Page 18 - ITU-T Focus Group Digital Financial Services – Executive Summary

ITU-T Focus Group Digital Financial Services
Executive summary

sector entities can strengthen the value proposition for providers and agents by disbursing salaries and social
payments through DFS channels. In addition, government entities and DFS providers can collaborate to educate
consumers and promote adoption of digital services. Governments can also address challenges related to
customer identification and agent liquidity. Customer identification can be facilitated by developing a national
identity system and using national ID numbers to address payments, while agent liquidity challenges can be
ameliorated by ensuring that DFS providers are appropriately compensated for facilitating G2P payments and
by encouraging merchant acceptance of digital payments.

3.2.1.3 Merchant payment acceptance
Many stakeholders also see merchant payment acceptance as a key driver of DFS adoption and usage. In the
absence of a wide network of merchants that accept digital payments, most recipients of digital money cash out
most or all of their funds, while others lack a strong incentive to open an account in the first place. Authorities
should promote acceptance of electronic payments by small merchants and other payment acceptors, such
as billers, government entities, and actors in the agricultural value chain. They should encourage digitization
and analysis of transaction data to facilitate access to credit and other financial services, while protecting
consumers’ data privacy and security and implementing safeguards to mitigate the risk of over-indebtedness.
At the same time, authorities should consider the implications of DFS taxation on merchant acceptance,
particularly for small or informal merchants, and consult with taxation authorities as required. For their part,
DFS providers should cooperate with other stakeholders to educate merchants on the benefits of digital
merchant payments. In addition, DFS providers should consider cross-selling additional services to merchants
(such as credit) to build a business case for serving very small merchants that are unlikely to pay to accept
electronic payments.

3.2.2 Navigating complicated DFS menus and UIs 39

Many poor and unbanked consumers find navigating DFS menus and UIs – which are often complex, poorly
designed, and developed for a more technology-savvy and literate consumer base – difficult. The challenge
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of adopting new technology is heightened for those with low literacy levels and/or little experience with
technology and formal financial services. Difficulty navigating menus (particularly due to session timeouts and
use of non-vernacular language) and poor numeracy often result in funds being sent to the wrong recipient,
which are then difficult to retrieve. These challenges are exacerbated in many DFS markets where basic handsets
and feature phones remain commonplace and a rapid transition to smartphone-based DFS is unrealistic due to
poor smartphone quality, limited 3G access, and consumer unfamiliarity with new functionalities. In response,
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poor and unbanked consumers may rely heavily upon the assistance of family, friends, or agents, exposing
them to additional sources of risk (such as misuse of their personal credentials and/or fraud). They may also
be more likely to use over-the-counter (OTC) services rather than a DFS transaction account.
In some markets, OTC transactions may be useful for facilitating a transition from purely cash to digital
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payments between transaction accounts. Authorities should permit OTC transactions to continue in
markets where they currently exist, provided that risk-based measures are implemented to identify senders
and recipients. At the same time, public- and private-sector stakeholders in markets with high levels of OTC
transactions should cooperate to develop a path towards account-based DFS.

3.2.3 Problems with DFS reliability and safety

Poor network quality and reliability, particularly in rural areas, leave many poor and unbanked customers
concerned about the reliability and safety of DFS. Customers may fear losing their funds in the event of

39 For a discussion of the various mobile phone UIs used in DFS, see ITU FG DFS Technical Report (2017), Technology Evolution and
Innovation in Digital Financial Services.
40 McKee et al. (2015), Doing Digital Finance Right: The Case for Stronger Mitigation of Customer Risks, https:// www. cgap. org/ sites/
default/ files/ Focus- Note- Doing- Digital- Finance- Right- Jun- 2015. pdf.
41 See ITU FG DFS Technical Report (2017), Mobile handsets use in DFS.
42 While some DFS markets have seen high rates of OTC usage, others have moved directly from cash to use of DFS accounts.

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