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

What is CGAP? Geneva, Switzerland, 4 December We Build Knowledge on issues such as customer needs and business models We Strengthen Markets so that promising services can thrive We Promote Policies and Regulations that allow services to expand and reach unbanked populations

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

Example 1. Robust Provider Ecosystems Geneva, Switzerland, 4 December 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

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 Geneva, Switzerland, 4 December

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 Geneva, Switzerland, 4 December

Example 2. Digital Finance Frontiers Geneva, Switzerland, 4 December 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

To effectively serve the lower income market, need to address other remaining barriers Geneva, Switzerland, 4 December Low activity rates While access barrier is solved, providers struggle reaching poor with meaningful solutions for everyday problems Facilitate access close to where people work or live, at affordable cost Little or no informatio n about customers Poor have many diverse needs Low literacy (means difficult to communicat e other than verbally) Little or no trust in providers Challenges providers face

Digital channel attributes may help address those barriers  areas of exploration for CGAP Attributes of digital channels and potential impact on solutions: Geneva, Switzerland, 4 December Digital data trail Visibility of transactional data, beyond financial transactions helps providers learn about their customers, inferring characteristics of cash flows for credit scoring, segmentation Real time interactions Two-way messaging creates opportunity to interact with customer at times when is important, delivering information and responding to questions creates confidence and proximity

Digital channel attributes may help address those barriers  areas of exploration for CGAP (con’t) Attributes of digital channels and potential impact on solutions: Geneva, Switzerland, 4 December Graphic user interface A rich user interface (e.g., involving graphics) helps customers relate more intuitively to financial services, improving understanding of choices, engaging more actively Instant location intelligence This helps contextualize delivery of certain services such as in-store purchases, event-based insurance; validate KYC profile

Digital channel attributes may help address those barriers  areas of exploration for CGAP (con’t) Attributes of digital channels and potential impact on solutions: Geneva, Switzerland, 4 December P2P social connections Cellphone as a tool helps to manage multiple financial relationships across social connections

Example 3. Digital Financial Services Plus Geneva, Switzerland, 4 December 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

Digital Finance Plus: Example Pay-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 Geneva, Switzerland, 4 December

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) Geneva, Switzerland, 4 December

Global Policy Architecture: Digital Financial Inclusion 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.” Geneva, Switzerland, 4 December Jaime Caruana, BIS Gen. Manager

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 Geneva, Switzerland, 4 December