Page 212 - The Digital Financial Services (DFS) Ecosystem
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ITU-T Focus Group Digital Financial Services
Ecosystem
2.3 Approach
The focus is on the concerns and capabilities of merchants at the BoP who are typically unbanked, without
a credit history, and are poor themselves. Included in this segmentation are the most basic sole proprietors
selling goods or services (“the person selling fruit on the corner”), which tend to look much like person-to-
person payments. The findings may also apply all the way up to mid-sized retailers, as well as small farmers.
See the Glossary for a more detailed definition of these segments.
To ascertain the state of the market, this paper reviews relevant companies and initiatives around the globe to
identify commonalities and differences in their methodologies. These case studies were supplemented with
interviews of industry experts “on the ground” in these markets.
2.4 Assumptions
• A sizable percentage of micro and small businesses desire, but are not eligible for, loans from traditional
lending institutions due to a lack of a bank account, credit history, audited financials, and/or collateral.
At the same time, traditional bank loans are also viewed as expensive.
• Most BoP merchants possess feature or smart phones capable of transacting on e-money platforms – and
may already do so for their business or as consumers.
3 Survey of In-Market Programs
While multiple factors are incorporated into a traditional credit analysis (e.g., business viability, collateral,
intended use of funds, financial statements, bank statements, etc.), traditional credit criteria and scores rely
heavily on three key data to determine access to credit:
Business’ or owners’ debt level
• Length of credit history
• Bank account history/behaviour
• Regular and on-time payments (typically of financial products)
Traditional credit history, then, largely reflects payment history and debit service, which is precisely what a
significant swath of the MSME population does not have. New credit scoring techniques look at data that try
to predict ability and willingness to pay versus traditional methods that rate financial statements and historical
repayment behaviour.
There are multiple programs around the globe using ACD to ascertain the creditworthiness of micro and small
businesses. As summarized in the table below, ACD programs are using a breadth of data in a customer’s
existing digital ecosystem – residing in phones and mobile wallets, e-commerce marketplaces, and social media
profiles – to eliminate the need for customer-entered applications. These programs require the involvement/
cooperation of the carrier, and, likely, consumer consent.
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