Page 24 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

• Identifying and communicating a compelling value proposition – understanding the nuances of how
consumers earn, save, and spend their money can help providers develop a relevant value proposition.
• Creating a user-friendly service and accessible interface – as poor customers tend to have lower financial
and technical literacy levels, the service will require a user-friendly interface to enable access. While
technologies such as IVR can be useful for reaching illiterate users, greater investment in customer
education and increased “touch points” are also proving successful as a means of on-boarding customers
• Finding solutions to the lack of formal identification documents – the absence of compulsory population
registration and identification is a common barrier to wide-scale adoption of digital wallets. In most
markets, regulation plays an important role; solutions such as tiered KYC and adjusting acceptable KYC
documentation can help providers facilitate customer adoption and increase the success of financial
inclusion initiatives.
Current offerings and the Future of Money Accounts

Current offerings are primarily limited to a temporary store of value and over the counter transactions. As
the industry matures deeper and richer offerings beyond a basic store of value for the eMoney account will
emerge. Money accounts may potentially become closer to traditional bank accounts but could also have
nimble and bespoke product features which banks have traditionally struggled with.

2.2.1.6 The CICO Problem: Cash-In and Cash-Out Services

Cash-In and Cash-Out (CICO) services represent both a critical enabling element of the digital financial services
ecosystem and a current and long-term problem. As an enabling element, CICO is simply necessary in order to
deal with consumers who have cash on hand, and want to use a digital wallet to send the funds to someone
else, and to deal consumers who receive electronic credit into a wallet and need to get cash to use. CICO often
goes hand in hand with a Person to Person (P2P) transfer, where consumers would Cash In (CI) at an agent,
perform a P2P transfer and the recipient performs a Cash Out (CO) at another agent.

The short term problem – often quite severe – is dealing with the liquidity and cash management needs of
agents, who at any point in time may have too much or not enough cash on hand to support their business.
The long term problem is an economic one: since many providers build their part of their digital wallet business
model on cash-out fees, a successful transition to “digital liquidity” (when a consumer leaves funds in their
wallet to be spent electronically) would present serious challenges to this model.

In some countries, “Super Agents” or “Master Agents” may be responsible for a set of underlying agents.
There are a variety of models within countries for agent regulation. In some countries, agents (or their “Master
Agents) are exclusive to one provider (bank or non-bank): in other countries, agents are permitted by providers
(and/or required by regulation) to support multiple providers. This can be accomplished either by the agent
enrolling and registering with each provider independently, or by some type of agent interoperability system,
possibly provided by the “Master Agent”.
Note that in bank-led models, the CICO function is provided primarily by bank branches and by ATM’s. Bank-led
models deployed to accomplish goals of financial inclusion normally have agent relationships (and economics)
which are similar to those of non-banks.

2.2.1.7 Description

A cash-in transaction requires an eMoney account holder to deposit physical cash at a participating agent of
their joint scheme. The agent accepts the cash and transfers e-money to the user’s eMoney account (i.e. mPesa
account at an mPesa agent). A cash-out transaction requires an eMoney account holder to transfer e-money
to a participating agent of their joint scheme, The agent receives the e-value and gives the user physical cash.
Cash-In and Cash-Out transactions therefore don’t change the total monetary value held on the eMoney
provider’s platform (and in the bank trust account), they merely change the ownership of eMoney and physical
cash between users and agents of the providers.

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