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CGAP Initiatives for Digital Financial Inclusion

Explore the initiatives of CGAP in promoting digital financial inclusion, including robust provider ecosystems, digital finance frontiers, digital finance services plus, and global policy architecture.

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CGAP Initiatives for Digital Financial Inclusion

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  1. ITU Workshop on “Digital Financial Services and Financial Inclusion” (Geneva, Switzerland, 4 December 2014) Digital Financial Inclusion: CGAP Initiatives on Demand, Supply, and Enabling Environment Kathryn Imboden Advisory Consultant, CGAP kathryn.imboden@gmail.com

  2. What is CGAP? We Build Knowledge on issues such as customerneeds and business models We Strengthen Markets so that promising services can thrive We Promote Policies and Regulations that allowservices to expand and reach unbankedpopulations

  3. Four examples of CGAP initiatives addressing digital financial inclusion 1. Robust provider ecosystems 2. Digital finance frontiers 3. Digital finance services plus 4. Global policy architecture

  4. Example 1. Robust Provider Ecosystems 1. Support for ensuring that basic regulatory enablers are in place, including rules governing: • E-money • Agents • Tiered KYC • Allowing multiple types of institutions to deploy digital financial services • Consumer protection

  5. Example 1. Robust Provider Ecosystems 2. Support for government policies and practices that open up pathways to support use of digital payments services 3. Support for building provider ecosystems able to scale low-cost digital payments services

  6. Robust Provider Ecosystems: country-level work Countries identified: • Ghana, Kenya, Rwanda, Tanzania, Uganda • Bangladesh, India, Myanmar, Pakistan Examples of work in progress: • Ghana • Myanmar • Interoperability work

  7. Example 2. Digital Finance Frontiers • Digital payments platforms are expanding around the world • As access barriers for payments are solved, other services can be added and delivered • BUT other barriers still exist to actual use of such products

  8. To effectively serve the lower income market, need to address other remaining barriers Challenges providers face Facilitate access close to where people work or live, at affordable cost Poor have many diverse needs Little or no information about customers Low literacy (means difficult to communicate other than verbally) Little or no trust in providers • Low activity rates • While access barrier is solved, providers struggle reaching poor with meaningful solutions for everyday problems

  9. Digital channel attributes may help address those barriers  areas of exploration for CGAP Visibility of transactional data, beyond financial transactions helps providers learn about their customers, inferring characteristics of cash flows for credit scoring, segmentation Digital data trail Two-way messaging creates opportunity to interact with customer at times when is important, delivering information and responding to questions creates confidence and proximity Real time interactions Attributes of digital channels and potential impact on solutions:

  10. Digital channel attributes may help address those barriers  areas of exploration for CGAP (con’t) A rich user interface (e.g., involving graphics) helps customers relate more intuitively to financial services, improving understanding of choices, engaging more actively Graphic user interface This helps contextualize delivery of certain services such as in-store purchases, event-based insurance; validate KYC profile Instant location intelligence Attributes of digital channels and potential impact on solutions:

  11. Digital channel attributes may help address those barriers  areas of exploration for CGAP (con’t) Cellphone as a tool helps to manage multiple financial relationships across social connections P2P social connections Attributes of digital channels and potential impact on solutions:

  12. Example 3. Digital Financial Services Plus Use of digital finance to increase accessibility to basic, essential services and utilities more accessible Finance as a means to help solve significant development challenges Identification of services that leverage established infrastructure of mobile payments Public goods research Research partnerships

  13. Digital Finance Plus: ExamplePay-as-you-go utilities in East Africa • Leveraging digital finance to deliver modern energy to the poor, sold on a pay-as-you-go basis • Designed to be flexible and to fit well with the existing economic realities of the energy poor consumer • Research partnerships with three pay-as-you-go solar providers operating in East Africa

  14. Example 4. Global Policy Architecture: Digital Financial Inclusion Digital transactional platforms and additional services they enable introduce new non-bank actors and shift risks among the new entrants and legacy players Key financial regulatory issues: agents, anti-money laundering and countering financing of terrorism (or “AML/CFT”), e-money regulation, consumer protection, payment system regulation, competition (but non-financial issues as well, e.g., USSD channel access) Combining financial & non-financial services calls for collaboration with non-financial regulators and standard setters (e.g., telco ministries & ITU)

  15. Global Policy Architecture: Digital Financial Inclusion - Jaime Caruana, BIS Gen. Manager 2nd G20 Global Partnership for Financial Inclusion (GPFI) Conference, Oct. 30 & 31: “Standard Setting in the Changing Landscape of Digital Financial Inclusion,” hosted by Bank for International Settlements (BIS) in Basel: “In the financial inclusion context, the standard-setting bodies . . . need to work together. But when it comes to digital financial inclusion, those represented in this room alone are not likely to cover all of the relevant landscape. In December, for example, the International Telecommunications Union will launch a new Focus Group on Digital Financial Services, and other collaborative forums are likely to emerge.”

  16. 2014 CGAP Publications on DFS • CGAP blog: “The Seismic Implications of Digital Financial Inclusion [for Standard Setters]” • CGAP Brief: “bKash Bangladesh: A Fast Start for Mobile Financial Services” • CGAP blog: “5 Sources of Untapped Innovation in Digital Finance” • CGAP Focus Note: “Electronic G2P Payments: Evidence from Four Lower-Income Countries” • CGAP paper: “Access to Energy via Digital Finance: Models for Innovation” • CGAP Focus Note: “Serving Smallholder Farmers: Recent Developments in Digital Finance See www.cgap.org

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