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Smart Electronic Ticketing for Public Transport

Posted on by MSC

We met Kinnee at one of the Vodafone e-ticketing roadshows. She, like other Fijians, had queued up at the Vodafone canopy to get her eTransport card. This digital card has been designed to replace the existing cash-based fare collection system across buses in Fiji. There was something that made Kinnee’s case particularly interesting – she had always been apprehensive about digital payments and had never used it before. However, the Fijian Government’s ruling to digitise public transit left Kinnee without a choice. We decided to follow her on her new journey. She emerged from the crowd, ecstatic, with her latest possession – a brand new, bright red eTransport card. Kinnee had just begun her digital journey and was excited. As were we.

A month later, after riding the bus thrice with her new eTransport card, Kinnee was amazed at the convenience that the new payment system had brought in her life. Not only was she excited about the experience of ‘tapping’ the card on the bus, but was also relieved from the hassle of carrying coins and haggling for change. She mentioned that a greater respite would be when her eight-year-old son starts using the card on his school bus. She quipped that now she would be able to outsmart her child by monitoring his expenses.

This anecdote highlights the transformative experiences that thousands of Fijians will undergo in the days to come. Public transport is vital for the people of this Pacific island-nation. Over 1,470 buses, as well as hundreds of boats and taxis, carry a significant percentage of the 920,000+ Fijians each year. Nearly 210,000 school and college students, and over 50,000 senior citizens are heavily dependent on public transport in the country. The Land Transport Authority, under the Ministry of Infrastructure and Transport, provides various concessions and grants for commuter convenience. Public bus transport is licensed to 54 private companies, covering 188 main Road Route Licenses (RRLs). All students and the elderly are eligible for discounted fares on buses. Almost 61,000 of them are eligible for 100% discount and do not pay any fare. The Ministry of Education issues discounted bus fare vouchers to eligible students under the government fare subsidy scheme for needy children. These vouchers are distributed individually through schools.

Private bus operators are eligible for a refund on fuel tariff and receive customs concessions to encourage fleet renewal. The Fijian government has introduced such measures to compensate private operators for losses from these concessional fares.  In the national budget of Fiji for 2017–2018, the import duty on new buses has been reduced to zero for a period of two years, with certain conditions. Bus operators are also exempted from paying Value-Added-Taxes (VAT). These grants and concessions add up to several million dollars a year.

Despite the massive financial support from the government, the current bus ticketing system faces several challenges. Several routes are claimed to be unprofitable, with bus operators alleging that they face severe losses. According to a report, bus operators on 22 routes cited annual losses of USD 4 million. In contrast, there seems to be a lack of accountability and diligence on part of the drivers. The distribution of millions of discounted vouchers to students every year in paper form places a significant additional burden on the school staff, requiring accurate accounting, distribution, and reconciliation. It is also vulnerable to misuse, despite check and balances being in place.

To overcome such challenges, the Government of Fiji plans to implement electronic ticketing in phases for public transport in Fiji. The move towards electronic ticketing is aimed to provide greater convenience and a superior user experience to commuters. At the initial stage, e-ticketing has been implemented for all buses plying on the mainland routes across Fiji. Rural service vehicles plying on the deeper rural routes are likely to be covered in subsequent phases. With the gradual transition away from cash, which started in July 2017, all mainland buses are slated to go cashless from October 2017 onwards.

The eTransport project involves multiple stakeholders on board, who would participate and collaborate in the development or adoption of the system. The main stakeholders of this project are:

  • The Government of Fiji;
  • The Land Transport Authority;
  • The Ministry of Education;
  • The Department of Social Welfare (Ministry of Women, Children and Poverty Alleviation);
  • The Ministry of Economy;
  • The Fiji Bus Operators’ Association and other bus operators in Fiji;
  • Vodafone Fiji;
  • Pacific Financial Inclusion Programme (PFIP).

The advantages of an electronic ticketing system will be:

  • Improved revenue collection and cash flows for the bus operators and the government;
  • ·Greater transparency and control over targeting, coverage, and distribution of the transport assistance/subsidy to the students, pensioners, senior citizens, and disabled citizens/residents;
  • No requirement for cash or change for passengers or drivers, resulting in speedy transactions;
  • Reduction in the handling of cash and associated efforts and risks;
  • Richer data and information quality for the government ministries and departments, and bus operators – for improved revenue management and informed decision-making;
  • Opportunities to learn lessons and build future capabilities to expand the e-ticketing architecture and platform to e-commerce, digital G2P and P2G payments, electronic attendance for students/teachers in schools, and other relevant use-cases.

The Design

PFIP and MicroSave consultants collaborated with and supported Vodafone in the design, planning, and rollout of the e-ticketing service. The service was branded as eTransport. The objective was to take advantage of global experience and lessons learned to avoid potential pitfalls, and to ensure improved service design and user experience. PFIP and MicroSave have developed several tools and frameworks to support Vodafone’s eTransport service.

An important element of PFIP’s approach has been to focus on and ensure consumer-centricity, particularly for women. Keeping this in view, we developed and mapped the complete lifecycle journeys of various user segments for the e-ticketing service in a framework. These user segments comprise adults, women, students, senior citizens, and concessional card users. The mapping process has formed the basis for defining or refining business requirements and business rules to be followed, as presented below. Moreover, this significantly aids in modifications to existing information technology (IT) systems and processes at Vodafone.

Deliberations based on this framework led to an improvement of several service functionalities and processes to enhance user experience. These improvements led to features, such as the ability to remotely top-up, or load e-money, to another person’s card using the M-PAiSA mobile wallet on a phone, or top-ups using only the serial number of a card without it being physically present. Other features that evolved from this approach include the ability for customers to refresh the stored value of their card while travelling in the buses, and to pay the fare immediately thereafter. Such features will eventually be of great utility to users. They would have access to multiple, remote options to recharge their eTransport cards, and would not have to depend on physical touch-points to do so. Vodafone would introduce these user interface functionalities in a phased approach, given the timelines for system development required.

Another example relates to concessional student eTransport cards, which need to be refreshed at the beginning of every school term once Vodafone has loaded the subsidy amounts onto the cards. The loading of subsidies is done through Vodafone’s back-end systems, on advice from the Ministry of Education. We suggested providing one or more POS devices at the school premises. The existing staff who handle paper vouchers would use the POS devices to refresh the student cards. This would add to the convenience of students, including the much younger primary school children. We developed a solution to cover the device costs when Vodafone agreed to provide a substantial discount on the cost of devices to be deployed in schools. The Ministry of Education is likely to consider these recommendations, which will ensure a near-seamless transition to the new system for the nearly 210,000 students in Fiji, without inconvenience or worries. Likewise, improvements have been made to the processes related to cards for senior citizens and the disabled, which are managed by the Department of Social Welfare.

There are several other learnings and smart-features associated with the architecture of the e-ticketing system in Fiji. The first major one is to ensure a commitment from the bus operators and drivers themselves. A lack of this has been the failing of some models in other markets. The Government of Fiji has ensured participation and commitment of the bus operators both through funding support and policy reforms. Considerable financial and handholding support has been provided in this regard. The financial support is in the form of subsidies on equipment required on buses. The handholding support is in terms of retrofitting/testing of equipment and software, training and capacity-building of the bus operators and drivers, and customer care support offered by Vodafone, among others.

Furthermore, the eTransport solution has been designed with an offline architecture, which does not depend on the availability or operation of the Vodafone mobile network. This will ensure that fare payment on buses is possible offline and in locations where or in situations when Vodafone’s network is unavailable. At the same time, information will be shared periodically between the devices on the buses and Vodafone M-PAiSA and other back-end systems through the mobile network whenever available during transit. This will allow synchronisation of the bus-based devices with Vodafone’s systems to enable balance-refresh on consumer cards during transit. The synchronisation would also allow the reconciliation of daily sales by the bus operators, and so on.

These considerations for an enhanced human-centric design architecture and superior user experience are in stark contrast to some of the less successful e-ticketing models in East Africa, which proved troublesome for users.

The eTransport card initiative has been a collaborative effort that spans stakeholders and vendors. Its end-outcome is the timely rollout of the service within three or four months, covering over 1,000 buses. The initiative includes the development of back-end integrated systems, training of agents and merchants on the new service, marketing programme design, and roadshows and awareness campaigns. Once operational, the eTransport project will see user registration and card issuance to over 520,000 commuters across Fiji.

The blog was first published by the Pacific Financial Inclusion Programme (PFIP). 

Can Fintech Really Deliver On Its Promise For Financial Inclusion?

Posted on by MSC

At the recent MasterCard Foundation Symposium on Financial Inclusion, I was asked to participate in the closing debate. A great honour. However, I was asked to support the proposition that “Disruptive innovations in the financial sector can no longer respond to the daily challenges of poor people”. Ouch! For all my critiques of digital financial services and digital credit, arguing this side of the debate is a real challenge. Especially when the potential for innovation and fintech to revolutionise our ability to deliver financial inclusion is so very clear.

MicroSave recognises this potential and has been working closely on a variety of initiatives that support fintechs and incubation labs. We are seeing a large number of extraordinary developments, tools, and solutions that can have a major beneficial impact on the lives of the poor. So arguing that fintech is unable and unlikely to respond to the needs of the poor was a tough ask …

I love fintech. I use fintech every day. I am a fintech fan … but I am privileged and middle class – and so both educated and connected.

However, if we visit a typical rural village in a developing country, we would see that the situation is very different. Fintech, in its current form, may be largely irrelevant. Why so?

  1. In most rural villages there is inadequate infrastructure to support fintech. In these markets, fintech faces some basic challenges. This is leaving aside the challenges concerning the business-case and liquidity management for rural agents, which remain very real and persistent problems. In many villages, there is limited or no electricity, which makes powering phones or towers difficult. Many villages have no signal to support mobile telephony. In places that do have a signal, it is typically 2G and thus does not support most fintech services, which require 3G or above to function properly.
  2. Among poor households, there are few smartphones, and even the feature phones are owned by the men. This leaves women with limited or no access. A recent Mozilla report highlighted that low-end smartphones have very limited RAM, which prohibits running many fintech apps. In addition, they also typically have hopelessly short battery life, screens that shatter easily, and a persistent problem with ‘fat finger error’ that makes them almost unusable. These are the very devices that are expected to lead the charge of achieving mass smartphone penetration amongst the poor. Furthermore, the cost of data needed to make fintech transactions is usually prohibitively expensive. Indeed, in our fieldwork, we have seen some men in Africa proudly carrying prestigious smartphones but using them only to make or receive calls and SMSs

According to the World’s Women Report 2015, there are 781 million illiterate people on the planet. The underlying assumption that those that pass Standard V are literate and numerate is fundamentally flawed. These estimates, therefore, significantly understate the size of the problem – perhaps by as much as 100%. In India, for example, “Half of all children in Std V have not yet learned basic skills that they should have learned by Std II.” (Pratham, ASER 2014).

3. Furthermore, most villagers are ‘Oral’. They – along with another 1 billion-plus people across the planet – cannot read, write, or understand the long number strings necessary to transact on mobile phones. This has profound implications for their ability to use digital financial services. Indeed, asking them to move away from counting cash to digital interfaces will remove a key learning opportunity and strand them in a literate environment that they do not comprehend.

4. Fintech is irrelevant for most villagers because providers have made little effort to tailor interfaces or use-cases for the low-income market. The vast majority of fintech providers develop solutions for the affluent and middle classes. This makes logical sense – these segments have the money (and connectivity) to use the solutions. Furthermore, fintech developers typically come from this background. They, therefore, understand the challenges this segment faces and thus the opportunities it provides. In contrast, when and if fintech developers focus on the low-income segments, they tend to create solutions and then look for problems to solve in preference to understanding the needs, aspirations, perceptions and behaviour of the poor first.

5. Furthermore, villagers value personal relationships – particularly when it comes to money. The idea of trusting technology that they do not understand for anything except very basic payments is out of the question. The idea of using a fintech solution on a mobile phone is alien and often even intimidating. This is particularly when the majority of systems they have seen or heard about remain unreliable and offer limited customer support and recourse.

6. Finally, it is quite clear that till date, the regulatory environment and consumer protection provisions remain too weak to secure the poor. Many have already lost money in basic money transfer transactions. Millions are negatively listed on credit bureauxand in the databases of large banks because of digital credit. Furthermore, in the flagship M-PESA deployment, almost half of non-airtime top-up transactions are for gambling … With a track record like this, how can we honestly claim that technology is helping the poor?

Perhaps it is time to take a step back and to reflect beyond the hype. Until we address these six fundamental barriers to the deployment and use of fintech by the poor, it will indeed remain irrelevant to them.  In fact, we risk exacerbating the digital divide and leaving the poor and vulnerable behind.

The most basic innovation at the heart of digital financial services is mobile money. Yet GSMA’s State of the Industry Report 2016 tells us that just 12% of the 286 deployments have more than 1 million active users. With such shaky foundations, it is clear that we have a long way to go before fintech can deliver on its promise of bringing services that are accessible and valuable, and thus can provide financial inclusion for the poor.

The Missing Truth on the Agent Banking Business Case in Nigeria

Posted on by MSC

Agent banking is increasingly popular in many developing countries. From Brazil to Kenya and many other emerging markets, agent banking has increased the use of transactional financial services among financially excluded adults. In Nigeria, the Central Bank introduced agent banking guidelines in 2013 to contribute towards achieving the objectives of the National Financial Inclusion Strategy. According to the EFInA 2016 Financial Access Survey, only 38.3% of the adult population in the country has access to formal financial services. This is characterised as having access to deposit money banks, microfinance banks, mobile money, insurance and/or pensions.

Since 2013, and increasingly through 2017, leading banks have embarked on a revolution in agent banking. These deposit money banks believe agent banking would enable them to reach more customers with increased profitability through better efficiency and cost-reduction. In the case of agents, the revolution is expected to ensure financial remuneration, increased customer traffic to pre-existing businesses of the agents, and improved community status through bank brand affiliation. For customers, the expected benefits are convenience and cheaper transaction costs. While this understanding of bankers is indeed appropriate – they often fail to consider critical elements of agent banking. Some of these misunderstandings are as follows:

Lack of Appreciation that Agent Banking is an Evolution

Agent banking plays an important part in the evolution of digital financial services. It is a critical step in the movement towards user-initiated transactions. Agent banking requires strategies that appreciate the element of time, therefore, the objectives and benefits need to be split into the short-run and medium-term. In the short-run, agent banking should mainly be perceived as an additional channel for the provision of products and services beyond the existing branch channels. Existing banks currently have only transactional relationships with customers from the bottom of the pyramid and not true banking relationships. This is partly attributed to existing products not being fashioned for the lower-income segments.

Having a network of agents does not guarantee the attraction of customers. It calls for developing products that target customers consider useful. These are products that can address their daily money management pain-points. The network cannot be expected to be the main driver for customer acquisition without considering the prevailing challenges around the creation of Biometric Verification Number (BVN), which constrain the ability of the banks to on-board new customers. Until these challenges are resolved, banks would need to migrate their existing lower value transactions from branches to agents to reinforce the business-case of agents.

In the medium-term, the case for agent banking is about providing value-added services. This involves the development of products that enable customers to easily associate and build relationships with a bank through increased transactions, which is necessary for market penetration. As an objective of financial inclusion, the focus should be on making financial services relevant to the unbanked on a daily basis. This would call for two critical steps. The first step is to build low cost ‘bridges’ to cash, that is, in the form of a ubiquitous, well-supported agent network. This would allow Nigerians to easily convert cash into electronic value (e-value). The second step is to make the e-value directly useful for customers, to encourage them to maintain their money in this form. Banks should, therefore, identify compelling use-cases and tap into relevant opportunities that exist in Nigeria.

Distended Expectations on Agent Banking Profitability

Agent banking is fundamentally not about the banks making huge direct profits through a low-cost channel. It is about what the additional channels can do to change the business model over time, shifting the banks’ customers from using more expensive channels like branches, service centres and ATMs. The channel itself may not generate significant profits. It can, however, facilitate additional business for the bank, as well as additional deposits. Some institutions with exaggerated expectations intend to deploy huge agent networks at the start. This poses a challenge to adequately managing and supporting agents and/or eroding the expected benefits to agents. With this understanding, the institutions will not engage in ‘spray and pray’ agent acquisition strategies but progressively and strategically grow their networks region by region..

From high-profit expectations come inflated financial models, which then translate to unrealistic Key Performance Indicators (KPIs) for the operational or branch staff members. These KPIs are unrealistic due to the incorrect metrics that generate them. This leads to poor buy-in among the expected foot-soldiers as the KPIs would be deemed unrealistic. This understanding is critical to enable the senior management to prepare appropriate budgets and KPIs for the operational staff driving the business.

Fear of Co-opetition

Co-opetition is the ability of players to cooperate with each other for the benefit of each business while remaining competitors. It calls for close partnerships that leverage the comparative advantages of the partners. There is a fear of these partnerships by leading banks, which could slow down the prospects of agent banking. For instance, the various agent banking operations, network deployment, and product development are struggling. This is because of their nature of high-involvement, yet there is minimal individual bandwidth within the banks to effectively run the operations. This is coupled with ignorance of the fact that agent banking requires focus. Strategic partnerships within shared agent networks and close tie-ups with the FinTech players could transform the agent banking business-case in Nigeria. It would allow partners to play their roles on the basis of their core strength. FinTechs have been seen to even attract the more traditional banking customers with services tailored to their needs, while banks struggle to innovate. This is despite existing gaps in technology development and understanding in the market.

Conclusion

For agent banking to prosper in Nigeria there needs to be a deeper understanding of the true business-case. A better understanding of the business-case calls for top executive/management alignment, a paradigm shift in organisational culture and structure, and specific customer segment orientation and differentiation. The actual business-case needs to be clearly articulated to all stakeholders to ensure meaningful partnerships that would make things work. The uncomfortable truth that patience should be a virtue with this engagement is inevitable. It is for the banks to find a way to convince and address the no surulere mentality, meaning ‘no to patience’ for this business model to be effectively implemented, especially for the bank teams and agents.

Foresight in a FinTech Forest – Financial Technology Drives a Digital Banking Response

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We’ve reached an inflexion point in banking, more pronounced and more fundamental than any which has preceded. The financial technology (FinTech) revolution promises dramatic improvements in customer experience and fundamental changes in how banking is informed and how it is conducted.  Financial institutions must make critical choices if they are to compete in the new digital finance world.

1. Given the pace of change financial institutions can no longer take a passive view towards the digital future. A point made by leading authors such as Chris Skinner in his book: “Digital Bank: Strategies to Launch of Become a Digital Bank”. Today, the number of fully digital banks is growing, the product range that they offer is typically limited but is evolving largely on business to consumer lines. These banks are starting to appear in Africa, after being based mainly in Asia, Europe and America. For traditional ‘brick and mortar’ banks, the question is how best to respond.

2. Foresight in a forest. It’s not easy for bankers to see what is happening, and therefore, how banks should respond; bankers in Africa have asked us – “How should we be concerned about the innovations happening in London or Europe, given our different banking and regulatory environment”. The FinTech world is vast, changing and growing rapidly, this makes it much more difficult to determine digital trends when observing a single market1, a single time-period or a single FinTech solution or type of solution. However, by comparing markets temporally and spatially, and grouping solutions, it is possible to determine tends, and through isolating these to derive insights.

3. There is a growing maturity in successful FinTechs. Two years ago, we would see FinTech ‘solutions’ pass through our offices which seemed to be looking for a problem to solve. Successful FinTechs are built around real, demonstrated customer needs that have a commercial use case, often filling a gap in the market which banks have failed to adequately address.

4. The business case of successful FinTech’s is evolving, to second generation use cases, typically these are evolutions around the core theme. Kopo Kopo, for example, in their first generation, processed payments for merchants and provided a user-friendly merchant dashboard. In later enhancements, Kopo Kopo used data gathered to offer loans to merchants based around their cash flows. After establishing a loyal merchant base Kopo Kopo rolled out QR codes. Today, Kopo Kopo offers their business operating system and intellectual property internationally.

5. Fintech’s struggle financially until they reach scale and/or multiple use cases, though investments are flowing into FinTech companies at an increasing rate – Disrupt Africa for example, reports an 84% increase in African FinTech start-ups securing funding. Nevertheless, the investments required for scaling financial technology offers opportunities for financial institutions to collaborate with FinTechs to build a unique solution for their customer base. Financial concerns can mean that some FinTechs initially opt to target customer segments where a high return can be guaranteed.

6. Beyond the fully digital banks many financial institutions are struggling with how to change. Many changes are not fundamental, but merely digitisations of the customer facing front end. However, this usually implies that aspects of the customer experience are lost, specifically turn-around time. Fast turn-around time invariably means straight through processing and digitisation of as much of the underlying process as is practical.

7. Many banks are poorly structured to exploit data. Data often exists in silos, held in legacy systems, data needs to be liberated so that it can be used. This point is clearly demonstrated when considering a FinTech’s approach to data – Fintech’s often take many more data points than banks in coming to their digital decisions – merging data from multiple sources to improve their algorithms, though sometimes they simply manage data better.  Leading banks are already responding to this challenge, by combining their huge internal datasets with data derived externally, cleaning data and analysing before warehousing it for further analysis and use. The question is whether banks will be nimble enough to exploit their data archives.

8. Bank’s often fight their own internal culture. Fundamental questions exist related to whether banks have the right drive, culture, and people, to support the data driven approach to drive efficiencies and develop and improve products and services based on data.

9. Bank-Fintech collaborations are increasing. Banks frequently sponsor FinTech labs to have the first opportunity to work with or invest in FinTech, for example, in May 2017 Barclays’ opened their flagship start-up incubator at The Rise, as Europe’s largest FinTech co-working site. DBS in Singapore has established its own FinTech innovation centres. The thirteen largest European banks are investing heavily in mature FinTech. Others like Equity Bank, in Kenya collaborated with a mobile network operator to launch a mobile virtual network.

10. Managing the culture divide is the key partnership challenge. However, while partnerships are logically the next steps managing partnerships and bringing vastly different cultures together in a sustainable way is the key challenge. Attempts to bridge this cultural divide are being made by creating platforms bringing together potential partners such as the FMO’s FinTech platform for African Banks.

11. The lack of human touch creates limitations for FinTech solutions as well as opportunities. Despite growing maturity, there is a recognition that solutions designed around the absence of human touch can create limitations on the type of solution which can be successfully delivered – particularly in the context of low income, often illiterate/innumerate communities, and in FinTech lending.

12. FinTech lending has limitations which are still being resolved. FinTech solutions are excellent at disbursing credit, but they suffer when it comes to collections – they simply don’t have the physical footprint of financial institutions. This is one reason why draconian measures are taken by the FinTechs to blacklist customers who fail to pay small loans – FinTech’s offering small loans simply don’t have the mechanisms to cost effectively enforce collection. Because of this inherent limitation millions of people are potentially blocked from accessing future credit because of failing to pay a $10 loan. For these microloans much work is required to consider repayment dynamics, whitelisting mechanisms and consumer education and protection in this space. These lending limitations will become more pronounced for larger loans, particularly those outside a natural repayment structure like a value chain. In the short to medium term, this may define a collaborative space between the FinTechs and financial institutions, or will result in FinTech’s investing in collection mechanisms for larger loans, such as Funding Circle in the UK.

13. FinTechs talk of User Experience – Banks of Customer Service. FinTech’s solution is digital end to end – their point of contact with the consumer is vital, hence they ensure that the interface is very easy to use. Compared with this, financial institutions strive to deliver customer service, which is much broader in nature with the cause of the service issue often opaque. Banks may struggle to replicate FinTech user experience through their own legacy systems.

14. FinTech’s apply Agile approaches to product development. FinTechs usually apply an Agile approach to developing financial services, a core focus in this approach is to learn & fail quickly, innovate the fail again until the solution is perfect. Fintech’s often compare the Agile approach to the Waterfall methodology which is to get everything right first before testing. These approaches are derived from the software development world. In contrast conservative financial institutions pilot test products and services with more rigour, typically preferring to succeed rather than to fail fast. Certainly, financial institutions need to be nimbler in product development. But in our view, a hybrid approach which combines slightly more in depth front end market research, user based pilot testing, and agile approaches can derive products faster and better than either approach on its own. It’s worth noting that the mobile payments doyen M-PESA was pilot tested for 18 months before it was launched, and was considerably more successful that its later – supposedly agile – imitators.

15. FinTech’s exploit social media. FinTech’s are a product of the digital age, much like social media. FinTech’s exploit social media, for communications, for marketing, for data analytics and in the case of some peer-to-peer lending methodologies for determining credit limits through social media contacts. Leading banks are already embracing social media as a key communication channel.

16. Social media is set to exploit FinTech. One of the biggest banking revolutions is set to take place as and when social media/technology platforms exploit their reach to absorb FinTech services – whether this is person to person remittances by WhatsApp, Facebook Bank, Amazon or Alibaba vertically integrating from e-commerce into payments.

17. Policy changes will make it easier for many FinTech’s to compete. Policy changes including biometric identity, eKYC, and open data standards (PSB2) will make it easier for FinTech’s to sign up large numbers of customers with confidence, and in some cases using bank acquired data. There are huge systemic implications – which will flow from this, conferring significant competitive advantages to institutions able to make strategic use of data – of any type.

18. Interest in regulatory sandboxes is increasing. Regulatory sandboxes are applied in the UK and in Singapore, however, regulatory interest in sandboxes is increasing with sandboxes being discussed in Nigeria, by the BNM in Malaysia, by the Bank of Uganda and in other African countries.

19. Compliance is a FinTech’s minefield particularly when spreading across borders. Successful FinTechs can spread across borders relatively easily in the absence of well-defined regulatory environments. However, compliance standards for FinTechs are evolving and change from market to market. A FinTech operating in a low compliance market may find it very difficult to move across markets, as a result successful FinTechs such as Jumo apply the standards existing in a tough reference market. Despite these constraints it is usually much more challenging for a financial institution to move across borders given the regulatory and capital requirements around new banks. An exception to this would be rapid moves from regulators to regulate FinTech market markers to ensure they can be monitored, in areas which threaten their wider central bank roles, such as crypto-currency.

20. Collaboration within the financial sector country by country appears to be increasing. Financial institutions often struggle to collaborate especially in competitive markets. However, what can be seen is strengthening of Banker’s Associations. The re-birth of the Kenya Banker’s Association with new leadership, effective advocacy and lobbying has been well documented. The Uganda Banker’s Association has also revived, and now meets regularly with the Governor of the Central Bank to discuss issues within the financial sector. Banks are coming together to discuss the issues confronting their industry much more readily and systematically than in the past. The question will be whether they can come to any agreement on industry-wide approaches.

In conclusion, the following stands out: Consumer needs are being and can be met in ways previously unimagined, and this is being done through new digital or digitally focused institutions, whether FinTech’s or financial institutions. Given this, financial institutions must make an active choice to participate in a digital future or risk stagnation and decline. This digital future must combine the best that banking and FinTech’s can offer. Realising the opportunities represented by the digital future requires significant changes in institutional culture – and attitude towards data which will see fundamental shifts driven from an executive level. Regulating this digital future represents a similar seismic shift for Central Banks and policy makers worldwide.

1 Websites or their archives such as Irrational Innovations provide useful infographics on FinTech’s operating in different geographies.

How India has Progressed on No Poverty and Reduced Inequalities

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Manoj Sharma, Director, MicroSave speaks on how India has progressed on SDG 1, or No Poverty and SDG 10, or Reduced Inequalities. Mr Sharma mentions that the JAM Trinity (Jan Dhan, Aadhaar and Mobile) holds the key to some of the biggest reforms ever attempted in the country.