Page 250 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Executive Summary

Social networks enable users to chat, share photos, and perform similar social activities. As social networks
mature, they continually add commercial services such as person-to-person (P2P) payments, shopping at
physical stores, and ‘conversational commerce’ via chat applications.

Social networks have become enormously popular and are themselves bigger than the largest e-commerce
companies in the world. Importantly, social networks have determined multiple ways to monetize their user
base, including advertising, digital content, and transaction fees. Revenue growth has been impressive: for
example, Facebook’s revenue has grown from $2 billion to $18 billion in just five years.

At this point in time, however, this social networking and commercial revolution has largely skipped the bottom
of the pyramid (BoP). In general, while social networks are present in most developing countries and view the
BoP as a big opportunity, the poor are not participating – primarily due to low Internet adoption. But, increasing
Internet adoption will not open the social networking floodgate. Feature phones, the primary device used by
the poor, limit the social network value proposition. While smartphones offer the best user experience, they
introduce new problems such as a short battery life and higher data costs. Even if social network adoption
grows, the commercial aspects won’t materialize for the poor without financial inclusion – a consumer can’t
buy unless they link a payment account like M-Pesa to their social network account.
Is this one more example of the digital and financial divide, or can social networks help the BoP economically?

Interestingly, social networks could help close the digital divide by providing various mechanisms, to the extent
that they are allowed by regulators:

• Digital on-ramps – Providing a simple, low-cost way of gathering information and communicating with
others. For example, chat and VoIP services could reduce spending on SMS and mobile phone calls.
• Platforms for BoP ecosystems – Enabling consumers and entities to create and manage groups,
commercially oriented, or otherwise. For example, social network platforms could be used to organize
agricultural value chains and enhance how farmers interact with produce buyers, agro-dealers, banks,
and other stakeholders. Alternatively, smallholdingfarmers could organize themselves into groups to share
knowledge, borrow from banks, or negotiate better prices from crop buyers. Other examples include
non-governmental organization (NGO) group lending programs and parent/school groups.

• Payment networks – Providing a global, interoperable, multi-channel and user-friendly eMoney payment
network. For example, social networks could resolve mobile network operator (MNO) interoperability
issues by integrating with multiple MNO wallets and transferring money between users. Additionally,
social networks could provide physical merchants with low cost payment solutions without chip terminal
or barcode reader investments.
• Marketplaces – Helping consumers shop better, merchants sell more, and entrepreneurs find more work.
This could take the form of selling products to a larger audience, maintaining an ongoing dialogue with
existing customers, promoting job skills, discovering employment opportunities, participating in ‘on-
demand’ labour marketplaces, or even virtual entrepreneurship (e.g., YouTube celebrity/entrepreneurs).
• Beneficial data collection – Improving access to credit and enabling targeted outreach and advertising.
For example, transaction histories and merchant reputation ratings could provide BoP merchants with
greater access to credit. Additionally, richer consumer data could allow NGOs and governments to target
interventions on a large level, or on a very small level by simply allowing an individual to sell their bicycle
within the local community.

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