Terms of ReferenceFirm:TBDThematic Area: Inclusive Payments Ecosystems Project:Global Landscaping Study on InteroperabilityFrom:1 March 2016To:30 August 2016Task Manager:xxxAbout CGAPCGAP is an independent policy and research center dedicated to advancing financial access for the world's poor. It is supported by over 33 development agencies and private foundations who share a common mission to alleviate poverty. Housed at the World Bank, CGAP[footnoteRef:1] provides market intelligence, promotes standards, develops innovative solutions and advises governments, financial service providers, donors, and investors. [1: In this TOR, CGAP includes the International Bank for Reconstruction and Development.]

CGAP works toward a world in which poor people have full access to the financial services they need and are considered valued clients of their countrys financial system. We aim to help build efficient and equitable local financial markets that serve all poor people with convenient and affordable financial services, by helping to identify and build viable business models that leverage technology and existing infrastructure to reach poor people with a variety of financial services at scalewhat is sometimes referred to as digital financial services (DFS).About the ProjectThe financial inclusion community is betting on the building evidence that the shift towards digital financial inclusion will bring a range of tangible potential benefits[footnoteRef:2]. However in order for these benefits to be realized, digital payments need to compete with and ultimately become indistinguishable from cash as a means of payment. At the heart of this, digital payments must be accepted as a means of exchange by all, irrespective of the parties banked status, financial service provider or mobile phone operator[footnoteRef:3]. Interoperability in retail payments is critical for this vision, and for the digital payment rails to be leveraged towards a situation where households and businesses have access to and can effectively use a broad range of financial services. [2: For example including lower costs and increased scalability and reach for financial service providers; lower risk of loss from physical theft; increased potential from the collection and use of digital data trails (e.g. for risk management and tailored products); increased convenience from remote payments (e.g. travel time); and even a potentially positive impact on economic growth. ] [3: There are other important elements necessary for the shift to digital payments such as the real time transfer of value, reliability and affordability.]

However at present the vast majority of emerging payment products that are suitable for low income people are not interoperable; and where progress has been made towards interoperability it is often limited to a specific use case (such as a person-to-person transfer between two mobile wallets) or type of institution (banks only or MNOs only); implemented in an inefficient manner which may limit affordability; or with business rules that fail to incentivize off-network transactions for all parties (including the sending provider and customer, and the receiving provider and customer).While there are at least 15 active projects[footnoteRef:4] working towards some form of interoperability in a range of countries, there is little consensus on some key issues including, for example the optimal process to work towards interoperability and the priority use cases from a financial inclusion perspective. [4: Countries where there is some sort of process underway on domestic interoperability include: Bangladesh, Egypt, Ghana, Indonesia, Jordan, Kenya, Madagascar, Myanmar, Nigeria, Pakistan, Paraguay, Peru, Rwanda, Tanzania, Uganda. The processes involve at least 10 different development partners/tech vendors in addition to local stakeholders.]

One result of these disconnected efforts is the creation of technical and commercial rules and systems that are isolated, with no clear sense of if / how they might converge over time. Furthermore, the various experiences of working towards interoperability have not been well documented and shared. What is lacking is an in-depth analysis of global interoperability initiatives, what various pathways have been followed and what evidence we have so far on what has succeeded and what has failed.Therefore, CGAP is embarking on a project to provide a global landscaping of existing initiatives to achieve inclusion-effective interoperability. This project will collect global evidence about the current range of initiatives to achieve interoperability, a categorization of these initiatives (both for interoperability process as well as interoperability scheme or outcome), lessons on determinants of success and failure and an analysis of any best practices that emerge on effective interoperability to achieve financial inclusion.

Scope of WorkThe objective of this project is to collect global evidence on the various initiatives to develop inclusive interoperability and synthesize lessons learned from these initiatives to develop emerging best practices. The project will provide an overview of the various models being adopted for interoperability, a few deep dives into the most promising approaches and emerging best practices on issues such as process, business rules and technology. The project will have three main parts.Part I Develop Initial Framework and Refine Scope In this part of the study, the firm shall refine a definition of interoperability in DFS to use throughout the project, including to select which global examples are relevant for this study. Together with CGAP and other relevant parties (e.g., the IFC), the firm shall develop an initial framework to capture key elements to define and understand both interoperability processes and interoperability schemes or outcomes. For interoperable processes, we wish to explore the best methods to achieve interoperable arrangements among providers and for interoperable schemes, we wish to understand the actual outcomes: whether customers are actually using interoperable services, which ones and why. Both are important, although the outcome (customer usage) is more important.Finally, the firm will develop a clear understanding of what we want to learn from the global examples, including a detailed list of questions. Methodology: Desk review of all available materials, especially business rules and documentation. Telephonic interviews with development partners (about 8-10, such as the Bill & Melinda Gates Foundation Level One team, GSMA and the IFC) as well as stakeholders in-country to develop a clear list of questions to be answered in the case studies and develop criteria to select countries for case studies. Work closely with CGAP to develop definitions and initial framework.The deliverable for this part will be a written output documenting: a) the proposed definition for interoperability, b) a draft analytical framework on how best to characterize and document both interoperability processes and outcomes, and c) research plan for Part II (proposed list of questions and interviewees).Part II Overview of global initiatives and Case StudiesThis phase of the project includes documenting what has happened in the various interoperability initiatives. A. Global ScanFirst, the Consultant or Firm will conduct a global scan of all domestic interoperability processes to collect a minimum set of information on how the interoperability process was arranged and what the outcomes of this process were in terms of which scheme was adopted and initial results. This will include some subset of the questions listed in section B) below. Following the global scan, the draft analytical framework should be revised and the Consultant or Firm will select three countries for deep dive case studies. These should be markets with globally relevant learning (e.g., country whose interoperability scheme is experiencing good take-up by low income customers, country with an interesting process even if not yet complete or country where on paper some of the right systems were in place but for some reason the interoperability process or outcome failed.)The methodology for this part will be telephonic interviews with in-country stakeholders. This should include development partners, providers and regulators.

The deliverable for this part will be a written document with: a) high-level overview of most/all interoperability initiatives, b) refined framework, and c) proposed countries for case studies with clear justification/criteria.B. Deep Dive Case StudiesUp to three markets will be selected for deep case studies where the entire interoperability process and outcome will be documented and analyzed. Key questions to be answered include: Who is leading - Who is leading the process (market-led or regulatory led)? Who runs or facilitates meetings? Is the regulator involved and how? Or, if no clear process in place, how are discussions/commercial negotiations taking place? Who is involved (in both the process as well as actual scheme) Who is involved in the process towards interoperability? How is it decided that participants join, vote or leave? Who is involved in the actual interoperability scheme and how are those rules decided? Which use cases? For which use cases (P2P, merchant payments etc.) does the industry currently have or is planning to have interoperability? Why/how? Which use cases were rejected and why? What existing rules/infrastructure? Is there an existing retail payment switch providing clearing and settlement positions? How does the MFS payment architecture work? What business models? What is the structure of the business model for each use case? How is the rate of interchange determined? Are there limits on charges that can be applied to customers? Initial results - What have been the outcomes in terms of providers joining the scheme? What have been the outcomes (e.g., rate of customer adoption, total volumes) since the introduction of interoperable services to customers? What are potential or actual obstacles? The consultant or firm should try to collect documentation on business rules, process adopted etc.Methodology: In-country interviews in three markets selected with development partners, technology providers/vendors, financial service providers and regulators.The deliverable for this phase is a written output of three case studies. This may be in powerpoint or word format as agreed with CGAP.Part III Synthesis and emerging best practicesThe final phase will focus on analysis of all the case study material to synthesize determinants of success and failure and develop any emerging best practices. This should follow the analytical framework developed through the project to include key elements of both the interoperability process and outcome. It may be that best practices can be extracted from different countries on different aspects (e.g., business model, technology platform, governance etc.)Methodology: Desk based review and analysis of all materials collected thus far in close coordination with CGAPThe final deliverable will be a high-quality deck that tells a powerful story about how interoperability in DFS is developing across the globe. This document should provide an in-depth analysis of global interoperability initiatives and act as a foundation for a gradual convergence of various efforts towards a common understanding of best practice principles.Necessary Skills and ExperienceThe ideal firm or consultant should have: Prior experience working on global landscaping studies; Deep understanding of the digital financial services and payments industry writ large, including a proven track record in research or consulting related to interoperability and/or payments architecture; Experience working (consulting, research or direct employment) at a high level with regulators and financial service providers in emerging markets; Experience drafting high-quality, accessible knowledge products around technical topics for a lay audience in the development space Strong understanding of the financial inclusion agenda and how interoperability fits into this; Availability of key staff within the stipulated time frames for this work. Specific names and resumes of the team should be included.