Page 23 - ITU-T Focus Group Digital Financial Services – Executive Summary

ITU-T Focus Group Digital Financial Services
Executive summary

costs by as much as 90 per cent compared to similar transactions conducted in branches. Nevertheless, it is
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challenging to develop profitable services aimed at poor and unbanked consumers. As of 2015, the average
mobile money P2P transfer was valued at the equivalent of only USD 38, the average cash-in transaction value
was USD 29, and the average cash-out transaction value was USD 33.
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Reaching poor and unbanked customers profitably is particularly challenging. While average DFS transaction
values are already quite low, transactions conducted by poor and unbanked consumers are typically even lower
in value. Regulatory requirements or restrictions that increase the cost of doing business or place restrictions on
fees or other charges can be expected to reduce profitability and discourage investment, particularly in remote
areas. On the other hand, high fees and charges can also hinder uptake by poor and unbanked consumers, so
DFS providers need to strike a balance that delivers profitable yet affordable services.
Authorities can help drive down costs by creating an enabling environment for provision of DFS. To promote
competition and establish a level playing field for DFS provision, authorities should allow both banks and
nonbanks to offer DFS, either directly, or in partnership. In addition, they should adopt a service-based rather
than institution-based approach to DFS regulation. This will help to ensure that different providers offering the
same services have similar rights and are subject to similar obligations. Furthermore, DFS providers should be
permitted to use third-party agents to lower the cost of reaching customers.

At the same time, authorities should monitor service costs to ensure that prices are not preventing poor
and unbanked consumers from accessing DFS. Authorities should use a combination of transparency, moral
suasion, and monitoring to ensure that consumer prices are reasonable. They should require equal pricing
of comparable on-net and off-net transactions and should regularly monitor interchange fees and evaluate
whether they remain necessary (and, if so, at what level). Authorities should also strive to ensure that pricing
for bulk payments strikes a balance that incentivizes providers while remaining affordable for consumers.

4.2.2 Compelling use cases and service reliability

DFS providers need to identify compelling use cases for poor and unbanked consumers to adopt DFS.
As noted earlier, the value proposition for poor and unbanked consumers to use DFS is not always clear,
particularly for services beyond basic payments and P2P transfers. To encourage adoption by poor and
unbanked consumers, DFS providers should collaborate to achieve interoperability, promote and facilitate
G2P payments, and develop merchant payment acceptance networks. Implementing the recommendations
for authorities and DFS providers discussed above in the demand-side section should support efforts by DFS
providers to encourage uptake by poor and unbanked consumers.

Similarly, service reliability should be viewed as a high priority from the perspective of DFS providers.
Given that consumer research in 16 markets identified inability to transact due to network downtime as a top
consumer concern, ensuring reliable service delivery and availability should be a priority for DFS providers.
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QoS requirements should be appropriate to the nature of digital delivery of financial services and should evolve
over time, taking into account new services, technologies, risks, and other relevant developments. Therefore,
as discussed above, telecommunication authorities developing QoS standards in consultation with financial
authorities should ensure that DFS providers have the opportunity to share their perspective.

4.2.3 AML/CFT compliance

AML/CFT requirements can also serve as a barrier to reaching poor and unbanked consumers. In some
countries, many low-income consumers lack formal identity documents, proof of residential address, or
other required proof of identity for access to formal financial services. In these countries, DFS providers may
be prohibited from offering services to customers who cannot meet the requirements. In other countries,

69 See Footnote 2.
70 GSMA (2016), 2015 State of the Industry Report: Mobile Money, http:// www. gsma. com/ mobilefordevelopment/ wp- content/
uploads/ 2016/ 04/ SOTIR_ 2015. pdf.
71 McKee et al. (2015), Doing Digital Finance Right: The Case for Stronger Mitigation of Customer Risks, https:// www. cgap. org/ sites/
default/ files/ Focus- Note- Doing- Digital- Finance- Right- Jun- 2015. pdf.

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