Page 313 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Figure 3 – The “long tail” of suppliers

To overcome this barrier, B2B payment solutions should be able to work for both formal and informal business
owners. This will require a risk-based approach to regulation, meaning that low-risk transactions will face lower
regulatory hurdles, no matter where they occur. Examples of regulations could include KYC and screening
requirements. If businesses face too many regulations, many will simply use cash, instead of adopting more
efficient methods of payment.
Digital B2B payment tools should also work on a wide range of mobile hardware across mobile software
platforms. Smartphones accounted for only about 13 per cent of connections in sub-Saharan Africa at the
end of 2013. Yet successful entrepreneurs are most likely to have smart phones rather than feature phones,
therefore business solutions can partake of the enhanced mobile capabilities to build feature-rich digital
payment solutions for B2B use cases.

At the same time, B2B payments may require more security than P2P payments. This is, in part, because B2B
payments may be of higher value. The company CopSonic is attempting to provide that higher level of security
on basic phones, using audio signals for authentication. However, any solution will need to manage the security
of transactions against the ease-of-use.

B2B payment solutions should also include the ability to take out a percentage of payments in order to repay
business cash advances, receivables financing, and other lending products. This will allow more credit to flow
into B2B payments, enabling faster growth.

All of this must work within a viable business plan. Both small buyers and small suppliers are cost conscious.
Any B2B product will need to be inexpensive enough to appeal to both parties, while also making money for
the DFS provider.

While it may be attractive to think that even the most thin margin business models can work with sufficient
transaction volume, providers should avoid the “network fantasizes” that plague many payment startups. Many
of the most successful B2B networks have only a small number of companies signed up. Therefore, providers
need to find a way to achieve a sustainable business model without massive scale.
Finally, B2B payments will be more widely adopted when digital payments generally are more widely accepted.
This means that a sufficient network of CICO points is a necessity for B2B payments. Also, this is why closed-loop
systems present a barrier to widespread use of B2B payments. Many digital payment schemes are so-called
“walled gardens,” making it difficult to send money from one digital money system to another. Interoperability
would make digital B2B payment tools more widely accepted, and therefore more likely to be adopted.

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