Page 16 - ITU-T Focus Group Digital Financial Services – Recommendations

ITU-T Focus Group Digital Financial Services
Recommendations

Title of recommendation Over the counter (OTC) services
Working Group Ecosystem

Audience for recommendation DFS stakeholders

"OTC" transactions may be useful in some markets for effecting a transition from purely cash to digital payments
between transaction accounts.

• Several markets are characterised by extensive use of OTC transactions. The ITU Focus Group on Digital
Financial Services has published a report titled “Over The Counter Transactions: A Threat To Or Facilitator
For Digital Financial Ecosystems?” that describes the various forms of OTC in place and analyses some
of the challenges arising from them.
• Regulators are understandably concerned about problems associated with payment transactions
conducted between unidentified individuals. In some countries, programs are being put into place to
ensure that identity information (sometimes biometrically established) are collected for both parties in
the transaction. Regulators should require that risk-proportional identification of both the sending and
the receiving parties are recorded.
• However, regulators are encouraged to consider the broader question of whether or not transactions are
paid out of – and into – transaction accounts. From the standpoint of financial inclusion, it is beneficial
for consumers to open and use transaction accounts, which can, over time, provide the base – and the
data – necessary for access to other financial services, including credit, savings, etc. Stakeholders in
markets with extensive use of OTC transactions should cooperate in order to create a path towards fully
electronic account-based payments, and thus, ultimately, to a range of DFS. Regulators should work
with DFS providers to implement education programs to promote the transition to a digital system, and
consider provisions to incent providers and consumers to use transaction accounts.
• Regulators should also consider the question of agent assistance as a separate question from the use of
non-account based payments transfers. Agent assistance can be of value in helping consumers understand
and become familiar with electronic payments. Agents often provide assistance with account-based
transfers, and this should not necessarily be discouraged by regulators.
• The economics of OTC transactions are problematic in several countries where the fee and commission
structure among DFS providers, agents, and consumers may together encourage the ongoing use of OTC
transactions. Regulators are encouraged to study this issue closely, and consider actions to reduce this
problem.
• Some countries have considered the question of banning OTC transactions altogether. Given that OTC
can create a transition path for the consumer to the full use of digital payments, it is recommended that
OTC be allowed to continue in markets where it currently exists – subject to efforts to create a path to
broader financial inclusion highlighted above.

10