Page 112 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

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

3 Technologies used to remotely access DFS 12

3.1 Overview

SPs will provide the remote access method(s) that are best suited to the access devices prevalent in the markets
in which they operate whilst also taking into account the technical literacy levels of their customers. So with
basic and feature phones dominating most DFS markets, SPs mostly facilitate access to DFS systems primarily
via text-based unstructured supplementary service data (USSD) and the short message service (SMS)-based
subscriber identity module Toolkit (STK) – both of which work on almost all GSM-based handsets.
13
USSD and SMS (using STK) do multiple duty in DFS as mobile network data transport mechanisms ‒ also known
as ‘bearers’ ‒ across GSM networks, as payment instruments using the handsets themselves for payment,
14
and as the UI to interact with DFS services.
Indeed, USSD – and voice, via interactive voice response (IVR) ‒ were initially the core mobile bearers and UIs
used in the mid-1990s for executing user recharges of mobile network prepaid airtime-based stored value
accounts, and as access mechanisms and payment instruments with progenitor DFS-type ecosystems that
allowed purchase of infotainment-type value-added services (VAS) using the MNO airtime-based value.
15
Utilizing opportunities by new enabling regulatory regimes, this concept of using a mobile-based store of
16
value (SoV) for transactional purposes has evolved to the DFS systems which instead use accounts with fiat
money-backed stores of value.

In more recent implementations from mid-2012, DFS-oriented apps using over-the-top (OTT) internet
connectivity via smartphones have emerged. These are not as of yet in mainstream use in most DFS markets
for a number of reasons which include the relative cost of the devices for those at the BOP and lack of national
17
high-speed data networks required to efficiently use all the features of these apps. 18

3.2 Mobile network evolution

GSM was invented in the late 1980s in Europe and has evolved to become the dominant mobile technology
worldwide. It is the digital successor to first generation mobile (1G) analogue and the largely insecure mobile
networks introduced in the 1970s. The initial GSM incarnations from the early 1990s to early 2000s were
characterized by ‘narrowband’ or low-speed second generation mobile (2G) technologies that used data
transport mechanisms (bearers) such as USSD, circuit switched data (CSD), and SMS. These have evolved to
Internet Protocol (IP)-based access technologies based on low speed 2.5G and higher speed third generation
mobile (3G), 3.75G, and fourth generation mobile (4G) technology.
19
While many countries with DFS have national 2G coverage, 3G/4G coverage in emerging markets is found
mostly only in urban areas and on or near national roads.

The GSM specification has at its core the mobile application part (MAP) protocol which specifies how handsets
with GSM-based SIM cards can gain seamless access to key GSM network features such as the Home Location
Register (HLR), Visitor Location Register (VLR), Mobile Switching Centre (MSC), Equipment Identity Register
(EIR), and Authentication Centre (AC). USSD and SMS messages also travel over MAP. Many of the GSM
technologies used in DFS – such as USSD and SMS – operate over what is known as the GSM ‘signalling’ channel.

12 Data based on Perlman (2003) ibid; Perlman (2010) ibid; Perlman (2012) ibid; Perlman, L (2015a) ibid; Perlman (2015b) ibid.
13 Excluding some smartphones.
14 A bearer service – or just bearer - is a telecommunications term describing a service that allows transmission of information
signals between network interfaces. USSD, SMS, and 3G networks can be considered bearer technologies used in mobile.
15 See Section 5.
16 ibid
17 See further, Perlman (2016b) ibid; and Perlman (2017) ibid.
18 For example, mapping services needed to locate DFS agents.
19 The ‘G’ (generation) designation refers to a significant enhancement of mobile network technology, mostly signifying faster
mobile data speeds. Fifth generation mobile (5G) mobile data technologies are still in development.

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