selection, cross-border data flows, and technology dependencies in ways that could fragment global interoperability.

Meanwhile, persistent digital divides threaten to undermine the inclusion benefits that comprehensive DPI systems promise. Connectivity gaps, digital literacy constraints, and infrastructure limitations mean technological sophistication alone cannot deliver equitable access. Participants emphasized how emerging technologies may exacerbate these divides unless governance frameworks explicitly address capacity building and universal access requirements.

Looking Forward

The session revealed that realising DPI’s transformative potential for financial inclusion requires more than technical infrastructure: it demands fundamental reimagining of how we govern digital systems that increasingly underpin economic participation. The evidence from CCAF’s research provides crucial insights into both the promise and pitfalls of current approaches, while practitioner experiences highlight the urgent need for governance innovation.

As regulatory authorities worldwide grapple with these challenges, our Community of Practice provides essential space for developing evidence-based approaches to DPI oversight. The complexity revealed in this session underscores that no single jurisdiction has all the answers, making cross-border dialogue and knowledge sharing imperative for effective governance development.

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