INCLUSIVE PAYMENTS BENEFITS EVERYONE

Financial Services for the Poor: Level One Project

James Dailey June 18, 2015

© Bill & Melinda Gates Foundation |

THEORY OF CHANGE – FINANCIAL SERVICES FOR THE POOR

Intervention areas Outputs Outcomes Impact

§  Reforms adopted on e-money account issuing, KYC requirements, and distribution

§  <$2/day adults use a digital account

§  Digital bulk payments §  Number/type of financial

products available digitally

§  Accounts which can connect digitally to other accounts

§  Population within 5km of access point

§  Reduced transaction costs

Foster Regulations and Policy Adapt regulations to enable poor people to open accounts, to allow providers to outsource distribution, and to protect users

Expand the Digital Financial Infrastructure Expand the digital financial infrastructure so that poor people can access digital money and use it to transact with their peers, businesses, and government

Drive Participation in the Digital Financial System Create value that results in poor people joining the system because financial service providers design products to meet the needs of the poor and can offer them profitably

Poor people manage their money digitally By 2035, 80% of adults worldwide and 60% of <$2/day adults actively use a digital account to access at least one financial service beyond payments (credit, savings, insurance)

Fewer people fall into poverty

More people move out of poverty faster

More people move out of

poverty faster

© Bill & Melinda Gates Foundation | 2

WHAT IF? FSP INNOVATION LANDSCAPE

What If: We could turn a 30 day sign up process into 30 seconds?

What If: Everyone was an agent?

What If: Anyone with a phone could send or receive money?

What If: Payment processing was digital and close to zero in cost?

What If: You could send money to any person in the world?

What If: Every mobile phone came with a savings account and insurance?

What If: Assessing risk for a billion new customers was cost-effective?

Customer Activation

Distribution Payments Front-End

Payments Back-End

Integration Products Analytics

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5 6 7

1

What If

What If: A pro-poor regulatory environment facilitated financial inclusion?

Enabling Regulatory Environment

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CONFIDENTIAL: FSP Strategy Review—Co-chair Presentation

© Bill & Melinda Gates Foundation | 3

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Retail  and    Commercial  

Banks  

Central  Bank  

Card  Networks  

ACH  

RTGS  

Retail,  Commercial,  and  Se:lement  

Banks  

DFS  System  Reference  Model  

Na;onal  Digital  Financial  Services  System  

Interoperability  Service    for  Transfers  

Fraud  and  Risk  Management  Service  

Agent  and  Merchant    Account  Management  

Digital  Financial    Services  Providers  

Account  Opening    Service  

Consumer  Account    Management  

Digital  Financial    Services  Providers  

Account  Opening    Service  

Consumer  Account    Management  

Agents  

Lower  Income  Consumers  

Small  Payees  (Merchants  Schools  Clinics)  

Large  Payees  (Merchants  U;li;es  Hospitals)  

Higher  Income  Consumers  

Large  Payers  (Governments  Employers  NGOs)  

Agents  

Lower  Income  Consumers  

Small  Payees  (Merchants  Schools  Clinics)  

Large  Payees  (Merchants  U;li;es  Hospitals)  

Higher  Income  Consumers  

Large  Payers  (Governments  Employers  NGOs)  

Regulatory  and  Governance  Framework  Establish  Legal  and  Regulatory  Framework  to  ini8ate  and  sustain  digital  financial  services  scheme  and  pla=orm  ensuring  safety,  security,  efficiency  and  innova8on  while  reaching  the  lowest  income  ci8zens  with  extremely  low  cost  services.  

Infrastructure  for  Connec;vity,  Interoperability,  Clearing,  Se:lement    Design,  deploy  and  operate  a  robust  digital  financial  services  infrastructure  that  enables  real-­‐8me  transac8ons,  efficient  end  to  end  interoperability  across  many  market  par8cipants  while  ensuring  adequate  fraud  and  risk  management  controls  are  in  place  to  protect  individuals  and  par8cipants.    

Digital  Accounts  &  Transac;ons  Enable  easy  and  efficient  account  opening,  account  access  and  effec8ve  digital  financial  services  for  consumers,  agents,  merchants  and  providers  of  payments  and  payment  processing  services.  

Accounts  

Rails  

Rules  

Innova;ve  Applica;ons,  Products  &  Services  Enable  market  ecosystem  innova8on  that  delivers  affordable,  effec8ve  pro-­‐poor    services  and  products  across  sectors  such  as  health,  educa8on,  agriculture,  retail,  small  &  medium  enterprises.    

Apps  

ROADMAP

© Bill & Melinda Gates Foundation | 5

Use  Cases  

World  Food  Program  

Telenaira   NigeriaCom  

User’s  Phone  

IST   Se:lement  Bank  

Bolajy  Eze  

Individual  

MFSP  Telenaira  

Phone  Number  206.474.4650  

DOB  16/04/1976  

Na;onal  ID    54321  

Alt  ID  000-­‐103-­‐300  

Dupe  Eze  

Individual  

MFSP  Nigeriacom  

Phone  Number  253.332.8912  

DOB  16/04/1977  

Na;onal  ID    N/A  

Alt  ID  0000-­‐303-­‐289  

Pa;ence  Chukwu  

Merchant  

MFSP  Nigeriacom  

Phone  Number  253-­‐332-­‐9474  

DOB  08/02/1975  

Na;onal  ID    N/A  

Alt  ID  0000-­‐303-­‐272  

NGO/GO  Portal  

Make  bulk  payment  

NGO/GO  Portal:  Generate  Report  

Observe  Pending  status  for  Bolajy    

Observe  successful  payments  status  

Review  detailed  errors  

SMS:  Bolajy’s  phone  

Receive  SMS  saying  he  has  a  pending  payment  and  needs  to  open  an  account  using  the  aQached  short  code  

USSD  Emulator  of    Bolajy’s  Phone  

Bolajy  opens  account  with  naRonal  ID,  sets  PIN  

Observe  alt  ID  

Observe  account  limits  

 

SMS:  Bolajy’s  Phone  

Receive  SMS  indicaRng  a  payment  has  been  received,  amount  and  payer  

USSD  Emulator  of    Bolajy’s  Phone  

P2P  to  Dupe  for  135  using  phone  number  

Observe  fee  transparency  

SMS:  Dupe’s  Phone  

Receive  SMS  to  confirm  payment  amount  and  payer  

USSD  Emulator  of  Pa;ence’s  Phone  or  Smart  Phone  

PaRence  (Merchant)  requests  payment  from  Bolajy  for  75  using  alt  id  

USSD  Emulator  of    Bolajy’s  Phone  

Check  pending  transacRons  and  approves  transacRon  with  PIN  

Observe  fee  transparency  

SMS:  Pa;ence’s  Phone  

PaRence  gets  SMS  to  confirm  payment    

Buy  Things  from  Any    Merchant  

Send  Money  to  Anyone  Self-­‐Issue  

Make  Bulk    Payments    to  Anyone  

USSD  Emulator  of    Bolajy’s  Phone  

Run  mini  statement  to  see  balance  and  a  summary  of  all  transacRons,  including  fees  

Keep  Money    Secure.    

Check  Balance.  

Screen  Setup  

DFS ROADMAP

Design Principles for the Digital Payments System •  Open loop •  Immediate Funds Transfer •  Same day Settlement •  Push Payments •  Open, international standards •  Irrevocability •  Shared fraud service •  Tiered KYC

LEVEL ONE PROJECT (www.leveloneproject.org)