Page 184 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

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

1 These may be specialized banks, for example the new payment banks authorized by the RBI in India. Competition issues between
payment banks and independent banks are discussed in CUTS (2016a) Understanding And Addressing Competition & Regulatory Bar-
riers To Growth Of Payments Banks In India, available at https:// goo. gl/ WW3oXv; and CUTS (2016b) Research Project On Identifying
And Understanding Competition And Regulatory Bottlenecks To Growth Of Payments Banks In India, available at https:// goo. gl/ RzfhmS
2 These may be specialized PSPs that are subsidiaries or co-owned by MNOs, for example PSPs authorized in Jordan.
3 Even if they are allowed direct access to the market, they may be restricted from providing certain services deemed risky by the
regulator, i.e. credit. Or they may be able to offer more risky services, but on less competitive terms than banks.
4 Non-financial services include customer authentication and KYC checks.
5 Even if MNOs are only allowed to provide agent services to banks or non-banks, these compliance rules may make even such an
opportunity less profitable.
6 For example in Ethiopia where only one (state-owned) MNO has been licensed.
7 They may be forced to interoperate through a payment switch at terms and prices that are unprofitable.
8 For instance, in India where only National Payments Corporation of India (NPCI) - owned by banks - has been licensed to offer retail
payment infrastructure services.
9 When compared to the MNO/MNO-partner’s access to similar services.
10 These may be low-margin bearer service and they may be forced to provide access to their communications network at possibly
below cost rates as a condition for their authorization to operate DFS.
11 MNOs are able to provide services and incentives that banks and other PSPs may not be able to provide: For example, to incentivize
customer DFS use by giving away free airtime minutes and SMSs when a MNO customer transacts.
12 For example, MNO-affiliated payments banks in India offer free mobile airtime with promoter MNOs for opening of accounts with
affiliated banks.
13 For example the Vodafone India MyVodafone Android smartphone app, which reportedly forces MNO Vodafone India users to
open up an M-PESA account with Vodafone’s M-PESA subsidiary to pay for their telecommunications services. See Medianama (2017)
My Vodafone App Is Forcing Customers To Create An M-Pesa Wallet, available from https:// goo. gl/ zYT7yI
14 Versus other preferred parties who may not have the same restriction
15 For example, for alternative credit scoring purposes.
16 In India, payment banks have access to data sets available with respective promoter MNOs/PSPs but not of other market players.
17 Compliance is more rigid for banks than non-banks for the same or similar service offering.
18 Payment banks in India might be required to comply with stringent/multiple approvals compared with full-service banks. See CUTS
(2016b) ibid and the Indian country example below.
19 Capital requirements, agent approval requirements and/or KYC requirements may be too stringent relative to the risk offered by
low-value DFS accounts.
20 Ibid.
21 Ibid.
22 Ibid.
23 Versus MNOs.
24 Non-banks may not have the same cash-handling, physical branch, and cash storage requirements that are imposed on banks. For
example, the requirement in Tanzania for banks to have security cameras at branches.
25 Ibid.
26 Their transactions are taxed at a high level, whereas non-banks are not taxed or taxed less.
27 For example, in Pakistan.
28 Transactions may be subject to special taxes not applicable to banks.
29 Ibid.
30 Ibid.
31 For example, the requirement in Nigeria for MNO’s DFS agents to have insurance.
32 They may not be able to use agents to provide DFS-related services, or the approval and/or compliance requirements for their
agents may in some cases be disproportionate to the risk

160