Page 16 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

Localization rules – Some countries impose restrictions that require domestic processing of all DFS transactions
as a means of maintaining operational control and data within a country . In other cases,
2
rules require the use of a local provider for all transaction processing, effectively creating a
monopoly on all processing.
– Localization restrictions can force the building or replication of costly infrastructure
domestically. Hence, such rules may prevent some international PIPs from offering certain
value-added services that could render better services to the end-users.

1 It is assumed here that mobile network operators that intend to provide payment services have already being
licensed by the telecom regulator in their respective countries.
2 For example, for some PIPs international data processing may be crucial to drive down costs.

Other barriers relate to aspects that affect the ability of end-users to adopt DFS. These are:

• Accessibility: This is perhaps the most basic factor influencing successful adoption of any DFS. Without
adequate access to a transaction account, a consumer can be excluded from the DFS value chain and
most likely will be compelled to use cash. Accessibility also implies access to transaction points within
the DFS ecosystem, such as ATMs, POS terminals, branches, third-party agents, etc.

• Convenience: beyond access to DFS, a user must find these services convenient and easy to use. Where
the adoption curve for consumers is smooth, usage tends to be high and creates a positive feedback
mechanism for other users to adopt such services as well.
• Cost and transparency: the use of any DFS involves a certain cost to the user. These costs include explicit
as well as implicit costs. High costs relative to the user’s income and the user’s perception of the value
of the service act as a barriers to DFS adoption and usage. In an environment where there are few
options available, some end-users will tend to “internalize” the costs and stick to the product they know
best. Others will simply refrain from using DFS. In contrast, in a competitive market the costs associated
with a payment instrument are more closely scrutinized, and the choice of DFS is made based on user’s
perception of the cost structure, as well as other factors such as safety and convenience.
• Safety and reliability: closely associated with cost and transparency is the safety and reliability of DFS.
A user’s perception of safety and reliability can drive usage. Systems that are prone to security risks can
create mistrust and result in lower usage.

3 Development of a vision statement, including policy objectives for DFS

3.1 National retail payments strategy and policy framework 1

Payment systems all over the world, as core infrastructures of contemporary market economies, are in constant
evolution on the technology, regulatory as well as business front, as they adjust to the changing needs of the
population, the economy and the financial sector.

Retail payment systems traditionally have been initiated and operated by private entities that come together
to try to address collectively recognized payment needs in a market. Industry initiatives range widely, from
setting up common platforms and new services, to adopting standards to increase efficiency and facilitate
automated inter-institution communication and transaction processing, among many others.

However, in recent years the evolution of retail payments is increasingly also the outcome of deliberate
strategies and policy choices from national authorities. Central banks are increasingly becoming involved in
retail payments reforming on the basis of their objectives to ensure the smooth operation of the NPS, improve

1 This section draws largely on World Bank (2012b).

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