key trends in digital financial services for financial inclusion
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CONFERENCIA CENTROAMERICANAY DEL CARIBE DE MICROFINANZASTecnologa: Competitividad e Inclusin FinancieraVII
Key Trends in Digital Financial Services for MicrofinanceJohn V OwensSenior Digital Financial Services Advisor
Digital Financial ServicesThree ways digital technology is facilitating access to financial services:ProductsDistributionBack-Office Operations
Leveraging mobile payments infrastructure and machine-to-machine connectivityMobile on-demand micro-credit Mobile & index-based micro-insurance Big data enabling new credit productsProducts offered by financial players riding on top of the e-money platforms
4Product Innovations
Innovations in Distribution
Apps and tools to digitize and speed up the account opening process Biometrics as additional options for customer authenticationTokenizationOptimizing distribution field-force management tools to track field staff, agents, and/or merchants Emergence of third-party agent aggregators offering access to provider-agnostic agent networks
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Back-office Innovations
Integrating with e-money platforms Technology companies enabling merchant acceptance of digital payments in-storePayment aggregators enabling online payments and e-commerceLeveraging alternative data sources for credit decisions
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Key Digital Financial Services ModelsE-money ServicesMobile Financial ServicesUse of Agents Payment OperatorsNew Fintech PlayersOther New Players
E-Money Providers
E-money is a payment instrument that contains monetary value that has been paid in advance by the user. E-money users can use their e-money to purchase goods and services from merchants. When users pay using e-money, the amount will be automatically deducted from their e-money balance. E-money comes in different forms and can be broadly categorized as card-based and network-based, which are currently accessible via the internet and mobile phones.
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Mobile E-Money Accounts by Region
GSMA MMU 2016
AFI | Alliance for Financial InclusionBanks Integrating with E-Money
20 Million bank accounts4 Million bank accounts24 Million registered mobile money users
Percentage of adults using a bank account in Kenya
Terms of conditionPrimarily based on data analysis of customers use of M-PESANumber of deposit accounts at CBA from 35,000 to 6 Million in a little over one yearLoan balance of 5.2 billion KESCBK now 2nd largest bank in terms of # of accountsCollective deposits26 billion KES
Small Value and Credit Savings
M-Shwari, a savings and credit product from Safaricom and Commercial Bank of Africa (CBA) has registered a phenomenal uptake. The product enables M-PESA subscribers registered for at least 6 months to get a loan, anywhere from $1 to $1,000for a 30 day term instantly into their e-wallets. M-Shwari: Mobile E-Money Supported Banking
CBK increased # of accounts from 35,000 to 9.2 MM-Shwari deposits total $1.7 BM-Shwari loans disbursed in 2015 total $322M
Financial Service Agents
3rd parties acting on behalf of a bank or other financial services provider to deal directly with customers
AFI | Alliance for Financial Inclusion
Why agents are important?
Using existing retail outlets as agents, particularly those near low-income populations, can help drive down the delivery costs of financial services for underserved populations.
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Agent Banking Services: BangladeshCollection of small value cash deposits and cash withdrawalsInward foreign remittance disbursementFacilitating small value loan disbursement and paymentsFacilitating utility bill paymentsCash payment under social safety net programmeFacilitating fund transferBalance inquiryCollection and processing of forms for account openingLoan application, credit and debit card applicationsMonitoring of loans and advances and follow up of loan recoveryReceiving of clearing chequesOther functions like collection of insurance premiums AFI | Alliance for Financial Inclusion
https://www.upsides.com/2013/03/25/banking-beyond-branches/
Above is an example of services allowed by agents under the guidelines issued by the Bangladesh Bank14
Payment Service Providers
A full-service PSP can offer risk management for card and bank based payments, transaction payment matching, reporting, fund remittance, multicurrency functionality. Some PSPs provide services to process next generation payment systems including wallets, prepaid cards, vouchers or even check cashing.
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Payment Service Provider AliPay
New FinTech PlayersFinancial technology players are now providing a range of financial services, either directly as non-bank financial service providers or in partnership with traditional players.
New FinTech Players & ModelsP2P lendersOnline balance sheet lendersLoan aggregator portalsThird-party analytic, data, and lending platform providersInvoice, supply chain platforms and trade financeMobile-data based lending modelsSME value added services and SME financing
New Financial Players Driving Financial InclusionE-Commerce & M-Commerce Providers Driving Financial Inclusion via a compelling value proposition
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AlibabaMatahari Mall
Kaskus Blibli
OLX Tropedia Lazada Bukalapak
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New Financial Players Driving Financial Inclusion Social Networks & Payments
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WeChat payment app
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Customer Adoption, Usage, Quality
Regulatory Issues
Customer Perspective
DFS Product/Service/Distribution Model
Environment
Institutional Perspective
Product DevelopmentAnalyzing DFS Opportunities
DFS Policy, Regulatory and Oversight Proportionate AML/CFT (FATF Compliance)Tiered KYC RegulationsE-Money Operator RegulationsRemote Account Opening RulesAgent RegulationsInteroperabilityFair Access to ICTCompetition PoliciesSecurity and Fraud MitigationConsumer Protection Issues
What are the biggest digital financial service developments for MFIs in Central America & the Caribbean?
Engaging Customers via SMSMobile phones now make it easier to stay in touch with customers
Juntos Finanzas has partnered with financial institutions to provide better customized support for two-way SMS conversations with customers
This improves uptake of existing products as well as cross selling new services
Digitizing the ROSCA (Savings Groups)
New technologies can help mimic informal savings products like Rotating Savings and Credit Associations (Tandas)
FinTech providers like AhorroLibre are now offering automated services that allow people to create their own tandas via their mobile phone
Financial EducationFinTech providers not only access but also improves the quality of financial services
New digital financial education tools can cost effectively teach and incentivize customers to use new products and services
Alternative Data for Credit ScoringDigital Tools + Online Footprints=Credit Scoring OpportunitiesNew platforms like Lenddo are providing alternative credit scoring tools
Potential PartnersE-Money OperatorsNon-Bank Financial Institutions (EMIs & PSPs)FinTechs (SMS Gateways, Alternative Data, P2P)E-Commerce PlayersLarge Social Media Network Payment Providers
Gracias!
[email protected]: @jvowens