Page 26 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

2.2.2.1 Domestic Transfers (Remittances)

A domestic digital funds transfer is the exchange of funds from one user to another through a DFS provider
using electronic means, including a mobile handset, to either initiate and/or complete the transaction.
A digital funds transfer competes with traditional money transfers services, which are performed in various
regulated and unregulated ways. The regulated environment includes licenced money transfer companies such
as banks and post offices, the unregulated environment includes both unstructured and structured personal
cash-transport services: in some parts of the world, these structured services are referred to as “hawala”. The
advent of eMoney accounts has enabled efficiencies to be gained against these traditional streams as cash can
be digitised through an agent of a trusted service provider, sent instantly across vast distances, and immediately
cashed out at another agent of the trusted service provider. Product attributes include security (all transfers
are PIN based, initiated by the sender) and convenience (transactions happen in real-time).

The business model of the domestic transfer provider is a “send” fee to the sending consumer. The business
model is tightly coupled to that of the underlying digital wallet and CICO services.

Cash-to-Mobile transfers are often referred to as “Over the Counter” (OTC). In this transfer, a user sends funds
from an agent (by giving the agent cash) which is then credited to a recipient mobile subscriber. Much like
Mobile-to-Mobile transfers, receivers are alerted through their mobile handset of an incoming funds transfer.
The transaction happens in real time with the recipient eMoney account receiving the credit.

Mobile-to-Cash Transfers: value is sent from an eMoney account to a recipient who is not on the same network.
The receiver would be alerted via SMS on its handset of an incoming funds transfer. Funds have to be collected
from an agent of the sender. Much like Cash-to-Mobile Transfers presented above, the Mobile-to-Cash Transfers
rely on the receiving party`s ability to have easier access to the relevant agents.
Interoperable Mobile-to-Mobile transfers: as the industry matures, interoperability between different service
providers is becoming a reality. In this transaction the sender sends eMoney from their eMoney account to a
recipient who could have an eMoney account at another service provider or potentially a bank. The business
model for these transfers is typically based on the sender paying for the transaction, and the receiver paying
a fee if they cash-out or perform further transactions. This is offset by fees paid to agents by providers.
Interoperability business models are being developed. Although the trend seems to point to sender paying
models, these can range from copying an ATM carriage fee (sender pays) model, to a surcharge (sender pays)
model, to an interchange model where the receiving institution pays the sending institution and the sender
or receiver do not pay any extra for off-us transactions.

Best Practices include having the transactions be credited to the receiver in real time. An emerging best practice
is account verification, so that the sender sees a real-time message “Do you mean to send money to [Name]?”
before finalizing the transaction: this reduces errors and resulting inquiries and disputes.

2.2.2.2 International Transfers (Remittances)
A transfer sent from a consumer in one country to a consumer in a second country. As these transactions are
normally cross-currency as well, the transaction requires someone – either the sending or receiving party, or
the providers who are serving them, to effect the currency exchange.
Traditional models for sending cross-border remittances include money transfer services, many of which are
specific to certain corridors (pairs of countries); banks, and structured cash transfer “hawala” style services.
The advent of eMoney accounts has resulted in a number of experiments with using to the wallets to either
receive or, in some cases, send cross-border remittances.

Many DFS Service Providers have built partnerships with the traditional international remittance operators
such as Western Union and MoneyGram. This model requires the sender to transfer from a developed market
through the provider’s existing process, with the recipient receiving their funds directly onto their eMoney
account. The recipient would then cash-out through their local agent.

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