Industry News

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At Enclude, we are consistently reviewing key trends that we observe in the digital financial services (DFS) ecosystem. These trends are informed by ongoing conversations with key industry stakeholders (banks, MNOs, regulators, etc.), as well as key market dynamics observed when on-ground in several frontier markets. While we won’t go into the details of the trends currently observed by our team, they are key dynamics that would move the industry’s focus from ‘access’ to ‘uptake’.

Until now, much time and effort in the DFS industry has been (rightly) spent on analyzing ways to increase access to DFS among the world’s un(der)served populations. While there still needs to be focus on improving access globally, the reality is that the channel is facing a key issue to its long-term success: uptake. For example, per GSMA’s latest State of the Industry report, they note the global activity rate of 33% among mobile money users. If, after all the effort to improve access for un(der)served markets, only 1/3 of all mobile money users are regularly using the service, then more effort needs to be spent on increasing the use cases. One such use case is essential to the continuing growth of DFS is merchant payments.

Both Ecobank and MasterCard have also realized that improving the merchant payment use case may unlock a large sector of consumers – after all, merchant payments account for a large portion of household financial activity on an on-going basis. They signed a memorandum of understanding to roll out MasterPass QR, a mobile payment solution that allocates payment through the scanning of a QR code at the merchant location, across 33 African countries. The roll-out, represents one of the largest implementations of a digital payment solution in Africa and is closely aligned with Ecobank’s focus to add 100 million new customers by 2020.

As far as the solution itself, QR presents an interesting case study for merchant payments. Our analysis shows that deployment of a point of sale device can be a costly venture for all parties, especially the merchants themselves who often bear the brunt of the deployment. According to the article, QR represents a much more cost-effective payment solution, hopefully increasing the value proposition to the merchant. Of course, scanning of the QR code also requires the end-user to have a smartphone – something that may initially create a barrier to usage. However, per GSMA, smartphone usage in Africa is anticipated to be 725 million by 2020, so MasterCard and Ecobank are making a long-term bet. It will be interesting to see if it pays off in time.

Read the article here:

Other News:


Africa: Mobile money on the rise in Africa as millions get phones


Globe: Will Alipay dominate global mobile payments?


USA: Banks bet on next big thing: financial chatbots


Nigeria: In former Boko Haram stronghold, POS bankers make quick cash

Industry News

Written by Christine Loftus

Following the meteoric growth of M-Pesa in Kenya, mobile financial services (MFS) have been lauded as an important channel for expanding access to financial services to the un(der)banked. Yet, global activity rates (33% per GSMA in 2015) have lagged behind those seen in Kenya (47% per GSMA in 2014), and other  frontier markets. The reasons for such inactivity vary; some find MFS solutions inefficient, burdened by cumbersome hierarchical mobile money phone menus that prolong even basic transactions. Others lack the literacy skills necessary to navigate text-heavy interface that often fails to capture key terms in local languages due to unicode constraints. Some cannot even register for MFS as they cannot access agents given mobility restrictions. For many, existing models do not fulfill their needs and, as such, they remain unbanked.

Thus, the Center for Financial Inclusion asks us to consider how to keep clients first in a digital world as we celebrate Financial Inclusion Week 2016. How do we ensure that an increasingly diverse array of products and services are demand-driven, fulfilling clients’ needs?

As many of the obstacles hindering the usage of MFS stem from feature phone use, much of the conversation regarding user interface centers upon this platform. However, increasing usage of smartphones worldwide may soon mitigate many of these concerns. The number of smartphone subscriptions globally is anticipated to grow by 2.6 billion by 2020, resulting 5.8 billion unique mobile subscriptions. As smartphones sell for as little as USD 28 in some countries, they are becoming increasingly accessible to low-income consumers. Service is not limited either; a minimum of 2G service will be ubiquitous within the next five years.

The proliferation of smartphones will provide the opportunity to develop MFS solutions that overcome many of the challenges reducing uptake and usage. They allow providers to simplify menus, increasing efficiency and minimizing written text. To further enhance reach to those with low literacy levels, providers can also utilize videos and graphics on smartphones. For those with limited mobility, smartphones can even facilitate self-registration, allowing individuals to enroll within their home provided access to mobile service. Smartphone technology could further allow MFS to expand to new markets by providing new models for product and services better meeting clients’ needs.

Although there are many opportunities posed by this new channel, many MFS providers utilizing smartphones have simply transplanted complex USSD interface onto a new platform. They have failed to develop new interface to reach new customers, which would increase uptake and usage. Recognizing the problem, CGAP recently partnered with various providers worldwide to determine how to best serve low-income consumers. Ultimately, they unveiled 21 fundamental principles requisite to expand MFS use via smartphones:

  1. Allow users to explore before using
  2. Help users find agents
  3. Simplify application registration
  4. Flatten menu hierarchy
  5. Focus menu choices on actions
  6. Reduce text and use visual cues
  7. Design icons relevant to local users
  8. Use simple and familiar menu terms
  9. Build on users’ familiarity with smartphones
  10. Customize transaction choices
  11. Auto-fill from the address book and transaction history
  12. Auto-check to minimize human error
  13. Display information in digestible chunks
  14. Reassure with transaction confirmations
  15. Leave a clear trail of transaction histories
  16. Provide instructions when needed
  17. Handle errors by providing next-step solutions
  18. Customize and simplify keyboards
  19. Auto-calculate fees during transactions
  20. Provide full transaction details on one screen to finalize transactions
  21. Make account balance easy to see and hide

Although the list contains ample recommendations, the underlying message behind the principles is much simpler: consider the needs of end-user when designing new products. As technology continues to evolve, new challenges to MFS uptake will emerge that are not currently addressed. Yet, adherence to the core principle of human-centered design will facilitate continued development of viable products capable of catalyzing usage in untapped markets previously outside the reach of MFS.

Read the Article Here: The Power of Smartphone Interfaces for Mobile Money

Other News:

Smartphones and MFS

Myanmar: Wave Money Myanmar: The Power of Smartphone Design

Economic Growth

Global: The Powerful Link between Digital Finance and Economic Development

Global: How Digital Finance Could Boost Growth in Emerging Economies

Financial Inclusion

Global: Cash Call

Sustainable Development+

Global: Fintech should be Eco-Friendly

Kenya: How Mobile Banking Brought Water Back to Nairobi’s Slums


India, Kenya, and Mexico: A Buck Short Report


Industry News

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Recently the traditional sending of remittances has been under attack from FinTechs. Companies like TransferWise, Xoom, and WorldRemit have utilized technology, superior user experience, and lower prices to compete with more traditional players – banks and Western Union, for instance – over the $582 billion global market. However, such disruption has not gone unnoticed and some country’s regulators are wary of the new entrants. In a recent move, the Central Bank of Nigeria (CBN) – a country who received an estimated $21 billion of remittances in 2015 – issued a new directive that will require the vast majority of the country’s money transfer operators (MTO) to suspend operations.

The CBN has a reputation for being a ‘hands-on’ regulator, and their focus on the role of MTOs in the country is not new. Last year, per Quartz, CBN issued a directive that all MTOs must be:

  • Operational in 20 countries;
  • Have a net worth of $1 billion; and
  • Have at least 10 years of working experience

The above are intended to be prohibitive requirements, especially for new FinTech companies who have been in business several years.

Per Quartz, the new regulation builds on those made in 2015 and “targets money transfer companies that work through local partners and do not have their own infrastructure to remit foreign currency to banks. Effectively it means all but a handful of MTOs that fulfill the central bank’s stiff requirements will have to close.”

In our work, we often see the struggle faced by regulators with the ‘inclusion vs. integrity’ debate. While the priority of central banks will always be to secure the safety of the payments ecosystem, they should not be overbearing and unduly shape the market and products offered (within reason, of course). While CBN may argue that more traditional players can best provide security, we believe this move to be shortsighted and incorrect. TransferWise, for instance, is an established company who is operating in 38 different currencies around the world – and several other companies share their global coverage. Unfortunately, in the case of Nigeria, ultimately the population and diaspora suffers the most – we hope that CBN reverses their decision shortly.

Read the article here:

Read the directive here:

Other News:


India: An Indian Start for Digital Credit

Nigeria: Nigeria’s New Collateral Registry Aims to Increase Access to Finance for Small Business


Africa: Smartphone Use Has Doubled in Africa in Two Years


Africa: FinTech isn’t Disrupting Africa’s Financial Industry – It’s Building It

Industry News

Written by Justin Ahmed

Must Read of the Week:

A great deal of hype has surrounded the emergence of blockchain technology and its potential to disrupt and transform financial services industries across the globe – lowering the costs and complexities of transactions, improving transparency, and supporting service delivery to the unbanked. Still, maybe not enough attention has been paid to its potential to alter enterprise management structures, networked business models, and consumer-company dynamics at their very core.

In an article for the Harvard Business Review, Don and Alex Tapscott reveal some of their key findings from a two-year research project spanning hundreds of interviews with blockchain experts. The authors expound upon blockchain’s power to shift business, government, and society in ways even more profound than the advent of the internet. Central to such power is the ability to impart productivity gains while eliminating the need trusted intermediaries. For example, smart contracts (software programs that self-execute complex instructions) and autonomous agents (bundles of smart contracts acting like rich applications) are such applications which can eliminate contracting, payment, agency, and coordination costs and facilitate structural shifts in enterprise management.

Much of the focus of blockchain technology in the context of global development has been on applications improving efficiency of financial services (e.g. remittance platforms offered by BitPesa in Kenya and by Rebit and in the Philippines) and on increased transparency and capacity of public service providers (e.g. for land registry as provided by Factom in Honduras and Bitland in West Africa). However, start-ups have emerged across the blockchain space for ends as diverse as protection of intellectual property, crowd-sourcing project management, and expansion of “sharing economy” infrastructure. Some multinationals have themselves taken up the call to adapt to and anticipate the shift, as Visa has through the launch of an innovation laboratory in Bangalore solely dedicated to global blockchain technology development. As the article’s authors recognize, the individual control and immutability afforded by distributed ledgers holds implications for management, collaboration, exchange, and ownership across increasingly-integrated segments of the economy across the developing world.

Read the article here, or purchase their book on the same subject released this week: Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World.

Other News:

Financial Inclusion

Peru: 34 Peruvian savings banks have launched a fully-interoperable national e-wallet system, “Billetera movil” (BIM)

Pakistan: Enclude partner, Karandaaz Pakistan, part of a consortium to set up USD 58 million Pakistan Microfinance Investment Company (PMIC)


Bangladesh: $81 million Bangladesh Bank heist linked to 2014 Sony hack and additional SWIFT breaches

Global: Kount’s ‘Nine Deadly Costs of Fraud’

United States: Lending Club facing questions concerning executive leadership, stock prices, and the future of its entire lending niche

Wearables / Financial Responsibility

United States: Intelligent Environments releases Pavlov-inspired electro-shocking bracelet to support financial responsibility

Financial Regulations for Improving Financial Inclusion

 Written by Rebecca Marx, Victoria Rau, and Paul Newall

Banking Beyond Branches has published many blogs highlighting how digital financial services (DFS) can expand financial inclusion, including through refugee populations, budget smartphones, and remittances. We also called attention to government policies toward financial inclusion as a key trend in 2016 and our prediction has been complemented by the Center for Global Development’s latest release: Financial Regulations for Improving Financial Inclusion.

A key focus for the report is examining the complexities in the ex-ante vs. ex-post debate on regulations – akin to tightrope walking for regulators. As we see in markets such as Nigeria and India, ex-ante policies may often inhibit the industry with too many regulations from the get-go. Ex-post regulation, on the other hand, may be too late to respond to issues. The key to this debate, some argue, is to allow the market to get out ahead, but keep it “within shouting distance”, as phrased by Marisa Lago, US Department of Treasury. In particular, the question of interoperability is of central concern – should the market evolve to interoperability naturally (presuming it does), or should it be mandated? Regulators want to ensure that the market will advance through competitive market mechanisms, but “maintain the capacity to be interoperable”.

Balancing proactive ex-ante regulation with reactive ex-post regulation and maintaining a level competitive landscape feature strongly in the report. The recommendations are intentionally agnostic to the technologies and players involved in providing financial services. They state that banks introducing additional mobile channels should still be scrutinized as banks, while digital services providers entering the market should be scrutinized more or less depending on the types of services they intend to provide, i.e. adopting a ‘service’ risk-based approach to regulation.

If it is anticipated that greater financial inclusion will be achieved by “disruptive” technologies in payments and financial services, as we would argue on this blog, then trying to regulate the payments industry as it advances is going to be a key question moving forward. A technology or innovation that truly disrupts does not announce its arrival with enough lead-time for regulators to anticipate the potential consequences or develop the appropriate regulatory framework. Innovative ways of paying for goods and services and storing or transferring money can just show up and are often out of “shouting distance” quite quickly. They disrupt the status quo and challenge existing rules, but who knows if they will gain enough traction to stay.

To analyze the role of ex-ante vs. ex-post regulations, and how central banks respond to disruptive technology, we need not look further than Kenya (whose former Central Bank Governor was a key contributor to this report). While lauded as the predominant mobile money case study, Kenya has had its own regulatory questions to answer. In 2014, the Communication Authority of Kenya (CAK) required Safaricom to allow its mobile money agent to host services from other operators but market competitor Airtel pushed regulators to go even further.  Airtel, asserting that mobile cash transfers from M-Pesa to Airtel Money are twice as expensive as transactions between Safaricom customers, wants to see regulators monitoring interoperability costs in order to reduce barriers to entering the market for other operators.

In July 2015, the government introduced new regulations that, if passed, would lead to the break-up of Safaricom in an effort to protect against monopolies. Fred Matiang’I, the cabinet secretary at the Ministry of Information said, “Telecommunications firms need to be regulated to ensure some players are not strangled”. If the regulation is passed it could force Safaricom to separate M-Pesa from its mobile phone services and infrastructure business, to the glee of Airtel.  In September 2015, Airtel chief executive Mr. Youssefi said, “Airtel is likely to exit Kenya if the market structure is not addressed in terms of dominance”.

While the discussion of M-Pesa’s dominance of the Kenyan market has certainly been elevated, reaction from Kenya’s authorities has been slow. The CAK said it would need at least one-and-a-half years to conduct a study to determine the thresholds of abuse and dominance in the telecommunications industry, and only after that study can anti-competitive practices in the market be addressed. Time will tell if regulatory action will be taken while providers are still “within shouting distance”.

From the above example, we are able to see some of the pros and cons of ex-post regulation. While Safaricom was able to develop themselves into the leading mobile payments players, rivals have felt that the playing field was not level – something ex-ante regulations might have mandated. The report attempts to provide regulators, such as Kenya’s, a framework to address these challenges and chart their path.