Page 334 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

profit margins of more than 20 per cent and cash flow margins which exceed 15 per cent. However, there is
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some industry concern around how OTC limits this product evolution. 14

In 2015, the GSMA reported that airtime top-ups, bill payments, and P2P transfers globally accounted for 96
per cent of transaction volumes and 87 per cent of values. OTC allows for all three of these transaction types,
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as long as the transactions are made at the agent.

Other mobile financial services products, such as mobile credit, savings, and insurance, often do require
a mobile money account, and are innovative evolutions building on mobile money. For example, in Kenya,
sophisticated and successful financial products like M-Shwari, KCB M-PESA Account, Lipa na M-PESA and
M-Ledger require an existing M-PESA account. However, these products came five years after M-PESA’s
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launch. As a result, one may consider OTC an appropriate tool to promote adoption and familiarity with mobile
money for early use cases (airtime top-up, P2P, bill payments); and when additional use cases (credit, savings,
insurance) are made available that require an account, end users, who have already been familiarised with
the early product, may be more compelled and able to register for an account.
This approach would not preclude collecting data on their preferences and usage during an initial period of
OTC, either. As mentioned above, formal OTC requires mobile money users to provide identification (to send
or to receive), and allows providers to collect similar data that they would be able to, if they were making
account-based transactions.

Moreover, in some instances, slow growth rates with new products and services may mean that active agent
assistance might be needed to sell the products to the mass market. This may suggest that the optimal time
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to register mobile money users might actually be upon launch of an account-based product that requires agent
promotion. While some argue that agents would not want to do this, given the high revenue they earn from
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OTC, The Helix 2014 Pakistan Country Report shows that only 26 per cent of agents surveyed felt this way,
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with the other 74 per cent willing to conduct mobile money user registrations for mobile money accounts.
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Therefore, given the right incentives, agents may be more willing to help with registrations than commonly
thought. They also provide trusted advice to the mobile money users which helps introduce new products
and services to the mass market.

3.3 Problem 3: Beginning with OTC locks you into the model

While OTC usage may bring benefits to overcoming the initial mobile money user barriers to using a mobile
money account, such as lack of requisite numeracy/literacy, fear and lack of trust in digital financial services
(DFSs), complicated user interfaces etc., it is argued that it will be much harder to transition users to mobile
money accounts at a later stage, as the OTC users and agents become accustomed to OTC transactions.
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13 GSMA. Mobile money profitability: A digital ecosystem to drive healthy margins, 2014. http:// www. gsma. com/
mobilefordevelopment/ programme/ mobile- money- programme/ mobile- money- profitability- a- digital- ecosystem- to- drive- healthy-
margins/
14 MicroSave. Over The Counter Transactions – Liberation Or A Trap? – Part I, 2015. http:// blog. microsave. net/ over- the- counter-
transactions- liberation- or- a- trap- part- i/
15 GSMA. State of the Industry Report on Mobile Money, 2016. http:// www. gsma. com/ mobilefordevelopment/ programmes/ mobile-
money/ industry- data- and- insights/ sotir
16 Safaricom introduced products using accounts as early as in 2009 (two years after the launch) such as Kilimo Salama, M-KESHO,
however these products did not succeed and scale up.
17 Anastasia Mirzoyants and Mike McCaffrey. The Human Touch Required to Evolve Digital Finance, Nov. 2014. http:// www. helix-
institute. com/ blog/ human- touch- required- evolve- digital- finance
18 Isaac Holly Ogwal. The OTC Trap – Impact on the Business Case for Uganda’s Mobile Network Operators, August 2014. http://
blog. microsave. net/ the- otc- trap- impact- on- the- business- case- for- ugandas- mobile- network- operators/
19 Maha Khan and Aakash Mehrotra. Agent Network Accelerator Survey – Pakistan Country Report 2014, May 2015. http:// www.
helix- institute. com/ data- and- insights/ agent- network- accelerator- survey- pakistan- country- report- 2014
20 See slide 14, Pakistan Country Report, 2014. http:// www. helix- institute. com/ data- and- insights/ agent- network- accelerator- survey-
pakistan- country- report- 2014
21 MicroSave.Over The Counter Transactions – Liberation Or A Trap? – Part II, 2015. http:// blog. microsave. net/ over- the- counter-
transactions- liberation- or- a- trap- part- ii/

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