Page 25 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Attributes of successful CICO models include: safety (all transactions are PIN based); speed (transaction take
place in real-time) and convenience (agent distribution is widespread).

2.2.1.8 Business Model
To attract funds into the system depositing users do not pay to deposit. Similarly, agents are incentivized by DFS
providers to attract funds into the system by earning commissions for cash-in transactions. To withdraw funds
from the system, users pay a fee to withdraw cash. Agents also earn commissions for cash-out transactions.
Therefore, the business model leans towards users performing cash-out transactions funding the bulk of the
ecosystem.

2.2.1.9 Best Practices

Agent management is a critical success factor for the CICO service to perform optimally. Factors which contribute
to a successful agent management include the following, which should aim to expand and consolidate efficient,
effective and trusted networks:

• agent selection and recruitment;
• agent training;

• agent incentives;
• agent liquidity management;
• agent monitoring.

2.2.1.10 Current offering and the future of CICO
• Current business models incentivize CO transactions – thus countering the long term ambition to keep
cash digital
• Agents have potential working capital constraints when making trade-off decisions between allocating
cash to eMoney (for cash-in transactions), keeping physical cash on hand (for cash-out transactions) or
allocating the cash to purchase other goods which may turn a higher profit leading to liquidity challenges
• Providers have aggressively competed on rolling out agent networks and pricing competition has led to
reduction in agent commissions
• Competition and pricing pressure may lead to situations where agents may not see value in CICO
transactions

• As bulk payment matures the funding side may potentially replace a large portion of the current over
the counter cash-in transactions

• As merchant payment matures and a merchant payment business model is defined the cash-out
transactions may be cannibalized. There may however be arbitrage issues where agents could encourage
cash-out transactions (and exchange the cash for goods) instead of merchant payment transactions as
they earn a higher margin from cash-out than they might from merchant payments.

2.2.2 Payments Services
A wide range of payments services are provided to users of the digital financial services ecosystem. These
services are almost all bi-party: that is, there is both a sender and a receiver of funds, and the transaction
account of each party needs to support the payments processes necessary to accommodate these transactions.
Note that two areas of payments services, of particular importance to the development of the DFS, are
described in separate reports from this Focus Group and therefore are not described in detail in this report.
These areas are merchant payments (including all forms of commercial payments acceptance such as bill
payment) and bulk payments.

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