Page 240 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

eMoney is still important: Even if eMoney within value chains will not materially impact digital liquidity,
eMoney is still valuable and offers a range of benefits.

• Direct benefits – These include lower cash handling costs, leakage reduction, greater safety, faster
payment, and other benefits.
• Indirect benefits – These include access to credit and insurance through transaction histories, higher
merchant sales, or more accurate tracking of accounts receivable.
• Solution benefits – In some use cases, eMoney is a component of a much broader solution, such as input
subsidy programs that improve food security, or a contract management system used by value chain
participants.
Thus, the justification/motivation for payment-enabling agricultural value chains should not, and does not,
need to rest on digital liquidity alone.
Part of a holistic approach

The building blocks of a holistic approach are use cases – specific situations such as paying for school fees,
receiving wages, or repaying a loan. Digital liquidity depends on making eMoney better than cash for a wide
range of use cases, including agricultural payments.

eMoney is already compelling for remote transfers (quicker and cheaper than transporting cash) and airtime
top-up (more convenient than visiting stores and without transaction fees). These solutions were powerful
enough to incent mobile money adoption. But, these two use cases have not been sufficient to achieve digital
liquidity. P2P recipients typically cash-out upon receiving their funds, and small businesses also tend to cash-
out quickly after receiving eMoney payments from their customers.

To achieve digital liquidity, the value proposition must widen to include more use cases. eMoney needs to be
better for buying crops, paying school fees, buying household supplies, paying utility bills, paying loans and
so on. In other words, value chains are only one category of use cases; non-agricultural use cases are at least
as important.

Broadly speaking, digital liquidity requires a balanced portfolio of eMoney use cases that encourages:
1. Injecting eMoney into the BoP economy: Getting money into BoP digital wallets is one of the first steps
towards digital liquidity. Remote P2P payments are an excellent source of funds as payments can be quite
large but more use cases are needed. Bulk payments from larger organizations such as governments,
produce buyers, and NGOs are a good source. These organizations need to pay thousands or even millions
of individuals. With their size and influence, organizations can often dictate how payments will be made.
Because bulk payments such as subsidies can be universal, these institutional payments can raise eMoney
adoption significantly.
2. Retaining funds electronically: Unless a user retains their eMoney in digital form, the digital liquidity
cycle breaks. Remote payments aside, why would consumers bother converting their cash back into
eMoney? They will just use cash. To avoid breaking the liquidity cycle, users must overcome their current
preference for cashing out. Providing interest payments, enabling a line of credit or lowering household
petty cash requirements are potential motivators.

3. Conducting BoP-to-BoP transactions: From an income perspective, this activity includes selling produce
locally, selling products (entrepreneurs), providing casual labour, and borrowing money from friends.
Expenses include income-related expenses such as paying labourers, repaying loans from friends, buying
seeds, as well as household expenses such as food, clothing, and transportation. Until BoP-to-BoP eMoney
transactions reach a tipping point, the need to cash-in or cash-out will remain high as these transactions
are likely the bulk of BoP activity. Getting the BoP to use eMoney in the local economy can be particularly
challenging due to high fees, lack of MNO interoperability, and poor user experience. Removing these
barriers is a pre-requisite to eMoney adoption, but is not sufficient. One or several compelling reasons
to use eMoney are required, this might include: Using eMoney to document the disbursement and
repayment of informal loans, or using eMoney transaction histories to secure credit.

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