Page 28 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Current mobile savings products are still in the early phase of the evolution of DFS. Since inception transactions
have been nuanced towards over the counter money transfer transactions but indications are that savings
products are starting to gain traction.
The advent of interest bearing products and sophisticated technology enabling deferred savings products will
potentially drive the uptake of mobile savings accounts. A very important regulatory decision will be to consider
whether or not eMoney issuers will be able to lend against balances kept in digital wallets.

2.2.6 Loans

2.2.6.1 Description

2.2.6.1.1 Secured Loans
A form of secured loans that is common across emerging markets is Airtime Credit. Service Providers give
users access to Airtime (typically a negative balance on the account) to be paid back when they top-up with
Airtime again. The “loan” is thus for airtime and not redeemable for cash. The security is any future airtime
purchase and risk models are based up airtime purchase behavior.

More recently cash loans are being offered by DFS providers through banking partnerships. In these models
there is often a joint savings and credit account and the loan is secured against a user’s savings. As the models
mature they evolve to unsecured lending products. MShwari in Kenya is potentially the most publicized example
of this, which is a joint venture between Safaricom and Commercial Bank of Africa (CBA).

2.2.6.1.2 Unsecured Loans

Unsecured loans have been launched more recently in a variety of markets – offering customers’ access
to credit with no direct recourse for non-payment. Typically the loan provider will score customers using
alternative data sourced from the MNO directly or through other means.

The credit decisions are based on data gathered from entities that collect mobile user data through smartphone
apps to build risk models or using MNO GSM and eMoney account data to build dynamic risk models to lend
to unbanked customers into their eMoney account. In this model interfaces can be for example USSD to
ensure inclusion and all loans have a risk based pricing methodology through rewarding good repayment with
lower prices and higher loan sizes. Loans are advanced to key participants in the eMoney Ecosystem: agents,
merchant and consumers.

2.2.6.1.3 Merchant Loans
An important part of the emerging DFS ecosystem is the provision of credit to small and medium merchants
– many of whom have not had previous access to formal credit. Often, these loans are based on information
the provider has from seeing the flow of sales transactions handled through the provider. In some instances,
the revenue from loans is sufficient to enable very low cost payments transaction fees to the merchant.

2.2.6.2 Attributes

In emerging markets the providers are often not solving a price problem but rather an access and distribution
problem as the majority of the population is excluded from the traditional lending sectors. Digital Financial
Services allows these segments access to convenient and simple products. Successful products have the
attributes of convenience (products are accessed through the handset, no need for branch visits and
paperwork), and accessibility (loans paid to eMoney account and for immediate use).

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