Page 36 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

– Financial Inclusion Perspective: it is in the end user’s best interest to have a strong understanding
of how digital financial services may or may not impact them and their behavior. This transparency
is particularly valuable as it relates to fees applied to a transaction. Ideally, fees are communicated
before the transaction is submitted.

2.3 Category 3: Market Access

• Specifying the types of entities that can hold a mobile money license or offer digital financial services

– Financial Inclusion Perspective: an open system is beneficial to lower income end users as it likely
increases access and drives prices down through increased competition.

• Cross-border money transfer
– Financial Inclusion Perspective: recognizing that many unbanked end users may migrate to support
themselves and their families, regulations should also aim to support open, low-value cross border
payments.

• Outlining entry and exit controls of digital financial service providers and other entities participating in
the scheme
– Financial Inclusion Perspective: increasing entry and exit controls is likely to decrease access, which
may limit competition and innovation. However, fragmented markets can be difficult to properly
supervise. As a result, regulators should aim for lower entry and exit controls assuming supervision
does not suffer.

2.4 Category 4: Payment Systems
• Identifying requirements for e-float to non-bank DFS providers

– Financial Inclusion Perspective: providers should be required to keep 100% of float in liquid assets
to ensure refund or redemption by the end users.

• Interest accrued on trust accounts
– Financial Inclusion Perspective: the custodian bank should be required to pay interest on float. Ideally,
the providers pass on interest earned on their trust accounts to end users.
• Defining or limiting payment scheme interchange (between providers)
– Financial Inclusion Perspective: low or no fees are preferred for the unbanked. Interchange can
create upward pressure on end user pricing. In instances where interchange from one DFS provider
to another is required or makes sense, providing a sunset period (where interchange is at first limited
than phased in) may avoid higher retail prices in the long run.
• Requiring interoperability of digital financial services providers and schemes

– Financial Inclusion Perspective: fragmented markets may limit access and usability for end users.
Regulators should aim to achieve full interoperability across all DFS providers and schemes.

2.5 Category 5: Risk Management

• Specifying Know Your Customer (KYC) requirements for digital financial services providers
– Financial Inclusion Perspective: restrictive KYC prevents undocumented end users from opening
accounts; tiered access is preferred. Additionally, connecting to a national identity scheme, if one is
in place, may prove beneficial to the unbanked who may otherwise have few forms of identification.
National identity scheme with biometric components have a powerful potential for avoiding payments
to “ghost” recipients.

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