Page 186 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

finally, there has been an adoption of innovative business models that has facilitated the growth of eMoney
deployments. This section will briefly touch on each of these factors.

A significant portion of the world’s population remains unbanked, having little access to transaction services
and financial products, their unsecured cash continuing to circulate informally. At an individual level financial
services would provide safety and convenience while expanding individual choice sets. At a societal level, these
services would enable greater factor productivity, deepen financial systems, and improve welfare distribution
and tax collection.

Concerted efforts since the 1960s have sought to improve the delivery of financial services. Targeted credit
programs emerged to finance the seed packets and fertilizer associated with the Green Revolution. These
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efforts evolved into a focus on Microcredit, Microfinance and most recently Digital Financial Services. The
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constant has been a focus on technology and innovative business arrangements to drive cost efficiencies in
the delivery of financial services.

The development of mobile phone technology provides an effective and low cost platform for continued
efforts to provide cost effective financial services to meet the latent demand of under and unbanked
populations around the globe. Feature phones have become almost ubiquitous, while the promise of the low
cost smartphones comes closer to becoming a reality. Mobile phones have provided the necessary digital
connectivity and a critical mass user base. Leveraging this platform innovators have been able to leverage USSD
and SIM card technology to enable low cost eMoney services. Furthermore, smart phones with continuously
declining prices and associated computational power, offer tremendous potential because of their ability to
deploy new applications and support new capabilities.

Regulators have established enabling environments that have facilitated the emergence and growth of eMoney.
First, they established a level playing field of providers, allowing non-financial institutions as well as financial
institutions to become mobile wallet providers. This benefited MNOs who are particularly well positioned in
their distribution and marketing channels to get at the far reaches of bottom of the pyramid merchant users.
Secondly, they created guidelines for successfully mitigating institutional risks and liquidity risks through
prudential requirements, consumer protections, and minimum capital requirements. And thirdly, they have
established customer due diligence measures for eMoney. This clarity has fostered a willingness by business
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to invest and innovate.

4 Agency for International Development (A.I.D.) (1973), Spring Review of Small Farmer Credit, 20 Volumes. Washington D. C.: A.I.D.
5 Miles, Ann (2015), MasterCard Foundation, From Microfinance to Financial Inclusion: Reflections on 20 Years, 16 November
2015, Blog Post on CGAP Site.
6 Di Castri, S. (2013). eMoney: Enabling regulatory solutions. Available at SSRN 2302726.

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