digital finance ecosystem: regional, national and household level snapshots
TRANSCRIPT
Asia-Pacifi c Regional Forum on USO
Digital Finance Ecosystem: Regional, National and Household
Level Snapshots
26 March, 2015BKK, Thailand
Yoonee Jeong, Research Director, TRPC
Understanding risk profi le at different levels of the digital payment value chain
Understanding the players involved, incentives and trade-offs
Roles of international/regional players, government, and the private sector
Why flexible and holistic framework approach
* KEY TAKEAWAYS
1. HH LEVEL: INCOME PROFILE
42%
46%
9%
3%
# of Income Earners
One Two Three FourInheritance
Remittance (from abroad)
Rent collection/Interest
Agriculture/livestock
Others
Remittance (within Indonesia)
Part time employment
Selling of goods and services
Full time employment
0.1%
0.3%
0.6%
0.7%
2.7%
9.0%
21.2%
47.8%
63.9%
Sources of Income
1. HH LEVEL: EXPENDITURE PROFILE
Food
Durab
le
Housin
g
Toba
cco
Other
s
Remitt
ance
s
Educ
tatio
nFu
el
Tran
spor
t
Utiliti
es
Non-d
urab
le
Ente
rtainm
ent
Mob
ile
Cloth
ing
Land
line
Health
Car
eTa
x IDR -
IDR 100,000
IDR 200,000
IDR 300,000
IDR 400,000
IDR 500,000
IDR 600,000
IDR 700,000
IDR 800,000
IDR 900,000
Monthly Average Household Expenditure
1. HH LEVEL: FINANCIAL RESILIENCE
41%
58%
Had to borrow to pay for monthly expenditure?
Yes No
43%
14%
18%
0%
9%
5%4%
6%
1%
Who did you borrow from?
Family Bank Local Co-Op
Provident Fund Money Lenders Pawn broker
M-Money Debit Cards Credit Cards0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
WealthyRiskyWastefulConvenientModernFast (transactions)
1. HH LEVEL: PERCEPTIONS
Credit cards: higher associati on with negati ve images of indebtedness (“wasteful”)
Debit cards: generally positi ve images, but also associated with the wealthier income brackets (“wealthy”)
m-Money: associated with fast and modern transacti ons (i.e. not necessarily relevant to them)
1. HH LEVEL: BARRIERS TO ADOPTION
Can’t open an account due to lack of required ID
Do not trust banks or other financial institutions
Poor experience with banks
Previously had an account but the bank closed it
No experience with the bank
Bank facilities too far, hence inconvenient
Do not want to pay additional charges (hidden or otherwise)
Do not know how to open or manage an account
Prefer to have physical savings
Do not have enough money for min balance
0% 10% 20% 30% 40% 50% 60% 70% 80%
0%
1%
1%
2%
4%
5%
1%
1%
1%
1%
2%
4%
5%
12%
20%
1%
1%
1%
5%
3%
8%
4%
7%
15%
24%
41%
Reasons for not having a bank account
<IDR1M IDR1M-2M IDR 2M-3M IDR3M-5M IDR5M-7.5M >IDR7.5M
1. HH LEVEL: BARRIERS TO ADOPTION
66%
50%
21% 18%9% 7% 6% 4% 4% 2% 1%
64%61%
19% 13%
5%8%
4% 6% 4% 2% 3%
M-Payment/Wallet
M-Banking
Cash is sti ll King – a viable alternati ve has yet to emerge
Spending needs are liquid, frequent and informal
Use of mobiles is more central than ever – but no one has
made a compelling propositi on for m-money (e.g. ease of use -
61.9%, safety for money - 11.8%)
Earners and Spenders within HH are oft en diff erent – current
m-money off ering target both audiences simultaneously
Network eff ects show some promises (e.g. 54% willing to give
m-money a try if a family/friend uses it. Higher proporti ons of
females, urban households and aged 21-30 willing to try.
1. HH LEVEL - FINDINGS
2. NAT’L LEVEL - LANDSCAPE MAP (LK)
PROVIDE
PARTICIPATE3
REGULATE
• -
FSI TELCO/MNOs
M-MONEY
Central Bank Telco Regulatory Commission 1
2M-Wallet/Payment
3RD Party Platform Providers
Banks M-Banking M-Wallet
Payment
MNOs
Insurance Companies
Utility Service Providers
Retailers
Spec Leasing Coms
Financial Coms
2. NAT’L LEVEL: INSTITUTIONAL CHECKLIST (MN)
Policy Goals? Additive or Transformational? Bank-centric or Telco-centric or Hybrid or Market-driven?
Risks? Regulatory Response? Regulatory – and Administrative – Responsibility? (e.g.
primary/2ndary) Temporary or Institutionalized?
Legislati on? What to legislate and what to leave to market forces? Whose rights are being protected and for what purpose?
2. NAT’L LEVEL: REGULATORY CHECKLIST (MN)
Payment Systems Prudential Risk Management AML/ CFT/ KYC Agent Networks e-Money Telecommunications Regulation Competition Consumer Protection e-Commerce & e-Security Foreign Exchange Taxation
2.NAT’L LEVEL: RESPONSIBILITY MATRIX
Payment Systems
Prudl Risk Management
AML/ KYC
Agent Networks
eMoney Telecom & IT Regs
Compete Consumer Protection
eCommerce Forex Taxes
1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3
MoF √ √ ~ ~ ~ ~ √ √ √ ~ √ ~ ~ ~ ~ ~ √ ~ √ √ √ √ ~ √
BoM √ √ √ √ √ √ √ √ √ √ √ ~ ~ √ ~ √ √ √ √ √ ~ ~ ~ ~ √ √ √
FRC √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ ~ ~ ~ √ √ √
NCP √ √ √ ~ ~ ~ ~ ~ ~ √ √ ~ √ √ √ ~ ~ ~ ~ √ ~ ~ ~ ~ ~ ~ ~ √ √ ~
NDIC ~ √ ~ ~ √ ~ ~ ~ ~ ~ √ ~ √ √ √ √ √ ~
MBA ~ √ ~ ~ √ ~ ~ √ ~ ~ √ ~ ~ √ ~ √ ~ √ ~ ~ ~ ~ ~ ~ ~ ~ √ ~ ~ ~ ~
ICPTA √ ~ ~ ~ ~ √ √ √ ~ √ ~ √ √ √ ~ √ ~ √ √ ~ √ √ √
CRC √ ~ ~ ~ ~ ~ √ √ √ √ √ √ √ √ √ √ √ √ √ ~ √ √ ~
UCRA ~ √ ~ ~ √ ~ √ √ ~ √ √ √ √ √ √ √ √ √ ~ ~ ~
Tax √ √ ~ ~ ~ √ ~ ~ √ √ ~ √ √ ~ √ √ √ √ √ √
1 = Key regulatory or policy role to play currently √ = active role Green = existing laws2 = Information role or requirement ~ = role not clear Yellow = some laws3 = Anticipated future regulatory role Primary responsibility highlighted by boxed squares Red = No existing law
Data localisati on requirement Local content requirements Labelling requirement Limitati ons in franchise and dealership Negati ve Investment List, limitati on in foreign
ownership, limitati ons to divestment Can lead to over-reach, over-regulation, and
counter-productive impact from an economic and trade perspective.
3. BEYOND-THE-BORDER ISSUES
COST OF COMPLIANCE
Privacy Law
Privacy Commissio
n
Implementation &
Enforcement
Compliance
Medical Records
Telco
m
Taxation
Banki
ng
Nation
al
Securit
y
Personal
finances
COST OF COMPLIANCE
Source: ECIPE, 2014, The Costs of Data Localisation: Friendly Fire on Economic Recovery
IMF projections
W across-the board localisation
CN 7.7% 6.6%
IN 4.4% 3.6%
ID 5.8% 5.1%
KR 2.8% 1.7%
VN 5.4% 3.5%
Protect ‘national interests’
• balance of payment and tax base
• local industry growth and ecosystem
• personal data privacy
Promote opportunities for low-income families and local companies to engage in mainstream and global value chain • e/m-commerce,• e/m-payment, • outsourcing• regional economic integration
WEIGHING THE COST VS OPPORTUNITIES
Understanding the transformati onal benefi ts of mobile money,
forumulate and state clear objecti ves POLICY CLARITY
Establishing a holisti c view encompassing all players
Clarifying gaps and overlaps in existi ng regulatory framework(s)
Institutional + Activity-based approach
Horizontal + Vertical perspectives
Coordinati on across agencies in developing a regulatory roadmap
Prioriti sing specifi c elements within policy and regulatory
roadmap – rather than trying to get everything right from the
outset
Adjust fl exibility and rigor according to risks
* FRAMEWORK APPROACH