Enhancing efficiency and financial Inclusion: Role of the Digital Financial Services
PAVEL SHOUSTRUSSIAN MICROFINANCE CENTER
State of Financial Inclusion in Russia
23% of respondents are not using financial services at all
50% of respondents are actively using remote
channelsNAFI&CGAP Report, 2014
State of Financial Inclusion in Russia
2,83 bank offices per 1 000 sq.km.
13,49 ATMs per 1 000 sq.km.Mobile phone users: 73%
Internet users: 52%
VS.
Retail Financial Services in Russia
E-Money Systems
(more than 40 mln. users)
Payment kiosks
250 000 kiosks(1 600 per
1 mln. people)
Payment cards
(1.5 cards per capita)
Prepaid mobile accounts
Approx. 20 mln. users
How Digital Financial Services can help?
Higher accessibility
Higher competition (i.e. quality)
Lower costs
Higher accessibility
Communication infrastructure
Payments use basic
infrastructure
Other financial services ‘ride on the payments’
back’
Payment Aspects in Financial Inclusion // Bank of International Settlements. September 2015.
Higher Competition
‘Remote’ means ‘accessible’ + ‘competitive’‘Competitive’ is more innovative and affordable
Decreasing Costs
Low operational costs
Usage of existing infrastructure
Low personnel costs
How market is affected by innovations?
Innovations contribute to financial inclusion but they also change the
market, refocus strategies and present certain challenges for both
private and public sectors
These changes directly affect the efficiency of the market
Traditional taxi service
Traditional taxi = dispatch + cars
Taxi ride and Dispatch are bundled services. Customers are limited in choice
New technologies on the taxi market
Such new services as GetTaxi are actually high-tech mobile-based dispatchesTaxi companies provide only car rides
One dispatch can work with multiple taxi companies, one taxi company can work with many dispatches
Many interfaces, real competition, lower prices, higher quality
Traditional Financial Services Model
LOANS
SAVINGS CARDS
E-BANK
These services are ‘packaged’, i.e. forming ‘vertically integrated monopoly’
Moving away from the traditional model
New technologies unbundle the sources of funding and
interfaces
‘Division of labour’ on the market
One interface for different sources of funding
E-wallets aggregate different sources of funding: payment cards, bank accounts, airtime, e-money
One source of funding for many interfaces
Prepaid cards, mobile phones, PCs, etc. are all instruments to access e-wallet
More competition in a vertically integrated market
Retail finance can be considered a vertically integrated industry
Generators (high reliability, low innovation)
Banks
Transport(monopoly with
low marginal cost)
VISA/Mastercard
Last Mile(high competition, Innovative market)
Payment providers
Better competition in a vertically integrated market
How to ensure competition?
New EU Payment Services Directive allows third-party developers of interfaces to get access to the customer’s account in any bank, without contract with this bank
(i.e. implements de-verticalisation of the industry)
Bottomline
Universal players (and solutions) are less popular
No more ‘universal’ products: focusing on best competences is a success strategy
Banks are likely to focus on risks, IT companies – on interfaces
Regulation susceptible to innovations
Gradual regulation: stricter regulation for higher risks
Lighter regulation for small-scale companies
FATF and other bodies encourage risk-based approach
Efficiency is a key
Efficient markets are more conducive to financial inclusion
New technologies help to increase efficiency
Financial inclusion-focused regulation is based on the efficiency-focused strategies
Pavel ShoustRussian Microfinance Center+7 (906) [email protected]
ENHANCING EFFICIENCY AND FINANCIAL INCLUSION: ROLE OF THE DIGITAL FINANCIAL SERVICES
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