Big Story: The $4.1T Market Hiding in City Hall
Key Takeaways
In FY2021, U.S. state and local governments collected about $4.1 trillion in general revenues that still often run through paper checks, walk-in counters, or outdated portals.
The real breakthrough is deep integration with government ERPs and financial systems, ensuring reconciliation, coding, and audit trails are fully automated.
The most effective entry point is high-volume, predictable revenue streams like building and permitting, utilities, licensing and code enforcement, and property or local taxes.
In most fintech conversations, the emphasis remains on speed in the forms of instant payouts, accelerated underwriting, and seamless checkout experiences. At the same time, some of the most stable and recurring payment flows in the United States sit inside city and county finance departments, where large transaction volumes still move through legacy processes. Governments already collect at scale. Residents already expect digital options for permits, utilities, and taxes. The remaining constraint is adoption, integration, and execution.
Public sector payments require the modernization of established revenue streams. Professional guidance has supported this shift for years. The Government Finance Officers Association recommends electronic payment methods where feasible, with appropriate internal controls for each channel. Large cities and smaller municipalities alike have begun moving in this direction. Phoenix has implemented SHAPE PHX to support online permitting and payments. Smaller jurisdictions such as Fort Lupton have also transitioned permitting and payment workflows into online portals. Technical scale is no longer the primary barrier.
The real opportunity lies in operational depth. Government payments represent a sizable and recurring market with limited credit risk. However, digitizing the front end alone does not resolve structural inefficiencies. If payment data does not integrate directly with the ERP system of record, finance teams remain dependent on manual reconciliation, re-entry of transaction details, and correction of coding discrepancies. Efficiency gains materialize only when acceptance, posting, and reconciliation are connected end to end.
Execution can follow a practical sequence. A municipality can begin by fully digitizing two major revenue streams, such as permits and utilities, within a defined six-month window. Multiple payment methods can be offered, including ACH, cards, and digital wallets, while encouraging lower-cost channels where appropriate. Posting and reconciliation should connect directly to core systems. Additional capabilities, such as installment plans, autopay enrollment, selective instant payment pilots, and public dashboards that show digital adoption progress, can follow. Leadership targets help anchor the effort, for example, setting a goal of migrating 60 to 80 percent of eligible receivables to digital channels within two years.
Viewed this way, the opportunity in public finance is about executing modernization with discipline. The revenue is already there. The expectation for digital access is already there. What determines impact is whether systems are connected, adoption is managed, and operational processes are redesigned to match the technology.
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