Page 322 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Interoperability:

Interoperability is one of the biggest technical issues facing bulk payment providers. Closed-loop systems,
where funds are limited to a single payment provider, provide limited utility. “The system should be an open
loop,” according to the Gates Foundation’s Level One Project, “with the objective of encouraging all qualified
participants to join.” 16

When beneficiaries are able to use their own payment system, instead of being forced to use a closed-
loop system, training is much easier. And if mobile operators have already enrolled beneficiaries, the job of
enrolment is much easier. In this way, interoperability can improve leakage within bulk payment systems by
making the system more efficient.

Without interoperability, the task of routing payments becomes much more complicated. For example, paying
agencies may have to know the addressing information on the beneficiaries and their preferred financial
institution in order to send the payment. If the beneficiary were to change financial institutions, that payment
could get lost.

Logistical issues:
The first logistical issue faced by bulk payment providers is how to enrol beneficiaries in the system. New tools
have made enrolment more efficient, but sending workers into the field to collect addressing information is
still challenging.
Once that information is collected, organizations are forced to consider where to house and how to update the
data. For many organizations, the data simply sits in Excel format on the internal servers. These databases can
be difficult to access and update. Also, organizations often face a tradeoff between accessibility and security
– the more accessible data is, the more difficult it is to secure that data.

Cash transfer programs can also require a massive staff. In the Philippines, cash transfer administrators were
forced to hire 10,000 staff in order to manage the program. Managing and training that many people on
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payments technology and procedures can be difficult.

Staff are not the only parties that require training. Beneficiaries, especially those with high illiteracy rates,
may not understand basic security functions, including PIN or passwords. Training is required, both in the
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technology and on the purposes of the program itself. In some contexts, beneficiaries saw the cash transfers
as a “gift” and were loath to complain when the transfer didn’t arrive, or if there was misconduct at the pay
points.
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Liquidity:

Providing liquidity – usable money – is a difficult but necessary aspect of an efficient bulk payment program.
Generally speaking, beneficiaries receiving benefits through eMoney, smart cards, or vouchers – will immediately
want to “cash out” the electronic payment. This is understandable, given that beneficiaries often live in a
situation where the eMoney – on a card or in an eMoney wallet – cannot be spent at the merchants (shops
or service providers) they patronize. (Note, the ITU DFS Focus Group has a number of reports addressing the
particular problem of merchant payment enablement.)

This can create a logistical problem of how to reliably provide cash to recipients.

Many cash transfer programs rely on agents to act as intermediaries. In Malawi, Airtel Money relies on its
banking partners to provide liquidity to agents during pre-determined days used for distribution. This process
is resource-intensive and expensive. The agents may be necessary to help beneficiaries. In this situation,
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16 The level one project guide. The bill and Melinda Gates Foundation. 2015.
17 Zimmerman, Bohling, and Rotman Parker. CGAP. 2014.
18 Muralidharan, Niehaus, and Sukhtankar. UC San Diego. 2015.
19 Zimmerman, Bohling, and Rotman Parker. CGAP. 2014.
20 Almazan, Mireya. G2P payments & Mobile Money: Opportunity or Red Herring? GSMA. September, 2013.

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