Page 341 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

6 Conclusions

The industry and stakeholders have expressed concerns around OTC causing: Increased AML/CFT risks,
decreased provider revenue, locking providers into the model, limiting product evolution, and creating volatility
in market shares for the providers. As analysed in the previous sections, we conclude the following:

• Pure OTC and partial OTC lacking identification of either the sender, the recipient, or both, may increase
the risk of money laundering and terrorism financing. However, this should not mean that the regulators
should ban OTCs altogether. Instead, the regulators may formalise OTC transactions to ensure that both
the sender and the recipient (for a P2P transaction) can be identified. Also, the regulators should let the
market decide the nuances of the registration processes.
• OTC is often seen as limiting product evolution. However, OTC may be an appropriate tool to promote
adoption and familiarity with mobile money for early use cases. This approach does not preclude providers
from collecting data on the preferences and usage of the mobile money users during an initial period of
OTC. The data thus collected may be used to develop additional use cases around credit, savings, and
insurance and can be pushed through a mobile money account. The end users, thus having already been
familiarised with the early use cases, may be more compelled, and able, to register for an account.
• Industry experts argue that it is much harder to transition pure and partial OTC users to mobile money
accounts at a later stage, as the OTC users and agents become accustomed to OTC transactions. However,
it is noteworthy that most providers offering OTC also offer mobile money account registration at the same
time. For most providers, mobile money account use and OTC use grows in tandem. The industry-leading
numbers of account registrations in both Bangladesh and Pakistan, where OTC is prevalent, illustrate that
OTC does not prevent growth in account registrations.
• Registration for accounts is important for product evolution and building an ecosystem. However, in
some cases, depending upon the market conditions, registration campaigns may be most optimally
sequenced after launch, as it would allow providers to target specific user segments with tailored value
added services.
• Pure OTC transactions lead to a considerable reduction in profits for the providers because of higher
operational costs. However, it is compensated for by the fact that OTC models have resulted in an
increased number of transactions and is appealing enough for a segment of mobile money users who
are not interested in accounts.

Table 3 – Stakeholder pros and cons

Stakeholder Pros Cons
Regulators and OTC can catalyse uptake and access to finan- If there is not a formalised methodology, as
policy-makers cial services, which is a common goal of mobile money user identity is unknown, and
regulators. Further, allowing a formal method informal ones especially could lead to AML/CFT
to exist can reduce the risks inherent in infor- risks.
mal methods.

Providers In some markets, OTC may be an easy way to For the subset of mobile money users that
grow usage quickly from the start, especially would have made a mobile money account-
if the provider’s market share in their core based transaction (as opposed to just not using
business is not dominant, and could be the the system), there is a reduction in profits, as
only way of reaching early and late majority OTC models are easier for competitors to copy
quickly. and could potentially start an agent commission
war. In addition, it can be hard to transition
from an OTC model to a mobile money account-
based model.

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