Page 188 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

These observations about technology and business models have a number of implications for the emergence of
merchant acceptance in eMoney deployments. These are outlined in the next section and ultimately examined
in models and corresponding deployment.

7 Hypotheses

A number of hypothesis were generated in this work, some of which were answered, others are still outstanding
and await further deployment development and insight. The hypotheses include:

• A variety of approaches will emerge to support merchant acceptance, each with its own unique Business
Model, Transaction Flow and Pricing;
• Given the recent emergence of merchant acceptance we expect to see various pricing approaches
deployed;
• Purchase transactions will be characterized by push and pull approaches;
• Third parties are likely to emerge and play a role in more fragmented markets where they can lower the
transaction costs associated with in-house arrangements;
• To expand eMoney services beyond P2P services to enable P2M payments, the deployment of new
technology will create an incentive to work with specialized third parties to deploy and service POI
capabilities as well as train store staff in their use;

• Movement towards open loop systems, at the POI, will drive the introduction of 3rd party players who
can enable merchant acceptance for multiple payment types;

• The drive for scale and its corresponding revenue opportunities, coupled with the improved economics
achieved by Payment Facilitators, will drive their emergence in the near further.

8 Overview of Key Model Characteristics

This effort focuses on key model characteristics and the identification of generalizable models in eMoney
deployments to drive merchant acceptance. Such models can be used to classify experiences, thereby identifying
general characteristics, considerations and potential issues. This would enable us to better understand issues
that MMOs are grappling with in nascent merchant acceptance and focus attention on critical issues. Several
dimensions are explored below, these include: 1) Business Model; 2) Deployment Openness; 3) Transaction
Flow; and 4) Pricing.

8.1 Business Model

Three models (In-House, MSP and Merchant Acquirer) are used to characterize the nature of merchant
acceptance that has been observed in MM deployments. The models are based on the execution of necessary
tasks across the merchant acceptance value chain. These models are described in more detail in the next
section.

Open or Closed Deployment: The MMO deployments examined were for the most part closed loop. In this
approach the institution issuing or deploying the wallets is also enabling merchant acceptance. All activity
remains on the provider’s rails and there is no interaction or interoperability with other providers. In an open
loop deployment, on the other hand, a merchant would not be limited to acceptance by one payment type,
but could instead support the acceptance of multiple payment types.

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