Page 184 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

5 Policy Considerations for Financial Inclusion

Policy makers and other organizations in a position to influence how the digital payments ecosystem evolves
may want to consider the following points:

• Merchant acceptance of payment from consumer digital wallets will be a critical enabling component in
reaching "digital liquidity" amongst consumers, and reducing the costs and risks associated with "cash-in,
cash out".
• Interoperability at the payment acceptor level and open payment platforms (standards, APIs, etc.) are
key components to not only help achieve digital liquidity, but also to help ensure providers compete on
both price and innovation.

• Poor customers of eMoney systems may never be profitable on a standalone basis, but financial inclusion
and associated benefits to BoP populations are important to governments for a number of reasons (e.g.,
building / growing a credit system that can grow the economy). Therefore, government entities that
directly and indirectly pay for other payment systems (e.g., cash) should consider analogous support for
eMoney systems serving poor payment users (senders and receivers).
• Some tax-related accommodations may be required from governments, particularly in the early stages,
so as to not disincent smaller, and perhaps even larger, merchant adoption. Governments should also
consider the possibility that once electronic transactions become more prevalent, the visibility of
transaction for tax-related purposes will likely increase.
• The merchant landscape is very broad, and the requirements of each segment can be quite different.
Policy makers should anticipate and welcome a robust and competitive marketplace of merchant services
providers, both large and small. Some of these merchant services providers will be direct participants in
payments systems; some may access them through relationships with other participants. But it is essential
that easy and open access to interoperable, low cost payments systems is made available to merchant
services providers.
• Shared services, such as fraud management, can be a particularly important way to achieve success,
particularly for those that benefit all participants, require economies of scale, and which are not thought
to be sources of competitive differentiation.
• Successful merchant service providers will likely have a variety of organizational forms and should be
allowed to compete on level playing fields.
• Merchant services providers working exclusively with smaller and poorer merchants will not be able
to sustain business models from transaction fees alone. These providers will extend their offering to
merchants to include a variety of services, most critically the provision of credit to merchants and in
some situations to their customers.
• While not in themselves sufficient to achieve digital liquidity, government entities may want to look for
opportunities to move bulk payment and related transactions to eMoney systems in order to help those
systems reach critical mass.
• Other policy interventions, such as expanded use of digital IDs, could also be important contributors to
achieving critical mass and digital liquidity. Two components of digital ID’s are particularly important for
the viability of a merchant services marketplace. One is a persistent identity for merchants, enabling the
detection and identification of fraudulent merchants. The other is a biometric component to the identity
of a business owner, again to enable the control of payments and credit fraud.

156