Page 189 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition
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ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition
A true enabling environment is said to exist when banks and non-banks are allowed to undertake almost equal
market activities on almost equal terms using a functional and proportional approach that reflects the risk
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profile of the service being offered, rather than being based on the type of provider. 55
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The lack of legislation, such as a national payment systems act and associated regulations, is not necessarily
a handicap to non-banks being allowed market access: A central bank, and often the telecommunications
regulator, may issue a letter of no objection (LONO) in advance of, or in the absence of an adopted regulatory
framework. However, if the terms are not transparent and applied uniformly amongst market participants,
this may result in certain entities being favored and subject to privileged terms.
4.2 Competition aspects
Consent by a regulator for an entity to enter a market is ground zero for the facilitation of a robust competition
in a market. Without the consent, certain entities may be left to only provide ancillary services. And even where
some participation is allowed from non-bank entities, there may be sectoral complaints.
Consent by a regulator for variety of entities to enter a market is precondition for robust competition in the
market for DFS. Without the consent, new innovative providers will not be able to deliver DFS services at
scale and certain entities may be left to only provide ancillary services. And even where some participation
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is allowed from non-bank entities, there may be sectoral complaints.
4.3 Country examples
Bangladesh
Under the ‘Mobile Financial Services Guideline 2011’ issued by Bangladesh Bank (BB), only banks or their
subsidiaries are eligible for a DFS license. Neither MNOs nor other non-banks can legally independently operate
in the DFS ecosystem in Bangladesh, although non-banks can be investors in bank subsidiaries. So far BB has
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not approved DFS licenses for bank subsidiaries that have MNOs as shareholders.
This regulatory situation has brought about a virtual monopoly in the DFS market, dominated by the DFS
Service Provider (SP) bKash which holds over 90 per cent of the market share, even though 18 banks operate
DFS. There are 28 commercial banks with MFS licenses, but only three or four are effectively operating in
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the market. The consequence of this lack of competition is seen as having created a situation of insufficient
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investment and innovation in the DFS market. 60
53 ibid
54 This is akin to similar treatment of similarly placed entities to avoid any competition concerns. However, there might be instances
of similar treatment of dissimilar entities resulting in competition concerns.
55 The GSMA definition of an enabling environment includes non-banks, including MNOs or their subsidiaries being able to offer
electronic money services; that they are able to use a network of third party agents to cash-in/out and register clients; and that
there is a market led approach to interoperability. See di Castri (2013) ibid.
56 From an impact perspective, large-scale quantitative analysis on the success factors for Mobile Money demonstrates that MNO-
Led MM deployments have been more successful in developing and delivering DFS: MNOs obtain an average of almost 45,000
active accounts within a year of launch – 60% higher than for non-MNOs. By the 5th year of launch, this difference grows to
almost four-fold. See GSMA (2016) Success Factors For Mobile Money Services: A Quantitative Assessment Of Success Factors ,
available at https:// goo. gl/ epIufJ
57 ADB (2016) Digital Payment Systems, Mobile Money Services and Agent Banking: Bangladesh, Nepal and Sri Lanka, available at
https:// goo. gl/ KRZwyt .
58 Between bKash and DBBL they have 95 per cent market share. See Dhaka Tribune (2015a) Bangladesh Bank’s Nuclear Option,
available at https:// goo. gl/ BVxvBT .
59 Ibid.
60 A recently published report by the Better Than Cash Alliance (BTCA) recommends improving the regulatory environment to
achieve more competition in the DFS market. See BTCA (2016) Building Digital Bangladesh: The Way Forward for Digitizing Pay-
ments, available at https:// goo. gl/ FnIN8t .
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