Page 15 - ITU-T Focus Group Digital Financial Services – Recommendations

ITU-T Focus Group Digital Financial Services
Recommendations

Title of recommendation Shared services
Working Group Ecosystem

Audience for recommendation Competition authorities

Regulators, including competition authorities, should recognize that the DFS ecosystem will benefit from some
services being shared among providers and should encourage this sharing. Shared services, such as fraud
management services, can be an important way to achieve success, particularly for those which benefit all par-
ticipants, require economies of scale, and which are not thought to be sources of competitive differentiation.

• Although policy makers are encouraged in general to promote vigorous competition in the DFS ecosystem,
there are areas where cooperation and collaboration make more sense for the development of low-cost
financial services. The most obvious area of collaboration is in the development of shared, interoperable
payments schemes – that is addressed at length in other papers and recommendations of the DFS Focus
Group.

• There are other areas where policy makers and regulators should allow, and even promote, a collaborative
approach. Payments fraud management relies on the use of data and algorithms to detect anomalies that
might be fraudulent, and to detect “bad actors” who are using the ecosystem through a variety of DFS
providers. Allowing or even mandating DFS providers to share data (while protecting the confidentiality
of this data, at both the consumer and the DFS provider level) is strongly recommended. Having a larger
pool of data simply makes fraud detection easier and better - no single DFS provider can have the data
that all DFS providers together have. Furthermore, a shared investment in fraud algorithms, and even
the use of those algorithms to stop fraud, can be equally beneficial.
• There are multiple examples of the use of collaboration in fraud management in the U.S. payments
card market. Visa and MasterCard cooperatively manage an Issuer’s Clearinghouse which require
issuers to report: All credit card applications; all fraudulent applications; and all accounts that have
experienced unauthorized usage. From this data the card networks provide reports and tools to allow
issuers to manage account application fraud. Multiple other services, including early warning services, ID
analytics, and Experian’s National Fraud Database, support similar payments related fraud management
capabilities using shared data. Although many of these services are now commercial, in the early days
of the development of the systems they were managed by bank-owned entities and operated on a cost
recovery basis.

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