Training Module 1 for consumer associations was launched on May 25 under the auspices of the Consumers International. Training Module 1 aims to orient consumer associations from low and middle income countries, including the Philippines , on why digital financial products and services are important to the consumers .The materials are shared here solely for information and education.
- Why are Digital Financial Products and Services important for today’s consumers?
Digital Financial Services are designed both for unbanked and underbanked consumers with easy-to-use entry level products, and sophisticated users with smart phones and investment accounts.
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Digital Financial Services allow access from anywhere in real time, keeping funds safely stored and easily accessed. They allow business and consumers to engage in broader digital economy.
B . What are Digital Financial Services Products?
Digital Financial Services products are banking products offered by financial institutions for the purposes of carrying out financial transactions, for example savings, borrowings or making payments. They are differentiated from traditional banking products by the use of technology and data in their user experience or back-end processing.
- What are Digital Financial Services Channels
Digital Financial Service channels are points of service offered by Financial Institutions (FIs) for the purposes of depositing, withdrawing, or making payments. They are differentiated from traditional banking products by the use of technology and data in their user experience or back-end processing.
Funds will always be held in a bank, even if services are offered by a Mobile Network Operator (MNO) or Payment Service Provider (they’ll be in a trust account bank - also know as float) and consumers will always access through a voice or data line provided by the Mobile Network Operator (or other telecoms operators).
- Features of the Digital Financial Services Business Models
The table below describes the defining features of the different types of Digital Financial Services business models. The models that are found in local markets are largely driven by what regulation allows in the market. From the consumers’ perspective, the differentiation may be unnoticeable.
| Feature | Bank Led | MNO Led | Hybrid | PSP |
| What license is needed? | Bank Mobile money operator | Value added services | Joint licenseE-money issuersMobile money operator | PSP licensing |
| What channels are used? | MobileAgentATMsPoints of Sale (POS) InternetCard | MobileAgent | MobileAgent | AgentMobileInternet CardPoint of Sale (POS) |
| Where are funds held? | Trust or bank account | Trust account | Trust account | Trust account |
| Who owns the consumers | Bank | Telecoms company | Both | PSP |
| Who owns the channels? | Bank | Telecoms company | Both | PSP |
| Who is the regulator | Central Bank | Central Bank or Ministry of Finance or Telecoms | Central Bank | Central Bank or Ministry of Finance or Telecoms |
- Wallets and Accounts
Wallets and digital accounts mimics traditional banking products. They are usually free to deposit and may charge fees for withdrawal. They may earn interests and are generally the first product used to onboard a new consumer.
What’s the difference between a wallet and an account?
| Wallets | Accounts |
| Storage of ValueCan deposit and withdraw (known as cash in/cash out)Usually no interest paidUsed for payments and savingsCan be open (Visa), closed (Amazon Pay) or Semi-closed ( Pay TM ) | Storage of ValueCan deposit and withdrawInterest and non-interest earning accounts (checking vs savings)Deposit insurance protected by Central BankUsed for payments and savings |
Without bank branches – how does a consumer deposit and withdraw?
| Cash-in/Cash-out (CICO) Model | Account Linked Model |
| Consumer gives cash to an authorized agent.Agent sends e-money to their wallet/account. | Consumer uses an app to initiate a digital transfer from an account to their walletThe bank debits their account and credits the wallet. |
- MERCHANT Payments
Merchant payments are the ability to pay for goods and service digitally. They may be used online for e-commerce or they be used in physical shops for consumers to pay electronically or using their mobile.
| In Person | Online |
| Consumer gives card or mobile to a shop cashier for the purchase of goods. Money transfers from the consumer’s account to the merchant. | Consumer uses an e-commerce platform to purchase goods or services and uses the digital “check-out” function. Money transfers from the consumer’s account to the merchant account. |
4.Bill Payments
Bill payments are defined as the use of your digital wallet or account to pay bills. Billers are integrated through to the Digital Financial provider such that a consumer can use a mobile app, Unstructured Supplementary Service Data (USSD), or Internet browser to access their account and push payment from a consumer’s account to a company’s account along with an identifying tag such as an account, reference, or invoice number so that the biller can match the incoming funds to the record of account.
- Government to Person Payments
Government to Person (G2P) payments also known as social cash transfers are account deposits from government, non-government, and humanitarian institutions for the purposes of social welfare. They may be pension payments, welfare payments, or humanitarian assistance programs for beneficiaries following natural disasters, war or response to other civil unrest.
Atty. Victorio Mario A . Dimagiba, AB, LLB, LLM
President of Laban Konsyumer Inc.
( DTI recognized National Consumer Organization )
Email at [email protected]