Page 30 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

2.2.6.6 International trade

The participation in international trade through the use of digital financial services will not be thoroughly
analyzed in the context of this report. Notwithstanding, it is relevant to mention how the combined use of
several digital financial services facilitates engaging in international trade and thereby it promoted access to
trade-related development benefits.
For example, in China the e-commerce company Alibaba opted to establish its own e-payment system, which
soon expanded to banking, investment and clearing house for cross border merchandise trade. The company
developed a network of affiliated financial entities that enabled business-to-consumer services. One of these
entities, Alipay, had in 2013 approximately 300 million users of its online and mobile payment services. This
underlines how digital financial services can provide the right ecosystem for the provision of financial services.
It also enabled crowd funding initiatives by facilitating contributions from a large number of people. Alibaba's
platform allowed e-commerce activities by integrating consumers, manufacturers, custom clearing, transport
and several financial services such as credit, foreign exchange and insurance .
4
Digital financial services also facilitate the role of international trade in support rural development by reducing
physical and economic barriers to financial inclusion. Small farmers in rural areas benefit greatly from enhanced
connectivity to financial services, to reach clients and providers and to obtain updated price information
on their products. Access to mobile savings and credit services can allow small farmers to purchase the
necessary inputs for their agricultural activities. In addition, mobile credit and insurance services can enable
their connection to markets and ultimately alleviate poverty in rural areas.

The introduction of a mobile wallet system in Nigeria increased agricultural productivity in the country, which
was previously declining. Smallholder farmers depend on subsidized fertilizer, but often this would not reach
beneficiaries. This was addressed by the introduction of mobile technology to transfer fertilizer subsidies
directly to farmers, removing the Government from the role of procuring and distributing fertilizer. The transfer
system relies on a database with more than 10.5 million farmers who are subsidy recipients, which allows
them to have access to formal or regulated financial services. The system is expanding for digital identification
systems and biometric signatures, increasing rural financial inclusion .
5
While growing e-commerce creates significant opportunities, lack of security and trust remain barriers to
international trade transactions in the DFS ecosystem. Online fraud and data breaches require adequate
legal and regulatory measures, including aligning laws for e-transactions; streamlining consumer protection
policies, data protection and cybercrime laws; strengthening the capacity of policymakers and enforcement
authorities; and enhancing the awareness of consumers and companies . The focus area on fraud on this
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report will develop some of these issues.

2.2.7 Investment Services

2.2.7.1 Current and future investment products

Investments (defined as investments into financial products such as stocks, unit trusts, ETF’s etc.) in the DFS
space have to date not gained much traction. Some DFS operators are starting to investigate medium to long
term savings plans linked to money market accounts but very few have implemented anything.

Some of the contributing factors to the immaturity of this product offering is potentially a combination of
demand and supply side factors, these include:

• lack of surplus funds for investments at the Bottom of Pyramid
• lack of an investment for retirement culture

4 Adapted from UNCTAD, 2014, Report of the expert meeting on the impact of access to financial services, including by highlight-
ing remittances on development; economic empowerment of women and youth.
5 Adapted from the World Bank (2016), World Development Report.
6 Adapted from UNCTAD (2015), Cyberlaws and regulations for enhancing e-commerce.

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