Page 111 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

2 Digital financial services (DFS) technology overview

DFS are rapidly becoming a ubiquitous and affordable platform to access basic financial services to increase
1
financial inclusion.
2
In many instances, DFS is enabled by technological innovations that allow non-banks to provide basic financial
services that are similar to those traditionally offered by banks but which have hitherto been unavailable to
those at the bottom of the pyramid (BOP) who are typically, ‘unbanked.’
3
DFS products are offered by banks, non-bank third-party providers, and mobile network operators (MNOs),
4
together with service providers (SPs).
5
The ability of these providers to make these services global and at scale has been enabled by:
6
• Improvements in mobile network technology and coverage.
• Greater reliability and sophistication of mobile handsets.
• Better mechanisms to identify and authenticate users. 7

• Increasing acceptance by merchants of electronic payment instruments. 8
• New vendor platforms that allow non-banks to safely store both fiat-backed and airtime-based stored
user value.
9
• The leveraging of features of Global System for Mobile Communications (GSM) mobile technology
11
10
that allow them to act as both an access mechanism and a seamless user interface (UI) for navigating
DFS service options.
A number of ‘contactless’ facilities such as Near Field Communication (NFC), Near Sound Data Transfer (NSDT),
and linkages of DFS accounts to companion debit cards through national switches are all also spurring the
growth of merchant payments in DFS.

1 These services are also variously also known as ‘mobile money’ and ‘mobile financial services’.
2 The BOP which actually means the bottom of the wealth pyramid or the bottom of the income pyramid is the largest, but poorest
socio-economic group.
3 This is a generic term to indicate that they have not had access to a bank account, or are underserved by lack of ready access to a
financial services facility.
4 The predominant transaction types currently in DFS are P2P Payments, CICO, and mobile airtime purchases, bill payments, and
merchant payments. See further ITU Focus Group on Digital Financial Services report: Introduction to the DFS Ecosystem (2017)
5 In most cases and for reasons of brevity, this study will mostly conflate third-party SPs ‒ which may include banks ‒ with MNOs,
to mean entities providing DFS. Where a distinction is necessary per context, SPs will be differentiated from MNOs: For example,
in relation to competition issues and MNO mobile data coverage.
6 Data in this paper is drawn from Perlman, L (2003) Mobile Commerce, Payments Conference, Cape Town; Perlman, L (2010)
Mobile Money, Mobile Money Conference at Columbia Business School; Perlman, L (2012) Legal and Regulatory Aspects of
Mobile Financial Services; Perlman, L (2015a) Security Issues in Digital Financial Services; Perlman, L (2015b) Technologies Used in
Mobile Financial Services, Perlman, L (2016a) Risks in Digital Financial Services; and Perlman, L (2016b) CFI/Accion: Access at The
Frontier; and Perlman, L (2017) ITU Focus Group on Digital Financial Services report: Mobile Handsets Features for DFS.
7 Identity designs and platforms are covered in a separate report in the ITU Focus Group on Digital Financial Services and hence
will not be covered in great depth here. See ITU Focus Group on Digital Financial Services report: Identity and Authentication
(2017).
8 Merchant services are covered in separate ITU DFS FG studies and hence will not be covered in great depth here. See ITU Focus
Group on Digital Financial Services report: Enabling merchant payments acceptance in digital financial services ecosystems
(2016).
9 Vendor platforms and integration into financial infrastructure are covered in a separate study and hence will not be covered here.
See ITU Focus Group on Digital Financial Services report: DFS vendor platform features (2017)
10 Originally Groupe Spécial Mobile. GSM was developed in the 1980s by the European Telecommunications Standards Institute to
describe the protocols for second-generation digital mobile networks. See GSMA (2016a) History, available at http:// www. gsma.
com/ aboutus/ history
11 These include features such as voice, short message services (SMS) and unstructured supplementary service data (USSD).

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