ITU's dedicated Focus Group for Digital Financial Services (DFS) published today eight new reports that reveal key findings on how mobile banking services can help alleviate poverty for millions ahead of final meetings in December.
"Mobile banking services bring direct benefits to millions of the previously unbanked," said Houlin Zhao, ITU's Secretary-General. "These reports thoroughly review the key challenges facing digital financial services globally. Think how much more we could do."
The key findings from each report, made by four Working Groups of the Focus Group, will be unveiled at its concluding meeting 6-8 December at ITU headquarters, Geneva. These reports will conclude two years of work, aiming to guide both the regulatory and commercial sectors in increasing access to basic financial services for the estimated two billion people around the world that currently have no access.
The latest announcements bring to sixteen the number of papers that have been published dealing with a broad range of key issues that the Focus Group has been reviewing. Today's reports include analysis on electronic B2B (business to business) payments, merchant data and lending, the role of postal networks, bulk payments, agriculture value chains and the role of social networks and two further reports on payment system oversight and interoperability.
Sacha Polverini, Chairman of the Focus Group and Senior Programme Officer of the Bill & Melinda Gates Foundation's Financial Services for the Poor programme, said: "There's an incredible amount of data in these reports that anyone looking into the DFS space will value, whether a government regulator or a commercial operation. An example is the report on social networks and its implications for financial inclusion. While social networks are present in most developing countries and view the bottom of the financial pyramid as a big opportunity, the poorest segments of the population are not yet participating, primarily due to limited internet access and the continued use of feature phones. Even as social network adoption continues to grow, their commercial potential won't materialize for the poor without financial inclusion. A consumer can't buy anything unless they link a payment account to their social network account."
In 2014, ITU established this Focus Group incorporating 60 organizations from some 30 countries. The Focus Group has created four thematic working groups covering the following areas: DFS ecosystem; Technology; Innovation and Competition; Interoperability and Consumer Experience & Protection. The group's goal is to develop guidelines, principles and toolkits based on international best practices, which will be adapted and implemented by countries looking to capitalize on digital and mobile technologies in their efforts to increase access to basic financial services for people that today remain at the margin of society.
Following the Geneva meeting ITU will host a seminar in London on 13th December to discuss the overall findings and key next steps as the theoretical process concludes and the focus shifts towards implementation
The eight new reports published today include:
- B2B and the DFS ecosystem: examines the impact of electronic B2B ('Business to Business') payments in developing countries. Small players usually pushback on digital payments. However they are a crucial factor for success for both large and small enterprises. Therefore this report determines four policy considerations which regulators should look into when promoting digital payments: factors that make it easier for informal businesses to make digital B2B payments; subsidised credit for SMEs; determining the feasibility of interoperability; and monitoring the role of e-Invoicing.
- Merchant Data and Lending - Can Digital Transaction History Help Jumpstart Merchant Acceptance?: Micro, small and medium-sized merchants (MSMEs) form the backbone of developing economies. However their growth is stifled by the lack of access to capital as they have no collateral and don't have the requisite credit histories that traditional lenders use to assess credit risk. This report therefore explores the hypothesis that Bottom of the Pyramid (BoP) merchants may be more likely to accept mobile money transactions and thus help the eMoney system achieving 'digital liquidity' which will make credit more available and accessible.
- The role of postal networks in DFS: Post offices have a long tradition of offering financial services, but digitizing their services remains a challenge. This report presents innovative business models for postal operators to ensure full digitalisation of their postal services.
- Bulk Payments and the DFS Ecosystem: Government-to-person and Employer-to-person payments of all sorts, often referred to as 'bulk payments', are seen as key enablers for growth of the DFS ecosystem. This report analyses the remaining challenges which have hindered bulk payment rollouts in many countries and proposes a model of how bulk payments could be effected when certain conditions are met.
- Impact of Agricultural Value Chains on Digital Liquidity: As agriculture is critical to alleviating poverty in developing countries, mostly through commercial value chains, this report analyses whether eMoney will improve digital liquidity for small farmer holders. The report concludes that even if eMoney within value chains will not materially impact digital liquidity, eMoney is still valuable.
- The Impact of social networks on Digital Liquidity: Even if social network adoption grows, the commercial aspects won't materialize for the poor without financial inclusion. As it remains a challenge for policy makers to on one hand encourage the adoption of social network, and on the other hand protect the consumers, this report lays out different policy considerations that can guide regulators when developing new policies around this issue.
- Payment System Oversight and Interoperability: Payment system oversight is about controlling risk in payment systems and promoting payment infrastructure. As interoperability represents both an important feature of payment system efficiency and, at the same time, an important source of risk, this report describes the foundations of payment system oversight, and considers how oversight policy should apply to interoperability in payment systems.
- Payment System Interoperability and Oversight: The International Dimension: approaches the issue of interoperability and central bank oversight of payments from an international perspective. As the interlinking of national payment system infrastructure (PSIs) and their interoperability represent important fundamentals for economic and financial development and bring potential significant risk, the report considers the implication of PSI interlinking and international interoperability for central bank oversight policy, and elaborates a set of principles that complements those developed in the companion report.