The key findings and policy recommendations made by the ITU Focus Group on Digital Financial Services following the conclusion of its extensive two-year consultation process have been hailed by stakeholders across the ICT and financial-services sectors as an 'incredible success'. The ITU Focus Group presented its 85 'policy recommendations' at a workshop entitled 'Digital Financial Services and Financial Inclusion' hosted by the World Bank in Washington D.C. on 19 April.
Bilel Jamoussi, Chief of the Study Groups Department of ITU's Telecommunication Standardization Bureau, highlighted that the timing of the Focus Group was perfect due to growing momentum of international efforts to provide policy guidance in relation to the pursuit of Financial Inclusion.
Mr. Jamoussi said: "Innovators were finding their feet in developing the business case for digital financial inclusion and gaining an understanding of their ecosystems. ICT and financial services companies were more into new competitive space - and each sector was determining the competitive advantage that they could draw from their different expertise. However, ICT and Financial Services regulators found themselves in a new shared territory with different mandates and expertise; they had different perspectives on the opportunities and risks related to Digital Financial Services. Recognizing this growing momentum, a variety of international efforts had emerged to provide policy guidance to assist the pursuit of Financial Inclusion."
The ITU Focus Group was proposed with the goal of bringing greater cohesion to these efforts. According to Jamoussi, expectations on the Focus Group were high and the group 'exceeded' these expectations, making the work of this particular Focus Group stand out among the most successful ever conducted by an ITU Focus Group. The Focus Group's recommendations outline the main areas to be addressed by regulators, policymakers, Digital Financial Service providers and payment system providers to increase the usage of Digital Financial Services, the volume of transactions conducted and market competition, competition which will drive down the costs of Digital Financial Services and establish an open ecosystem that allows market entry by banks as well as non-banks.
Jamoussi stated: "Expectations on the Focus Group were high, but the group was successful to an extent that far exceeded the expectations. In fact, it's probably one of the most successful Focus Groups that the ITU has ever had since the creation of this tool to open the dialogue between the ICT sector and other adjacent verticals."
In his concluding statement, Jamoussi emphasized that the Focus Group was made unique by the diversity of its participants and that this diversity proved to be the group's greatest strength.
He said: "Following two-years of extensive consultation, our Focus Group concluded its work with the publication of 85 policy recommendations and 28 supporting thematic reports. These valuable outcomes will be presented in detail over the course of today's workshop. All the groups that participated and collaborated with the Focus Group highlighted its diversity and openness throughout the whole process."
Sebastian Molineus, Director, Finance and Markets Global Practice, World Bank Group, praised the work conducted by the ITU Focus Group, welcoming the group's 85 policy recommendations by saying that they 'perfectly complement' the work of the World Bank Group in addressing Financial Inclusion.
Mr. Molineus said: "I welcome the recommendations on Digital Financial Services from the ITU Focus Group - the findings are relevant, timely and perfectly complement our approach to issues surrounding both Digital Financial Services and Financial Inclusion. Since G20 recognized Financial Inclusion as one of the key pillars of the International Development Agenda in 2010, we're now seeing digital technologies offer powerful solutions for expanding access to financial services."
Molineus then highlighted the rapid increases in financial inclusion that some countries have achieved with the help of digital technologies, and declared that these technologies would ultimately reshape the financial services sector fundamentally.
He stated: "We've already witnessed rapid improvements in relation to Financial Inclusion in countries such as India, Kenya, Tanzania and China, and in fact many others. This has been achieved through the use of digital technologies - and those aforementioned counties have been able to overcome barriers that previously prevented them from providing more access to financial services for its underserved populous. Digital Technologies are currently transforming and truly fundamentally reshaping the business operating models of the financial services industry."
According to the World Bank Group executive digital technologies are at the heart of the innovation underway in a variety of areas in the financial sector. He added that new technologies had brought a whole new set of players into the financial services market going on to praise these new players for finding innovative ways to bring financial services to underserved communities
Molineus said: "Critical innovations in Digital Financial Services are underway across many different areas of the financial sector - including identification, authentication, KYC utilities, payment services and in-market infrastructures leveraging transaction data and other sources of data for credit appraisals. These developments are also bringing in a new set of players into the market, such as FINTECH companies, mobile operators and e-commerce firms. Collectively they're finding innovative ways to create better, more customized and, most importantly, more accessible financial services solutions for the underserved."
Molineus concluded by stating that the recommendations proposed by the ITU Focus Group on topics such interoperability, technology and innovation will advance international standards. He also expressed his view that both ITU and the World Bank Group are on the right track in their work to expand financial inclusion. He said: "The recommendations on interoperability, technology and innovation in competition will inform and advance both international standards and best practices. As I mentioned earlier it will truly impact our day-to-work on the ground in terms of providing technical assistance to our client countries and the governments who are seeking to create a level playing field between financial service providers. Overall I think we're on the right track and it's good to see that our thinking and priority issues for expanding financial inclusion, in a matter that's both safe and promotes an increase in inclusion, are well in line between our two perspective missions."
Jason Lamb, Deputy Director, Financial Services for the Poor, Bill & Melinda Gates Foundation, outlined that one of the Gates Foundation's key motivations in proposing the establishment of the ITU Focus Group was to bring more stakeholders into debates around how digital technologies could assist the pursuit of greater financial inclusion. Lamb went on to describe how the Focus Group had done exactly that, engaging a wide variety of stakeholders to stimulate a broader 'movement' towards inclusive, multi-stakeholder collaboration in the interests of Digital Financial Inclusion.
Lamb said: "As we thought about engaging with the ITU, I think we had four real objectives prior to that initial engagement. The first was to expand the tent of stakeholders around digital financial services and financial inclusion. This focus group really brought in an extended group of regulators, technology companies and other stakeholders. A real accomplishment of this Focus Group has been its ability to bring this group of people together. The second objective was to really continue to spread the promise of digital financial services as an economically viable solution for bringing the poor and unbanked into the formal financial sector - so that they can take advantage of economic opportunities. We need all the stakeholders gathered at this event to be a part of that solution and so we're quite happy that this Focus Group really helped to bring more stakeholders in, but I think we still have more stakeholders to bring in. I think this effort with the ITU was the start of what we call as the Gates Foundation a 'movement', one of our strategic goals around global movement is to bring all the stakeholders in and keep expanding the tent beyond just the core of central banks and banks."
Lamb concluded by saying that the policy recommendations issued by the ITU Focus Group would be of great value to the Bill & Melinda Gates Foundation in their work to promote sound policy approaches to financial inclusion and the effective execution of the actions encouraged by such policies.
Lamb concluded his presentation by saying: "Our third objective was really to influence the policies and approaches of implementation around digital financial services. The recommendations made are meant to really influence how countries help stakeholders think about not only the policies they put into the ecosystem, but also how they approach implementation. Finally, the fourth objective was really around advancing the lessons and best practices that the four working groups within the focus group have put together. With 28 thematic reports and 85 policy recommendations, it is really a phenomenal volume of work."
The policy recommendations and supporting reports delivered by the ITU Focus Group on Digital Financial Services can be accessed here.