Digital Public Infrastructure and State Capacity: A Theoretical Account of Identity, Payments and Data Exchange as Foundations of Governance in Developing States

Abstract

Digital identity, interoperable payment systems and data-exchange layers, grouped together as digital public infrastructure (DPI), are promoted as the fastest route to state capacity for developing countries: they promise governments the means to know their citizens, to pay and tax them, and to coordinate across ministries. Yet the policy literature treats capacity as a single quantity that DPI adds to, while the critical literature on surveillance and exclusion often treats state capacity itself as the problem, and neither asks which dimension of capacity is being built, how quickly and relative to which others. This article develops a theoretical account of the relationship between DPI and state capacity. It follows a conceptual, theory-building design based on an integrative review of 33 peer-reviewed journal articles published between 2023 and 2026, together with one primary statute, and proceeds through typology construction, the derivation of propositions and an illustrative case. The analysis distinguishes three dimensions of capacity: legibility, the state's knowledge of its population; reach, its ability to deliver and extract; and coordination, its ability to act coherently across agencies. DPI strengthens all three, but unevenly. Legibility rises fastest because enrolment can be compelled, reach follows because payment rails have commercial sponsors, and coordination lags because it requires settling authority among agencies. The gap between what the state can see and what it can do accountably with that knowledge is where coercive and extractive uses take root, aggravated by vendor dependency, exclusion and control. Seven propositions specify when DPI yields developmental capacity, and Nigeria's identity, payment and data initiatives, read against India, Kenya, Estonia, Ethiopia and Togo, illustrate them. The article recommends a capacity audit for DPI programmes : dimensional accounting, review of enrolment logic, procurement that preserves exit, and independent oversight established before identity is put to security and extraction uses.