Moving from Mobile Money to Digital Financial Services

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In this webinar, I shared updates on the growing shift from mobile money to broader digital financial services to promote financial inclusion. These broader services include greater integration and convergence of electronic funds transfers, debit/ATM cards, and agent banking. Over the past couple of years, a range of public and private players such as USAID, the Better Than Cash Alliance, the Bill & Melinda Gates Foundation, the Alliance for Financial Inclusion, and other groups have actively supported or focused on policy areas that promoted the use of digital financial services for greater financial inclusion.

With the greater role of governments, regulators, private sector players, and more importantly, the role and perspective of clients at the base of the economic pyramid, this new emphasis on digital financial services, has a much better chance of accomplishing deeper financial inclusion than we have seen in the past. This presentation focuses on this broader approach to improving financial inclusion and shares lessons learned from a practitioner in the field point of view.

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  • There continues to be significant interest in using new technologies to provide for greater financial inclusion. While much of the excitement has been focused on mobile financial services, we are seeing a shift to a broader focus on a range of technologies, players, and partnerships that are taking a more comprehensive view to providing access to financial services. This new approach is now being defined as digital financial services.  From the role of governments, regulators, private sector players, and more importantly, the role and perspective of clients at the base of the economic pyramid, this new emphasis on digital financial services, has a much better chance of accomplishing deeper financial inclusion than we have seen in the past. This presentation focuses on this broader approach to improving financial inclusion and shares lessons learned from a practitioner in the field point of view.  
  • Some of the institutions that have provided and helped shape the new emphasis on “digital financial services” to support great financial inclusion include the Bill & Melinda Gates Foundation and a wide number of public and private sector members under the Better Than Cash Alliance with their focus on electronic accelerating the shift to Digital Financial Services.See Gates Foundation Financial Services for the Poor Strategy http://www.scribd.com/doc/118777907/Gates-Foundation-Financial-Services-for-the-Poor-Strategy-OverviewSee more on the Better Than Cash Alliance led by Founding Members USAID, Gates Foundation, Omidyar Network, UNCDF, Ford Foundation, Citi, VISA http://betterthancash.orgAnd GSMA’s Mobile Money for the Unbanked
  • There are over 28 countries with more mobile money agents than bank branches but this is growing rapidly as more countries and agent networks become allowed and supported via regulation and legislation
  • Four Countries
  • Much of the early development of both mobile financial services and early electronic banking for the poor involved mostly single focused institutions including either banks, telecoms, or third-party operators promoting a “silver bullet solution”
  • Expand the Reach of Digital Financial Service InfrastructureDrive Participation in the Digital Financial SystemFoster Better Regulations and Policies
  • Governments now on board and committed under the Better Than Cash Alliance include Afghanistan, Philippines, Colombia, Malawi, Kenya, Peru
  • With the advances over time, there is a growing consensus that Building strategic partnerships is key to offering digital financial services especially in the area of promoting deeper financial inclusion.  Partnerships that are currently being formed and promoted include a range of international donors, governments, banks, financial institutions, payment providers, and other companies that provide or sell products and/or services to the poor.  
  • In terms of offering digital financial services, it is important to carefully plan how to offer these new services. I like to call this developing a road map. The most important thing is to start from a customer-centric approach. Since many of the solutions today focus on the growing use of mobile phones, it is important to look at this and other forms of technology that could be used or offered to clients. In addition, those offering digital financial service solutions must take into account the unique market conditions that exist in each country and even within different regions within a particular country. While there are lessons to be learned from others, the unique aspects of the environment in which you will operate in will be key to take into account. The overall regulatory and policy framework for mobile financial services is also one of the most important aspects that everyone using mobile money in a country will need to understand. A supportive regulatory environment is key. Fortunately, many regulators are now more open to their role as economic enablers rather than just gatekeepers so we now see much more engagement between regulators and digital financial service providers to work on developing a more pragmatic regulatory enabling environment. In addition, regulators around the world are now coming together to discuss and share experiences to promote policies that provide for a more conducive environment to promote financial inclusion. In particular, the Alliance for Financial Inclusion (AFI) now coordinates with over 109 regulatory bodies in 89 countries. Founded in September 2008, AFI is a global network of policymakers in emerging and developing countries. AFI’s focus is to accelerate the adoption of innovative financial inclusion policy solutions with the ultimate aim of making formal financial services more accessible and useable to the billions of unbanked people. This includes developing a regulatory framework that supports access, usage and quality of a range of financial services. In addition, regulators are increasingly understanding the role and importance of new technological innovations such as digital financial services.The next factor to take into account is the institutional perspective. There is now a growing consensus that to offer true financial inclusion, a full range of institutions, strategic alliances, and partnerships need to be in place. These can include governments, mobile network operators, various financial players such as banks, payment providers, credit cooperatives and microfinance institutions and third-party operators. The fifth step in developing your road map is the product development phase. Building on the previous steps, digital financial services should start with the steps of understanding the client, the environment, the regulations, and the institutional capabilities during the product design phase. The design phase also includes building a business case, desk testing the product, feedback from focus group discussions with the target market, and beta-testing services. The next phase for digital financial service providers to plan for is the conduct of a proper pilot test. Too often, those offering mobile money services do not adequately conduct pilot tests or stress test their products before launching them as there is always a lot of pressure to go to the market. Even Safaricom spent over two years understanding the market to design and pilot test their services before rolling out M-Pesa.During the pilot test, digital financial service providers need to make sure the systems are working, the network signal or technology supporting the digital financial service is sufficiently available in the regions where the target market is located, customer services and back-office staff are able to understand and manage the service, and, more importantly, that customers and businesses understand the services and can make use of them. This is where the importance of financial education comes into play as well. The lessons learned during the pilot can help digital financial service providers to determine the best approach to launching the product in the market.  
  • USAID’s Kenya Transition Initiative shifted to mobile money payments using M-Pesa’s online bulk payment system & saved almost 60% on disbursement costs Over 1,100 rural bank agent outlets More than 390,000 new clients served Over PhP 17 Billion ($400 million) in mobile money enabled banking transactions PRISM2 Reduced Check Payments by 74% & Saved Over 100 Labor-Hours a Month in Personnel CostsLAPO & eTranzact bring together one of the new mobile money providers and the largest microfinance bank in the country with 320 branches and more than 700,000 clients to benefit from mobile money. Phase I – Branches become mobile money agents & Employees on mobile money payroll, phase 2 – key clients become agents, phase 3 – clients to use agents to receive remote loans, make payments, deposit and withdraw funds from their accounts
  • Several years ago, there were many who argued that mobile money transfer systems could side-step the traditional payment operators altogether in the developing world but this is not happening; instead, we are now seeing a convergence of different technologies to broaden access via multiple channels that build both on mobile networks and existing ATM and point of sale (POS) networks. While, ultimately, we could see mobile phones becoming fully enabled m-POS machines and there being less of a need for traditional POS machines and/or ATMs, at this time, there is still the opportunity to build on ATM/POS networks. Interoperability and interconnectivity are now the new buzzwords in the digital financial services industry.  
  • Moving from Mobile Money to Digital Financial Services

    1. 1. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Moving from Mobile Money to Digital Financial Services for Financial Inclusion
    2. 2. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Who are the are the Movers, Shakers & Supporters?
    3. 3. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion http://www.mobileworldlive.com/mobile-money-tracker
    4. 4. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Countries with more mobile money agents than bank branches GSMA Mobile Money for the Unbanked
    5. 5. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Countries with More Mobile Money Accounts Than Bank Accounts
    6. 6. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Countries where Mobile Money % Equivalent Transactions are Significant to Country GDP  60 % in Kenya  30% in Tanzania  20% in Uganda
    7. 7. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Third-Party Players
    8. 8. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Shift to Broader Digital Financial Services: Gates Foundation Moving from Mobile Money to Digital Financial Services for Financial Inclusion
    9. 9. Rationale for the Better Than Cash Alliance An alliance of Governments, Private Sector, and Development Organizations to create a global movement from cash to electronic payments; Billions of dollars in cash payments are made every day in emerging and developing economies for salaries, to suppliers, for pensions and social welfare, relief etc. With appropriate digitization of these payments both payee and payer can have great benefits...
    10. 10. Digital money can bring five main social benefits Cost Savings: decrease costs of cash or in-kind payments. Transparency: increase accountability and tracking, reducing corruption and theft. Security: typically safer and faster delivery. Financial Inclusion: can accelerate access to financial services. New Market Access: open doors for new business models for previously excluded people.
    11. 11. Partnerships Are Key Third-Parties Clients Businesses
    12. 12. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Digital Financial Services for Financial Inclusion: Key Steps in the Road Map
    13. 13. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Donors & the Benefits of the Collaboration Digital Financial Service Provider • Technical assistance and R&D • Work with regulators • Pilot testing of new services Donor Agencies • Leveraging of resources • Technical platform Project Implementation Partners • Greater Efficiency • Lower Costs • Improved Outreach
    14. 14. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Financial G2P Disbursements via Digital Services for Financial Inclusion Service Platforms
    15. 15. Mobile Banking and Mobile money
    16. 16. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES The Shift from Mobile Money Alone to Moving from Mobile Money to Digital Financial Services for Financial Integration with Broader Digital Financial Inclusion Services
    17. 17. Businesses: Leveraging Digital Financial Services MTN Ghana, UT Life & MicroEnsure
    18. 18. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Bank or Mobile Money Agents
    19. 19. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Digital Financial Services for Financial Digital Financial Building TRUST in Money toInclusion Services is Key!
    20. 20. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Convenience & Access are Key!
    21. 21. CHEMONICS TECHNICAL PRACTICES | FINANCIAL SERVICES Moving from Mobile Money to Digital Financial Services for Financial Inclusion Thank You Twitter: @jvowens Blog: www.mobilemoneyfordevelopment.wordpress.com www.chemonics.com

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