Page 218 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

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

By partnering with another MNO, it allows the bank to access and use USSD, SMS or STK or any other facility
offered at a far lower cost than the MNO the bank may primarily be competing with in their DFS product
portfolios.
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17.2 Country examples

Colombia

Bank BanColombia entered the telecommunications market by acquiring a majority share of MVNO Uff!.

Kenya
As noted above, licensed Kenyan MVNO Equitel – the telecommunications arm of Equity Bank – uses its
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thin SIM technology to bypass market leading MNO Safaricom, using instead cheaper bearer services from
Safaricom competitor Airtel. Equity Bank has also begun to loan Equitel subscribers money to buy dual SIM
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smartphones. Safaricom reportedly lowered many of its transaction fees in response to the emergence of
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Equitel. As of mid-2016. Equitel had over 2m million subscribers. 250
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South Africa
First National Bank, one of the largest retail banks in South Africa, in 2015 launched its own MVNO using its
own SIM and billing systems.
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18 New payment rails and interfaces

18.1 Overview

As noted above, access to payments infrastructure is often unavailable to entities, or if it is, is not at FRAND
terms. While bank-based models of DFS have faced most favorable conditions in integrating with payments
infrastructure, situations may arise where a non-bank incumbent has such large market penetration, that
the accessing of their large customer base by banks and other non-bank PSPs, or at FRAND terms without
regulatory intervention, is challenging. There could also be challenges in accessing card networks or due to
the excessive costs relative to the amounts transacted in relation to card networks.

In all cases, developing enabling payment switches using existing technologies and standards, or introducing
new alternative, technologies such as Distributed Ledger Technology (DLT) are seen as solutions for both actual
access and for lower access fees. These are shown in the country examples below.

DLT in particular is a new type of secure database or ledger that is shared across multiple sites, countries or
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institutions with no centralized controller. In essence, this is a new way of keeping track of who owns a financial,
physical or an electronic asset. A primary incarnation is blockchain technology. All blockchains operate by

245 Of course, besides boosting its DFS business through increased usage through cheaper access channels, the bank may even profit
from provision of telecommunication services to its customers and other looking for a cheaper telecommunications alternative.
It also allows the bank to participate on relatively equal terms with its MNO rivals by being able to incentivize customer DFS use
through giving away free minutes and SMSs when their customer transacts.
246 The holding company is called Finserve Africa.
247 In the case of Equitel in Kenya, use of the shortcode *247# will divert the session to use the Airtel network. See Equitel (2016)
Get Activated, available at http:// www. equitel. com/ my- phone/ get- activated.
248 The Star (2016) Equity Bank To Loan Equitel Subscribers Money To Buy Dual SIM Smartphones, available at https:// goo. gl/ S8nzt8
249 Mazer & Rowan (2016) ibid
250 The Star (2016) ibid
251 It also sells mobile hardware on credit and at discounted prices.
252 For further information on DLTs, see Perlman, L (2016) Aspects of The Legal and Regulatory Issues In Blockchain Technology; and
ITU Focus Group Digital Financial Services Technical Report: Distributed Ledger Technologies and Financial Inclusion (2017)

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