Attendees to a workshop hosted by CGAP voiced their opinions on different topics related to digital finance.

1. How would you describe the role digital financial services play in
financial inclusion?
A. DFS will make traditional
financial services irrelevant
B. DFS complement
traditional financial
services
C. DFS are the current hype,
but something new will
emerge
D. DFS are important, but not
sufficient for achieving
financial inclusion
E. Other
1
A. B. C. D. E.
6%
58%
6%
30%
0%

2. What is your main motivation for attending this event?
A. I would like to know what
others are doing in DFS
B. I would like to learn about
the latest trends in DFS
C. I would like to know more
about what funders can do
to support DFS
D. I want to learn the basics –
this is completely new to
me
E. I wanted to come to Paris
F. Other
2
A. B. C. D. E. F.
7%
20%
7%
10%
3%
53%

4. DFS: Key concepts

5. Digital Financial Services
“Branchless Banking”
“Mobile money”
“Internet Banking”
“Mobile financial services”
Financial services delivered over a
digital channel (mobile, internet)
using any electronic instrument
(card, phone, computer)
Accounts, products and services
can be accessed remotely (outside a
physical branch or outlet)
Mobile Financial Services
Digital Financial Services
3

6. FSP
Agent
Client
The basic DFS model

7. FSP
Client
The basic DFS model: Cash-in
Client opens DFS
account (accessible
by POS or phone)
Agent opens
DFS account
(accessible by
POS or phone)
2 Cash-in
3 Agent account debited
Client account credited
1 1
-
+
Agent

8. FSP
Client
The basic DFS model: Cash-out
2 Cash-out
Agent
1 Agent account credited
Client account debited-
+

9. Key terms: E-money
Standarddefinition
Closed-loop
store cards
are not e-
money
• Monetary value represented
by a claim on an issuer
• Electronically stored (on a
server or–rarely–a card) and
exchanged
• Widely accepted means of
payment by others than the
issuer
• Can be redeemed as cash
Stored value
accounts also
fit the definition
E-money accounts can be issued by non-banks.
They are regulated more lightly than bank products.

10. Key terms: Agents
• Offer services on behalf of the provider
• Are separate entities—not provider staff
• Provider typically fully liable for agent
• This liability cannot be contracted away
• Usually have different core businesses
• Often small retailers or airtime vendors
• In advanced markets, dedicated agents exist
• Transact against own funds in real time
• Don’t at any point hold customers’ cash

11. Verify client
identity
• Comply with KYC
standards
• Guard against
fraud
Help clients
transact
• Cash-in and
cash-out
• OTC payment
transactions
Act as face of
the service
• Sign up clients
• Educate clients
about the service
• Troubleshoot
clients’ problems
Agents fulfill 3 important functions in a DFS service

12. CGAP research on the activity rate of customers registered by best vs. worst agents
Agents are central to the success of the business
Providers often focus on agent quantity, but agent quality is more important:
• If agents are weak, customers will not use the service
• Registering inactive customers is only a drain on the business
Top 20% of
agents by # of
registrations
Top 10% by
activity rate
Bottom 10% by
activity rate
Top10%Bottom10%
Activity Rate
Customers registered
by these agents make
up 5.7% of total
customers
Activity Rate
39.9%
0.9%
Profile of customers registered
by these agentsAll Agents
Top 20% of agents by
# of registrations
Customers registered
by these agents make
up 5.1% of total
customers

13. Why are DFS transformative?

14. Traditional financial services are inaccessible to the poor
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
World Developing countries Of adults earning <$2 /day
Global financial inclusion
Excluded Included
Source: World Bank Findex 2012

15. Why are traditional financial services inaccessible to the poor?
1. High cost of bank branches
 Branch infrastructure is small & heavily
urban
2. High documentation requirements
 Large share of population cannot qualify
 Illiterate clients often excluded
3. Low income clients find banks intimidating
 Products, experience not designed for them
 Often prefer more familiar informal services
4. Most banks don’t want low-income clients
 Opening and monthly fees, minimum
balances, etc.
DFS models help overcome them all

16. Technology dramatically lowers cost of outreach
*Includes costs for physical set up (e.g. brick and mortar branches, hardware) only.
1
Lower cost
translates directly
to larger scale

17. Case in point: Financial infrastructure in Kenya
Bank branches have been built
over the past 100+ years.
Today, there are 1,200+
bank branches in Kenya.

18. Case in point: Financial infrastructure in Kenya
The ATM network has been built
over the past 24 years.
Today, there are 2,300+
ATMs in Kenya.

19. Case in point: Financial infrastructure in Kenya
Today, there are 120,000+
DFS agents in Kenya.
DFS agent networks has been
built over the past 7 years.
Low cost of infrastructure
translates to high access.

20. The same goes at the global level
Points of presence for traditional financial services…

21. The same goes at the global level
…are dwarfed by mobile phone connections.
6,800,000,000
Mobile Phone
Connections
Source: GSMA Wireless Intelligence

22. Risk-based KYC has lowered documentation requirements
It now aligns with what most people actually have
…in return for restricting those accounts:
• Limited maximum balances
• Limited transaction amounts
• Limited types of transactions
Bank High DFS Low DFS
Basic details Y Y Y
National ID Y Y -
Proof of address Y - -
Regulators are allowing lower Know-Your-Customer (KYC)
requirements for DFS accounts:
2
Ghana Low DFS:
• $300
• $100/day
• $1,000/month
Endorsed by global standard setting bodies and watchdogs for
Anti-Money Laundering and Combating Funding for Terrorism (AML/CFT)
Changes as ID
systems improve
Y

23. Mohammad Moniruzzaman, 2009 CGAP Photo Contest
Local agents are
far more inviting
to poor people
• Less formal
• No paperwork
• No queues
• Familiar setting
• Often known in
the community
• Agent is a peer
3

24. Distribution of agent transactions by day of the week and hour
% of total transactions within a sample of agents
Mon
Tue
Wed
Thu
Fri
Sat
Sun
10 2 3 4 5 6 108 12 14 16 18 20 2221 2397 11 13 15 17 19
22.6%
36.0%1.2% 40.2%
Business hours at Agent Partner
Business hours at bank branch network
Agents are also more accessible and convenient
Source: Akya/CGAP analysis; Note: Based on sample of 3,961 transactions

25. This isn’t about charity or CSR but real business (and that’s great)
Source: GSMA MMU State of the Industry 2015

26. …and this is with a single use case!
DFS has been primarily centered on domestic remittances (and airtime)
DFS are evolving to become considerably more than that

27. Advancing financial inclusion to improve the lives of the poor
www.cgap.org