Page 340 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

both Bangladesh and Pakistan are unregistered mobile money users or non-users. Brad Jones wrote an article
44
on this, calling the term “mobile money” a misnomer in Asia, where he notes the reliance is so heavy on OTC
that it should really be called, “Agent Money”. He notes that at Wing Cambodia, where he used to work, they
introduced formal OTC after launching wallets, and it accounted for an estimated 90 per cent of transactions.

To conclude, in a market-led environment, service delivery should be determined by demand. Because of
this, OTC, ironically, is client-centric, as mobile money users prefer it to accounts to fulfil their needs. Mobile
money users rarely cite reasons related to the awareness of mobile money accounts, or issues with registering,
as their basis for not opening accounts. The innovators and early adopters will likely refrain from registration
when it isn’t actively marketed, but may be very willing to do so when it is, even given an OTC option. The
early and late majority, when given the ability to choose, will still prefer to conduct OTC transactions at an
agent, rather than via an account.

5 Supply-side perspective for banks and third parties

One of the important drivers of OTC in Asia actually comes from the supply side. Many of the Asian regulatory
environments dictate that mobile network operators (MNOs) cannot own the DFS. Wing started as part of ANZ
Bank, bKash is a subsidiary of BRAC Bank; and, even in Pakistan, where MNOs run the strategic operations of
most of the services, they still have to either partner with a bank, or obtain a banking licence.

Most Asian providers have a partnership with a bank or a banking licence and offer fully mapped mobile money
accounts. The differentiation between fully mapped mobile money accounts (which banks can offer, along
with their value add of branding/trust and product differentiation) and MNOs’ mobile money accounts is that
the MNOs cannot intermediate the funds. For banks, it is of particular interest to have people register and
save – so that they have more funds to intermediate. However, given the cost of managing an account on a
core banking system, banks need substantial deposit balances, typically held in savings rather than transaction
accounts, to cover their costs. Banks can generate revenue by holding people’s money and investing it, and
therefore do not focus so much on transaction account-based revenue. Thus, they do not put much emphasis
on how a transaction is made (whether via OTC or via a mobile money account). However, in the case of OTC,
the money is not held in any account.

A similar argument holds true for third-party providers that offer services as that of Asian providers. Third
parties effectively control the agents, and are charged a fee when they, or their mobile money users, use
an unstructured supplementary service data (USSD) or short message service (SMS) channel to conduct
transactions. They, therefore, also have a much lower need to push an m-wallet-based transaction method,
and are more likely to choose an OTC model and price their services accordingly.

In contrast to South Asian MNOs, East African MNOs must keep the e-value they hold for mobile money users
in a trust account and do not earn revenue from it, so they charge fees on transactions made over the system
to generate revenue. To get money into the system, they usually do not change a fee for cash-in, but they still
pay the agent a commission, so it is a loss-making transaction. East African providers do make money when
the mobile money user cashes out, but it is split with the agent. So the real margins they make are on the P2P
transfers, or bill pay transfers that happen from a mobile money account. Perhaps that is why East African
operators are aggressive about registering mobile money users and curbing the use of OTC.

44 Brad Jones. The Paradox of Calling Mobile Money ‘Mobile’ in Asia, September 14, 2014. http:// www. mobilemoneyasia. org/ 2014/
09/ the- paradox- of- calling- mobile- money. html

312