Industry News

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While digital financial services (DFS) are widely lauded for their ability to expand access to financial services among un(der)served market segments, their application to development challenges spans multiple sectors. Known as Digital Finance Plus (DF+), the use of DFS to address service gaps leverages these platforms to enable households to make small and unpredictable payments without incurring immense transaction costs. Households, therefore, can make payments aligning with their cash flow and providers can profitably serve this market. Although DF+ assumes various iterations depending on the context, it is considered a promising solution to various global issues including abysmal access to water and sanitation services.

The exact application of DF+ to the water sector varies greatly, largely depending upon existing water provision or the lack thereof; it cannot generally be used to build the underlying infrastructure for centralized water systems—i.e. piping—that requires large upfront investment, however. Rather, it facilitates “last mile connections”, enabling individual households to build connections to existing grids or access water on a pay-for-use basis. In this context, a recent CGAP focus note identified four primary use cases: water bill payments; pay-as-you-go; digital credit; and digital government transfers.

By making water bill payments via DFS, households and providers can reduce both time and financial costs associated with utility bill payments and collections. In Kenya, for example, households reduced time spent paying bills by as much as 82%. Similarly, providers benefit from a sharp reduction in costs as well as simplified collection processes, which will be crucial if the sector intends to reach its stated goal of increasing investment by 300% over the next 15 years. Such a drastic increase will require the use of innovative financing mechanisms including water bonds, which demand transparent and efficient processes throughout the industry.

In communities without immediate access to existing water services, DFS allows for the installation of pay-as-you-go or prepaid water services. Pay-as-you-go schemes enable poor households to pay for water in miniscule quantities making payments via mobile money or depositing funds onto a stored-value card and retrieving water as per the available funds. Not only does this allow small households to make payments aligning with their cash flow, but it also enhances the business case for serving low-income communities by reducing the likelihood that water bills will not be settled.

While pay-as-you-go water provision largely relies on public water points for disbursal, many families strive to build a household connection, thus requiring access to finance to cover high upfront costs. Digital credit reduces costs associated with loan provision and collections, allowing financial institutions to better serve low-income households. As such, under-resourced households will have enhanced access to the credit requisite for initial costs associated with building a connection.

These three use cases assume households have the means to pay for water provision, but many families cannot afford to purchase even a minimum quantity of it, requiring government subsidies. By digitizing government transfers for water, governments can enhance efficiency, ensuring that households receive the funds in a timely manner. They can also earmark the funds for water via a closed-loop system as a means of guaranteeing that the money will be used for water purchases.

By highlighting these four use cases, the CGAP focus note showcases possible applications of DFS to the water sector. Yet, the opportunities extend beyond these iterations; in a recent engagement, Enclude identified additional use cases within the sector including earmarked remittances for water and sanitation as well as bundled water products. These opportunities only represent a fraction of potential for DF+ within the water sector and the development space. As we move forward, we look forward to exploring the application of DF+ to overcome challenges ranging from water provision to healthcare access.

Read Quenching a Thirst: Digital Finance and Sustainable Water Service for All

We also recommend reading Tricia Cuna Weaver’s blog: Beyond Financial Services: A Focus on Consumer Needs.

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Nigeria: How is Checking Your Balance Just Like Ordering a Burrito? Fast Food Menus Offer Lessons for Financial Institutions

India: Currency of Trust: Consumer Behaviors and Attitudes Toward Digital Financial Services in India


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Global: Cash Transfers Get an Upgrade


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


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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:

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Myanmar: Wave Money Myanmar: The Power of Smartphone Design

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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

Must Read of the Week:

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:

GSMA’s State of the Industry Report for Mobile Money 2015 provides a detailed look into the mobile financial services (MFS) industry. The report is an industry bellwether, pointing industry leaders and observers alike to the pressing challenges and opportunities posed to MFS providers in expanding and scaling their offerings.

In 2015, the number of registered mobile money accounts grew by 31% to 411 million accounts, 134 million of which are active. One third of newly registered accounts were opened in South Asia, and 63% of Sub-Saharan account openings came from outside the MFS-pioneering East Africa region. International remittances proved the fastest-growing product in the industry with 52% annual growth, highlighted by 29 cross-border mobile money remittance corridors that connect 19 countries as of December 2015. MFS continues to expand its reach to country’s populations with 37 markets have at least 10 times more registered mobile money agents than bank branches. 

While there was expansion in volume and scope of MFS in 2015, the report draws attention to key challenges inhibiting the industry’s continued growth:

  • Usage patterns remain undiversified, dominated by peer-to-peer (P2P) transfers and airtime top-ups. The value of bill payment / bulk disbursement / merchant payment transactions altogether is the same as last year’s at 24%. While government-to-person (G2P) channels have driven bulk disbursement volumes to new heights, the MFS ecosystems surrounding them continues to `encourage cash-out.
  • The proportion of agents classified as active fell in 2015, to 51% of the total. New tactics are being tested to improve activity rates – with demonstrated success in Mali and Chad – including the broadening of product portfolios, strategic utilization of master agents, and provider collaboration.
  • Adoption amongst women and rural segments remains disproportionately low, unchanged from 2014 at 47% and 37%, respectively. Tiered KYC requirements is just one of many solutions being tested for effectiveness in supporting adoption by women and disadvantaged groups.

We look forward to GSMA’s analysis of adoption of other mobile financial services – mobile insurance, mobile savings, and mobile cred – to be released (and showcased here on the Beyond Branchless Banking blog) in late spring 2016.

Read the report here:

Other News:


Nigeria: Boost to Country’s Move to Cashless Economy

Global: Why we should fear a cashless world


Global: Fed ‘Lapse’ Details Emerge in Bangladesh Bank Heist Case


West Africa: Over 16 million Ecobank and Orange customers can now transfer money using their mobile phones


Ghana: Only 14% of Ghanaians happy with mobile money service