Page 331 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

1 Introduction

The digital finance industry is both young and dynamic, and as it grows, it is constantly innovating to address
the issues it faces. One of the key contemporary issues is over the counter (OTC) transactions. The delivery
of mobile money over the counter raises a number of questions since it can: 1) limit product and ecosystem
evolution; 2) decrease provider profitability; and 3) lead to unregistered transactions, which run the risk of
money laundering and terrorism financing.
OTC is a new work stream effort in the Ecosystem Working Group of the ITU DFS. In this report, we want to
look more closely at these questions and, with the help of data from The Helix Institute, InterMedia, and the
GSMA, provide an analytical perspective on the pros and cons of the OTC to arrive at conclusions and key
considerations to move the industry forward.

2 What and why of OTC transactions?

2.1 Defining OTC transactions

Unfortunately, as with any new concept, OTC transaction is still poorly defined, as the GSMA and MicroSave
have pointed this out in previous blogs and reports .
1
In this report we define an OTC transaction as “a transaction that the agent conducts on behalf of a sender/
recipient or both from either the sender’s or agent’s mobile money account.” This definition includes both
transactions conducted by agents from their own accounts on behalf of senders, as is the case in Pakistan, as
well as agent-assisted transactions that are popular in sub-Saharan Africa, where many senders and recipients
2
already have mobile money accounts, but are assisted by the agent to make their transactions. These agent-
assisted transactions are made from the sender’s accounts, and do not involve the agent’s account.
We want to further distinguish between “formal” methods approved by the provider and regulator (as is the
case in Pakistan and Zambia), and “informal” methods (prevalent in Bangladesh, India and elsewhere), which
are frowned upon by regulators and disliked by providers to differing degrees. One informal method common in
sub-Saharan Africa is direct deposit, where the sender gives the agent cash, and the agent transfers it directly
to a recipient’s mobile money account, thus circumventing the P2P transfer that the user would have made.

We add a second dimension to the definition of OTC, based on whether sender/recipient are identified at
the point of transaction either through their mobile money accounts, or an identification card. In Pakistan ,
3
sender/recipient must bring their original identification document with a copy to make a transaction. In East
Africa, many senders conduct agent-assisted transactions where they come to the agent with their mobile
phone, they give their mobile phone to the agent, and in many cases disclose their PIN and request the
agent to conduct the transaction for them. Such agent-assisted transactions happen usually because either
the senders do not have the level of comfort or lack technical literacy to do it themselves . The sender can
4
be considered identified, as the transaction is made over their registered mobile money account and they
provide the PIN to authorise it.

To clarify, we have added Table 1 to anchor the discussion and further expand the definition of OTC.

1 Mireya Almazán and Lynn Eisenhart, OTC & Mobile Money: Making Sense of the Data. http:// www. gsma. com/
mobilefordevelopment/ programme/ mobile- money/ otc- mobile- money- making- sense- of- the- data
2 The Helix Institute Tanzania and Uganda country reports in 2013 showed that it is common for agents to offer OTC transactions
to customers, as described in more depth in this paper in later sections.
3 See http:// www. helix- institute. com/ data- and- insights/ agent- network- accelerator- survey- pakistan- country- report- 2014
4 Mike McCaffrey and Doreen Ahimbisibwe. Digital Finance and Illiteracy: Four Critical Risks, Dec. 2015. http:// www. cgap. org/ blog/
digital- finance- and- illiteracy- four- critical- risks

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