The Future of Supply Chains: Why Companies are Digitizing Payments

15 Jun 2018

New report underscores benefits of shifting from cash to digital payments in corporate supply chains.

Drawing on data and interviews with around 40 companies and organizations, the report shows how digitizing supply chain payments is having a profound impact on global businesses, economies and individuals. For example, in Kenya, small Unilever retailers grew sales by 20 percent thanks to accessing digital working capital loans. In Bangladesh, when H&M, Marks & Spencer, Target, Li & Fung, Lindex, Debenhams and Fast Retailing partnered with HERfinance, the number of instances when a woman was unable to save dropped by almost 70 percent.

These companies’ experience underscores why digital payments are a key pillar of a strong business model, and the lessons documented in the report are designed to help other brands know how to get started.

This publication is available on BTCA’s website

Accelerating Financial Inclusion with New Data

25 May 2018

This report—produced in partnership with the Center for Financial Inclusion at Accion and based on in-depth interviews with banks, fintechs, and other actors—examines how new types of data and new data tools present an unprecedented opportunity for financial service providers to better understand and serve clients, especially credit-seeking “thin-file” clients who are otherwise excluded from the formal financial sector. There are many internal and external challenges that providers must address for the promise of new data to be fully realized. From getting the right culture and technical talent in place to engaging with regulators and partners on data sharing and management, there are numerous obstacles to negotiate in capitalizing on the explosion of new data to reach underserved and unserved markets with new commercially viable solutions.

Modelo Peru: A Mobile Money Platform Offering Interoperability Towards Financial Inclusion

25 May 2018

everal emerging markets around the world face numerous challenges in their attempts at increasing their provision of financial services. Beginning in 2015, Peru implemented a strategy called Modelo Peru with the objective of launching a mobile money platform to reach and better serve the unbanked and underbanked. This strategy gathers financial institutions, telecom companies, and the government in an effort to achieve interoperability among these three groups and attain scale and breed competition among e-money issuers.

However, two years after the implementation of the strategy the number and value of transactions has not reached its desired level. Important challenges to succeed include investing in a wider distribution network to better reach the unbanked, and building a strong digital ecosystem that makes the platform relevant and understandable to users. These challenges require better collaboration from all parties involved as well as strong political will. Absent those, mobile financial services in Peru will remain an alternative financial service rather than a tool for financial inclusion.

Digital Access: The Future of Financial Inclusion in Africa

23 May 2018

The launch and growth of digital financial services in Africa has led to an unprecedented increase in the number of people enjoying access to formal financial services. The continent is now home to more digital financial services deployments than any other region in the world, with almost half of the nearly 700 million individual users worldwide. Mobile money solutions and agent banking now offer affordable, instant, and reliable transactions, savings, credit, and even insurance opportunities in rural villages and urban neighborhoods where no bank had ever established a branch.

Asia’s digital banking race: Giving customers what they want

23 May 2018

Asia’s banking customers are migrating to digital channels in force. The challenge for the region’s banks is to deliver superior digital experiences before competitors do.

Smartphones in hand, customers across Asia are changing how they bank, growing more open to exploring and using digital channels for their financial needs. This openness to digital channels will reward those banks that can meet customers’ expectations; but it also represents a challenge to incumbent banks—because customers are also expressing a willingness to bank with non-traditional players such as fintechs and nonbanking payments players. Incumbent banks need a response to this changing landscape if they are to remain relevant and sustain growth.

The insights in this report are based on McKinsey’s Asia Personal Financial Services Survey, which addresses changes in customer behavior, reflecting themes like digital banking and the use of fintechs or nonbanking payments solutions. Conducted every three years since 1998, the most recent survey covered about 17,000 respondents in 15 Asian markets.

Above excerpt from McKinsey’s website.

Biometrics and financial inclusion: A roadmap for implementing biometric identity systems in sub-Saharan Africa

22 May 2018

The World Bank (2017) estimates that 1.1 billion people live without proof of identity. Nearly 50% of these people live in sub-Saharan Africa, where 454 million individuals are excluded from formal identify systems. In Nigeria, 78% of the population or 149 million individuals cannot prove their identity.

Lack of identity documentation varies in its severity as a barrier to exclusion depending on the country, but overall indicates a significant problem for financial services. For example, in Angola, 41% of financially excluded adults cited a lack of documents as the reason for being financially excluded, while in South Africa and Nigeria this figure was 14% and 12% respectively.

But why is proof of identity such a barrier to financial inclusion? The problem is that financial service providers (FSPs) require a multitude of documents to comply with their Consumer Due Diligence (CDD) requirements that many poor people lack access to. This includes basic identity documents with Proof of Address (PoA) tending to be the most problematic.

While consumers are often willing to go to these lengths to get access to a bank account, other solutions are emerging. For example, biometrics. Biometrics is a way to identify individuals based on physical or behavioural traits.

Although a number of studies have explored the potential of biometrics in addressing identity challenges, the adoption and use of biometrics in Africa have been slow and uncoordinated at best. This is confirmed by the gap between the various approaches and the current practices on identity and biometrics.

This note seeks to understand the “biometrics journey” of countries and financial service providers (FSPs) and to help them select and adopt biometric approaches that have a lasting impact on financial inclusion, financial integrity and broader national development objectives.

It discusses the concept of identity and the link between robust identity systems and financial inclusion, highlighting the role that lack of identity plays in facilitating financial exclusion in SSA. It defines biometrics, unpacking the role of biometrics in the identity space and how biometrics can be a strong identifier. It looks at the use cases for biometrics as well as the barriers to the successful implementation of biometric identity schemes in SSA. Lastly, it presents a roadmap for implementing biometric identity in Africa to guide regulators, industry players and donors on how to best go about the process.

This publication is available through Cenfri’s website.

ePRIVACY AND DATA PROTECTION – Privacy Matters: Navigating the New World of Data Protection

21 May 2018

We’ve lost control of our personal data”, Sir Tim Berners-Lee, inventor of the World Wide Web, said in March 2017. The widespread collection of data has led to the rise of data asymmetry and, consequently, consumer trust is low. Some would argue that it has led to the prioritization of profit over privacy. Consumers believe cybersecurity and privacy risks are amongst the biggest risks facing society.[1] The ramifications should not be overlooked by corporates and investors.

In our first Citi GPS report on ePrivacy and Data Protection (Who Watches the Watchers?, March 2017), we highlighted that the focus on data privacy is on the rise and forthcoming changes to regulation in the European Union (this year), will fundamentally alter the risk/reward of using data and, with it, alter the perception of the long-term opportunity from data.

In this follow-up GPS report, with Europe’s General Data Protection Regulation (GDPR) less than a month away, we consider how prepared consumers, corporates, and regulators are for the tightening regulatory landscape. More broadly, we consider what the potential implications could be as we move from an environment where organizations have become accustomed to untrammeled access to data, to one where data minimization and transparency presides, consumers are empowered to take more control of personal data, and organizations are forced to think carefully about their use of data. To investigate this we surveyed those involved in implementing the GDPR across a range of organizations and conducted a series of interviews with industry experts from Telefónica, Schibsted, Zalando, and specialist consultancies.

The majority of companies believe they will have to change how consumer data is used which brings with it rising costs (i.e., of compliance). Trust plays a fundamental role and unless consumers believe the value trade is beneficial, access to personal data could fall as consumers are prepared to use their enhanced rights. The application of the regulation (unintentionally) favors those closest to the consumer and large companies vs. small companies. Murky data supply chains are set to see a shakeout.

Advertising funded models have been one of the key planks supporting the Internet’s development and the online advertising industry appears to be right at the heart of the challenges that regulation presents. As one survey respondent commented: “The range of plausible outcomes includes total destruction of the online ad ecosystem in Europe all the way to a minor blip.”

Companies claim to be well prepared for the EU regulation change. The 25th of May is D-Day, when the regulation will come into effect, but this is not going to be the end of the process. In fact, it may well be the start of a step change in the approach to data protection regulation globally.  We worry corporates and investors are being complacent about the risks.

The Global Findex Database 2017

23 Apr 2018

The Global Findex database is the world’s most comprehensive data set on how adults save, borrow, make payments, and manage risk. Launched with funding from the Bill & Melinda Gates Foundation, the database has been published every three years since 2011. The data are collected in partnership with Gallup, Inc., through nationally representative surveys of more than 150,000 adults in over 140 economies. The 2017 edition includes updated indicators on access to and use of formal and informal financial services. And it adds new data on the use of financial technology (fintech), including the use of mobile phones and the internet to conduct financial transactions.

Financial inclusion is on the rise globally. The 2017 Global Findex database shows that 1.2 billion adults have obtained an account since 2011, including 515 million since 2014. Between 2014 and 2017, the share of adults who have an account with a financial institution or through a mobile money service rose globally from 62 percent to 69 percent. In developing economies, the share rose from 54 percent to 63 percent. Yet, women in developing economies remain 9 percentage points less likely than men to have a bank account. This third edition of the database points to advances in digital technology that are key to achieving the World Bank goal of Universal Financial Access by 2020.

Toward Universal Financial Inclusion in China: Models, Challenges, and Global Lessons

18 Apr 2018

Learning from China’s financial inclusion experience over the past 15 years.

This report examines in detail China’s approach to financial inclusion over the past 15 years. It benchmarks China’s progress against peer economies and analyzes key developments and factors in China’s financial inclusion experience.

The report also outlines remaining challenges to achieving further advances in financial inclusion in China, and distills key lessons for policymakers in other countries to develop and refine their own pathways toward sustainable and long-term financial inclusion.

This was originally posted on the Microfinance Gateway.

Distributed Ledger Technology (DLT) and blockchain

13 Apr 2018

The financial sector is currently undergoing a major transformation, brought about by the rapid development and spread of new technologies. The confluence of ‘finance’ and ‘technology’ is often referred to as ‘Fintech’, typically describing companies or innovations that employ new technologies to improve or innovate financial services. ‘Fintech’ developments are seen across all areas of the financial sector, including payments and financial infrastructures, consumer and SME lending, insurance, investment management, and venture financing. This note on distributed ledger technology (DLT) and blockchains is part of a series of short notes that explore new trends and developments in Fintech and analyze their potential relevance for WBG activities. Forthcoming notes in this series will cover marketplace lending, ‘InsureTech’, and other topics. This note outlines the mechanisms, origins, and key characteristics of DLT; the difference between ‘public’ and ‘private’ DLT; the technology’s main advantages, challenges, and risks; relevant examples of DLT applications (with a focus on financial sector applications); and a brief overview of activities by governments, multilateral organization, and other stakeholders in this space. Finally, this note proposes next steps for the World Bank to study and evaluate areas where DLT could potentially be integrated into World Bank financial sector operations.

Originally posted by World Bank