The International Telecommunications Union (ITU) has recently taken on a new and challenging task: to promote digital financial inclusion through the adoption of technical standards.
The UN Agency for Telecommunications, more commonly known for its work in fields such as radio frequency spectrum, cloud computing or new generations of mobile technology, has established a new focus group with the aim to further unlock the potential of digital financial services to serve the poor. The focus group will build on best practices to adopt a series of recommendations that the ITU can then translate into international standards for national regulators and market players.
In recent years, information and communication technologies (ICT) have been increasingly instrumental to developing new and more affordable digital financial products that better respond to the needs of the unbanked and their circumstances. This is particularly true for poor people in rural and remote areas who can now be reached by leveraging the large uptake of basic mobile devices like feature phones and the presence of a growing network of agents allowing customers to deposit or withdraw money.
Not surprisingly, developing countries and emerging markets are looking at the new technologies to transition to a more digitized financial economy as this can enable government efficiency, increase transparency, stimulate growth and promote welfare (Under the 2011 Maya Declaration on Financial Inclusion, numerous countries have committed to introducing and promoting mobile financial services. An increasing number of countries are also participating in the Better than Cash Alliance initiative which aims to accelerate the shift to digital payments). These benefits are available in both rural and urban areas and can support multiple economic segments such agriculture, education and health.
However, despite the benefits brought by digital financial services and the efforts made to increasingly digitize cash transactions, there are still important challenges to rapidly and effectively leveraging ICT to create opportunities for low-income people to guard against risk, invest in their futures and build better lives. Uncertain business models, an uneven playing field amongst providers, and inconsistent or over-prescriptive rules and regulations, are just a few, fast evolving examples of issues that both public and private stakeholders continue to face.
International organizations and development agencies have been looking at global and local solutions for many of these issues. The new focus group’s objective is certainly not to duplicate the work done so far but to capitalize on it and leverage a neutral, multi-partisan international platform to bring the debate to the next level, particularly in areas where the ITU has developed specific competences and expertise.
The ITU can, for instance, play a critical role in two main areas:
- Foster dialogue and coordination amongst different national regulators. Because of their very unique nature, digital financial services play across traditional banking products and telecommunications services. They are broadly considered financial services and thus regulated by the local Central Bank. However their provision is increasingly ensured by nonbank providers (i.e. mobile network operators) which naturally fall under the supervision of telecommunications regulators. Hence the need to promote a dialogue between relevant authorities to clarify roles and responsibilities, stimulate collaboration and work on consistent rules and regulations.
- Provide guidance on specific issues such as fair access to business-critical technology and systems interoperability or help define the key characteristics of a payment platform that can economically support low-value and high-volume transactions. Work in these areas can significantly improve customers experience, reduce costs and support innovation.
ITU’s newly established focus groups will help support the Gates Foundation’s strategy to increase financial access in developing countries.
Participation in the focus group is open to all interested parties. We hope subject matter experts and partners around the world will participate in this important initiative with ITU. For more information about how you can get involved, please visit here.
Sacha Polverini is the Senior Program Officer for the Financial Services for the Poor program at the Bill & Melinda Gates Foundation.