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Geneva, Switzerland, 4 December 2014
Digital Financial Inclusion: CGAP Initiatives on Demand, Supply,
and Enabling Environment
Kathryn ImbodenAdvisory Consultant, CGAP
ITU Workshop on “Digital Financial Services and Financial Inclusion”
(Geneva, Switzerland, 4 December 2014)
What is CGAP?
Geneva, Switzerland, 4 December 2014 2
We Build Knowledge on issues such as customer needs and
business models
We Strengthen Markets so that promising services
can thriveWe Promote Policies and Regulations that allow services to
expand and reach unbanked populations
Four examples of CGAP initiatives addressing digital financial inclusion
Geneva, Switzerland, 4 December 2014 3
1. Robust provider ecosystems
2. Digital finance frontiers
3. Digital finance services plus
4. Global policy architecture
Example 1. Robust Provider Ecosystems
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1. Support for ensuring that basic regulatory enablers are in place, including rules governing:
E-moneyAgentsTiered KYCAllowing multiple types of institutions to deploy digital financial servicesConsumer protection
Example 1. Robust Provider Ecosystems
2. Support for government policies and practices that open up pathways to support use of digital payments services
3. Support for building provider ecosystems able to scale low-cost digital payments services
Geneva, Switzerland, 4 December 2014 5
Robust Provider Ecosystems: country-level work
Countries identified:Ghana, Kenya, Rwanda, Tanzania, UgandaBangladesh, India, Myanmar, Pakistan
Examples of work in progress:GhanaMyanmarInteroperability work
Geneva, Switzerland, 4 December 2014 6
Example 2. Digital Finance Frontiers
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Digital payments platforms are expanding around the world
As access barriers for payments are solved, other services can be added and delivered
BUT other barriers still exist to actual use of such products
To effectively serve the lower income market, need to address other
remaining barriers
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Low activity ratesWhile access barrier is solved, providers struggle reaching poor with meaningful solutions for everyday problems
Facilitate access close to where people work or live, at affordable cost
Little or no information about customers
Poor have many diverse needs
Low literacy (means difficult to communicate other than verbally)
Little or no trust in providers
Challenges providers face
Digital channel attributes may help address those barriers areas of
exploration for CGAP Attributes of digital channels and potential impact on solutions:
Geneva, Switzerland, 4 December 2014 9
Digital data trail
Digital data trail
Visibility of transactional data, beyond financial transactions helps providers learn about their customers, inferring characteristics of cash flows for credit scoring, segmentation
Real time interactions
Real time interactions
Two-way messaging creates opportunity to interact with customer at times when is important, delivering information and responding to questions creates confidence and proximity
Digital channel attributes may help address those barriers areas of
exploration for CGAP (con’t)Attributes of digital channels and potential impact on solutions:
Geneva, Switzerland, 4 December 2014 10
Graphic user
interface
Graphic user
interface
A rich user interface (e.g., involving graphics) helps customers relate more intuitively to financial services, improving understanding of choices, engaging more actively
Instant location
intelligence
Instant location
intelligence
This helps contextualize delivery of certain services such as in-store purchases, event-based insurance; validate KYC profile
Digital channel attributes may help address those barriers areas of
exploration for CGAP (con’t)Attributes of digital channels and potential impact on solutions:
Geneva, Switzerland, 4 December 2014 11
P2P social connectionsP2P social
connections
Cellphone as a tool helps to manage multiple financial relationships across social connections
Example 3. Digital Financial Services Plus
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Use of digital finance to increase accessibility to basic, essential services and utilities more accessibleFinance as a means to help solve significant development challengesIdentification of services that leverage established infrastructure of mobile paymentsPublic goods researchResearch partnerships
Digital Finance Plus: ExamplePay-as-you-go utilities in East Africa
Leveraging digital finance to deliver modern energy to the poor, sold on a pay-as-you-go basis Designed to be flexible and to fit well with the existing economic realities of the energy poor consumerResearch partnerships with three pay-as-you-go solar providers operating in East Africa
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Example 4. Global Policy Architecture: Digital Financial Inclusion
Digital transactional platforms and additional services they enable introduce new non-bank actors and shift risks among the new entrants and legacy players Key financial regulatory issues: agents, anti-money laundering and countering financing of terrorism (or “AML/CFT”), e-money regulation, consumer protection, payment system regulation, competition (but non-financial issues as well, e.g., USSD channel access) Combining financial & non-financial services calls for collaboration with non-financial regulators and standard setters (e.g., telco ministries & ITU)
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Global Policy Architecture: Digital Financial Inclusion
2nd G20 Global Partnership for Financial Inclusion (GPFI) Conference, Oct. 30 & 31: “Standard Setting in the Changing Landscape of Digital Financial Inclusion,” hosted by Bank for International Settlements (BIS) in Basel:“In the financial inclusion context, the standard-setting bodies . . . need to work together. But when it comes to digital financial inclusion, those represented in this room alone are not likely to cover all of the relevant landscape. In December, for example, the International Telecommunications Union will launch a new Focus Group on Digital Financial Services, and other collaborative forums are likely to emerge.”
Geneva, Switzerland, 4 December 2014 15- Jaime Caruana, BIS Gen. Manager
2014 CGAP Publications on DFS
CGAP blog: “The Seismic Implications of Digital Financial Inclusion [for Standard Setters]”
CGAP Brief: “bKash Bangladesh: A Fast Start for Mobile Financial Services”
CGAP blog: “5 Sources of Untapped Innovation in Digital Finance”
CGAP Focus Note: “Electronic G2P Payments: Evidence from Four Lower-Income Countries”
CGAP paper: “Access to Energy via Digital Finance: Models for Innovation”
CGAP Focus Note: “Serving Smallholder Farmers: Recent Developments in Digital Finance
See www.cgap.org Geneva, Switzerland, 4 December 2014 16