Page 187 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Figure 3 – A Digital Pathway to Financial Inclusion. Bill and Melinda Gates Foundation, Radcliffe, D and
Voorhies, R. (2012)

As pointed out by Radcliffe and Voorhies in their pathways to Financial Inclusion, merchant acceptance is an
important evolution of eMoney schemes. In many deployments P2P services have created an active user base.
This active user base has begun to develop some degree of digital liquidity and would benefit from additional
services, such as merchant acceptance, that leverages this liquidity, thusly setting the stage for the emergence
of merchant acceptance.

In considering the emergence of merchant acceptance in eMoney deployments there are several relevant
technological and business model innovations to highlight. There has been an emergence of low cost interfaces
at the POI (Point of Interaction) to enable merchant payments, these include: USSD technology, In-APP
payment, MPOS (Mobile Point of Sale), QR (Quick Response) codes and NFC (Near Field Communication)
technology. For example, MPOS has allowed the use of Smart Phones and recently feature phones, for card
based merchant payments. With QR codes a consumer scans a merchant code with their phone to enable
merchant payments, another low cost POI innovation. These POI technologies provide MMOs the opportunity
to expand into merchant acceptance. In addition, they provide merchant acquirers – a critical player in the card
centric four party model – a potential opportunity to move down market and profitability reach a previously
unserved market.

Other relevant technological advances for expanding merchant acceptance include advances in data processing
and transmission, which enable deployment of capabilities to provide more robust merchant value propositions
(e.g., working capital loans, inventory management). These and other benefits of electronics payments such as
minimizing the risk of theft and greater transparency provide further incentives to the adoption of merchant
payments.

These technological advances, while promising, may need to be combined with new business models to realize
their full potential. Some of the acceptance technologies can be deployed through push payments, which offers
the prospect of a lower payments cost structure. Another innovation is to lever Payment Facilitators to enable
acceptance. This business model changes the nature of the merchant relationship, enabling reductions in
on-boarding, risk management, and the equipment costs necessary to enable viable acceptance of electronic
payments.

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