Digital Financial Services for Financial Inclusion

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Digital Financial Services for Financial Inclusion

John Owens, Senior Policy Advisor, AFI 26 March 2015 Bangkok, Thailand Bringing smart policies to life1Global Financial Inclusion Indicators Source: Demirguc-Kunt & Klapper (2012), World Bank Policy Research Paper 60252.5 billion of adults do not have access to formal financial system

AFI | Alliance for Financial InclusionBringing smart policies to life2Overview of AFI

AFI is a global network of policymakers in developing and emerging countries

Founded in 2008, AFIs goal is to support developing countries to develop and implement successful financial inclusion policies

The goal of the AFI network is to accelerate the adoption of innovative financial inclusion policy solutions, with the ultimate aim of making financial services more accessible to the billions of people who do not have access to the formal financial system.Bringing smart policies to life3The AFI Timeline

125 Institutions, 95 countriesUnique Peer Learning network (working groups)G20 Implementing partnerMaya DeclarationMore than 70 tangible policy reforms

200820092010201120122013-20152015-Bringing smart policies to life484 members at the end of 2011. Currently XX members

Growing Relevance of Financial Inclusion GloballyFinancial Inclusion is no longer only a development concern but a cornerstone of economic development framework and modelMinistries of Finance and Central Banks are including Financial Inclusion in their mandate together with stability and integrityFinancial Inclusion is more and more understood in a broad framework including access, usage and quality of a range of financial servicesDeveloped countries are increasingly facing financial exclusion problem

G20 recognizes the benefits of financial inclusion for inclusive growth, stability and integrity AFI | Alliance for Financial InclusionBringing smart policies to lifeOpportunitiesGrowing alignment of interests among governments, private sector and global communityGreater understanding on the issues related to financial inclusion as well as more dataRecognition of country specific conditions and developing and emerging country-led approachesMore open communications with International Standard Setting BodiesTechnological innovation and enabling regulatory framework are driving new digital financial service models that support financial inclusion

AFI | Alliance for Financial InclusionBringing smart policies to life

Benefits & Opportunities of Digital Financial ServicesSource IFC Infographic: Bonny Jennings www.itldesign.co.za I AFI | Alliance for Financial InclusionBringing smart policies to life

AFI | Alliance for Financial InclusionE-money Services

Mobile Financial Services

Use of Agents Key Models of Digital Financial ServicesBringing smart policies to life8 AFI | Alliance for Financial InclusionConvergence & Interoperability

Financial InclusionBringing smart policies to lifehttp://mens-news.com/2012/06/research-says-cell-phones-may-make-men-sterile-cause-cancer/9DFS Policy, Regulatory and Oversight

Proportionate AML/CFTTiered KYC RegulationsE-Money Operator RegulationsRemote Account Opening RulesAgent RegulationsInteroperabilityFair access to ICTSecurity and Fraud MitigationConsumer Protection Issues

Bringing smart policies to lifeTechnological innovation to reduce cost of delivery and increase access on a large scaleProportionate financial sector policy and regulation is critical enabling factorIncreased importance of data to make informed policy decisionsQuality aspects (consumer protection) of financial InclusionCoordinated national strategies for expansion of digital financial ecosystems leading to more inclusive environments

10Regulatory CoordinationTelecom operators as financial service providers & banks as telecom operatorsUSSD, Fair Access, Data SecurityWho provides oversight?Overlapping issues among regulatorsCoordination is critical and needs to be improved

Bringing smart policies to lifeBangladesh: Mobile-Enabled Agent Banking Success AFI | Alliance for Financial InclusionBangladesh Banks Role:

Agent Banking & Allowable Services

Eligibility Criteria for Agents

Allowance of Non-Exclusive Agreements

Risk & Operational Issues

Consumer Protection PrinciplesCoordination with BRTCResults:

540,000 active agents

25.2 M registered clients

12.2 M active clients

Bringing smart policies to lifePhilippines: Mobile-Enabled E-MoneyE-money regulations clearly set forth by Bangko Sentral ng Pilipinas E-money issuers under Central Bank SupervisionAgent guidelines issuedTiered KYC processPartnerships promoted with the financial sectorInterconnectivity between financial players, payment operators and e-money issuers

Bringing smart policies to lifeGiven that the Philippines is considered the texting capital of the world and has one of the highest mobile phone penetration rates, using mobile phones to conduct financial services is a natural next step in the country. Mobile phone banking services (MPBS) include services such as informational banking SMS notifications, international & local remittances, deposit & withdrawal services, micro-loan payments, utility bill payments, payroll services and mobile commerce opportunities for all sizes of businesses. Whether located in urban or rural areas, clients find that MPBS are easier to use to remotely access banking services. MPBS were developed as an innovative and effective tool to help expand outreach and increase access to banking services. Read bullets

13Solomon Islands: Mobile Banking for Financial Inclusion AFI | Alliance for Financial InclusionCentral Bank of Solomon Islands:

Agent Banking RegulationsExpanded Eligibility Criteria for AgentsTiered KYC RegulationsPublic Private Sector DialogueFinancial Literacy and the role of the Private SectorResults:From 80% without a bank account 5 years ago, 80% now have access to basic banking services

Bringing smart policies to life Bringing smart policies to lifeinfo@afi-global.orgwww.afi-global.orgThank you!John.Owens@afi-global.org@NewsAFI

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