Towards a robust, innovative and secure DFS ecosystem for the poor
Mobile money in Kenya has brought some 70 per cent of the country’s population within reach of financial services, up from just 15 per cent in 2007. But with around 96 per cent of the country’s payments still being made in cash, it is clear that the ‘mobile money revolution’ is only just taking root.
2015 will see ITU devote increasing attention to the role of digital financial services (DFS) in promoting financial inclusion, driven by an ITU-T Focus Group on Digital Financial Services (FG DFS) chaired by the Bill & Melinda Gates Foundation.
Watch FG DFS participants give their views on the development of the DFS ecosystem
Setting the context of the Focus Group, an ITU workshop in December 2014 discussed the issues at play in efforts to rollout DFS in developing countries and emerging economies.
A new report, ‘Coordinating Convergence‘, summarizes the workshop’s central points of discussion, touching on the technical requirements of DFS – such as interoperability and security – and a range of questions surrounding policy and regulation, sustainable business models and consumer protection.
The policy and regulatory aspects of DFS came to permeate nearly every session of the event, highlighting the challenges associated with the convergence of financial services and information and communication technologies (ICTs).
This recurring theme brought home the need for greater coordination and dialogue between financial-services and ICT policymakers. Coordination at the international level is crucial, especially if cross-border digital finance is to become the norm, but coordination at the national level is perhaps even more important given that DFS calls for a convergence of the responsibilities of a country’s regulators.
Building on its summary of the workshop’s discussions, the workshop report distills five common stakeholder objectives:
Codify common terminologies for DFS, interpreted uniformly by all stakeholders. Establishing common definitions of terms is a fundamental exercise in any effort focused on harmonization, coordination or standardization. FG DFS will prioritize the codification of a common terminology for DFS, building on work being undertaken on the subject by organizations such as the Alliance for Financial Inclusion (AFI), GSMA and ISO TC68/SC7 on Core Banking.
Build consensus on security architectures capable of achieving end-to-end security in the increasingly complex DFS value-chain. The work of ISO TC68/SC7 to develop a multi-part International Standard on mobile financial services will provide a general framework for the security of mobile financial services. ITU-T Study Group 17 (Security) has also expressed interest in developing a security architecture for DFS if demand for such an architecture is identified by FG DFS.
Nurture stakeholder coordination in promoting the use of DFS as part of strategies to advance financial inclusion. Stakeholder coordination will be the key determinant of the speed and efficacy of DFS rollouts. The international community, itself beholden to a commitment to cooperation, must work to encourage the cooperation of the various implicated regulatory authorities within countries, as well as within industry and between the public sector, industry and the public.
Improve consumer protection and experience to build trust in DFS. Network downtime and timed-out transactions diminish the reliability of DFS, with users often not able to access the funds in their digital wallet or not certain of whether their transactions have been executed. Networks delivering poor quality of service can give rise to more than just user inconvenience. Network outages can encourage users to keep using cash or engage in risky behaviour, such as providing their mobile device and PIN to an agent to transact on their behalf when network service resumes.
Sharing key assets in the interests of building a competitive environment, in particular agent networks and infrastructure, is seen as crucial to the long-term evolution of DFS ecosystem. Without fair access to infrastructure, the barriers to market entry would remain too high to enable healthy competition. Alongside recognition of the benefits of advanced mobile-wireless technologies in promoting the adoption and use of DFS, the workshop participants’ stressed the need to open access to data networks to all players in the DFS value-chain.
The next meeting of the ITU-T Focus Group on Digital Financial Services will be held at the World Bank’s headquarters in Washington DC, 21-22 April, and I invite you to contact the group’s secretariat to learn how you can contribute to our work.
Sacha Polverini joined the Bill & Melinda Gates Foundation’s Financial Services for the Poor (FSP) team in December 2012 as Senior Program Officer – Regulation and Policy. A graduate of University L.U.I.S.S Guido Carli in Rome, Sacha holds a Master’s degree in European Political Studies from the Universite’ Libre de Bruxelles. In addition he has completed the post-graduate management program at Solvay Business School, Ecole de Commerce de Solvay, Brussels.