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The ways in which digital financial services (DFS) offer benefits for poor and unbanked consumers was the topic of this session organised by the International Telecommunication Union (ITU).
Mr Vijay Mauree (Programme Coordinator, Telecommunication Standardization Bureau - TSB, ITU), who moderated the session, introduced the two in situ and two remote panellists. Mauree then explained the ITU contribution in this field. The Focus Group on Digital Financial Services (ITU FG DFS) has completed its work, but the new phase, called the Financial Inclusion Global Initiative (FIGI), has started to operate. The main finding of the FG DFS, presented in their documents, can be summarized into six categories:
- improving the DFS ecosystem through competition and a leveled playing field;
- understanding supply side needs;
- understanding demand side needs;
- supporting consumer protection that includes network reliability, DFS transparency and consumer data privacy among other concerns;
- following security measures; and
- other issues.
As the FG DFS has produced 28 technical reports and 85 recommendations, the FIGI initiative has new tasks. They include security, infrastructure and trust; digital identity; and electronic payments acceptance.
Mr Rory Macmillan (Macmillan and Keck Partners, USA/Switzerland) addressed the current state of DFS and gave recommendations on how to proceed in their improving provision. According to Macmillan, the core functions of finance are facilitation of economic exchange, aggregation and allocation of investment capital, and finally, spread and allocation of risk. An insightful example of a good project is M-Kopa in Kenya, where digital capital is enabling a shift out of poverty but on a very limited scale. When it comes to risk allocation, remittance systems enables greater reduction in costs. Remittances shift the liability from informal and individual levels to a wider and therefore more efficient level for risk management. Macmillan specified that 'mobile financing is underdeveloped' and that mobile networks should be used better. Furthermore, he called for a push in investment in agent networks, expansion of network effect, more competition, development of digital identification, education on data usage, and overall capacity building among users and regulators.
Mr Olutunmbi Idowu (Head of Compliance and Risk Control, Ericsson) highlighted the importance of inclusion as the main driver of the process of digital finance. Idowu sees the international environment as a potential challenge since international initiatives tend to implement the same solution patterns in different domestic settings. This way the process is put before the person who should be benefiting from DFS. The technological aspect is not as problematic as is fragmentation of the domestic perspective. Leadership in the domestic setting should drive cooperation in order to enable real social and political inclusion of those in need. He mentioned solutions such as redefining the notion of inclusion by governments and securing sustainability of DFS providers. In his opinion, the main goal is to start the circle of increased value by empowering citizens, which will in turn raise productivity and generate investment.
Two online panellists joined the final moments of the discussion. Mr David Avsec (Universal Postal Union (UPU)) provided an overview of areas in which the UPU is advancing DFS. Raising awareness by publishing reports, doing research, presenting lessons learned, and advocating in international forums, are a few of them. Moreover, the UPU offers direct advice and assistance in project implementation, as well as specific IT solutions, Avsec said. Mr Kennedy Komba (Alliance for Financial Inclusion) agreed with the other participants about the importance of the regulators' role. He gave the example of national inclusion strategies as a tool that has worked in the past in setting the stage for cooperation. Interoperability, according to him, relies on trust and depends on specific markets, but can be achieved through advocacy and capacity building between financial and communication operators.
by Jana Mišić