TECHNICAL NOTE Financial Inclusion Beyond Payments Policy Considerations for Digital Savings LESSONS FROM SELECT ECONOMIES IN AFRICA AND ASIA 2019 FINANCE, COMPETITIVENESS & INNOVATION GLOBAL PRACTICE TECHNICAL NOTE Financial Inclusion Beyond Payments Policy Considerations for Digital Savings LESSONS FROM SELECT ECONOMIES IN AFRICA AND ASIA 2019 © 2019 International Bank for Reconstruction and Development/The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org DISCLAIMER This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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CONTENTS Acknowledgments v Acronyms and Abbreviations vii EXECUTIVE SUMMARY 1 PART 1: INTRODUCTION 4 PART 2: SCOPE OF REPORT 6 2.1: Financial product scope 6 2.2: Geographic scope 7 2.3: Access channel scope 7 2.4: Temporal scope 7 PART 3: MARKETS, MODELS, AND PRODUCTS 8 3.1: Assessing the Digital Savings Market Opportunity 8 3.2: Digital Savings Account Delivery Models and Characteristics 10 3.2.1: Digital Savings Account Delivery Models 10 3.2.2: Key Digital Savings Account Characteristics 11 3.3: How Innovative Business Models Enhance Savings Account Accessibility 16 3.3.1: Disaggregation of the Digital Savings Account Value Chain 16 3.3.2: Product Tailoring and Customization 17 3.3.3: Leveraging Existing DFS Ecosystems 17 PART 4: DIGITAL SAVINGS POLICY CONSIDERATIONS 20 4.1: G20 HLP 1: Promote a Digital Approach to Financial Inclusion 20 4.2: G20 HLP 2: Balance Innovation and Risk to Achieve Digital Financial Inclusion 21 G20 HLP 3: Provide an Enabling and Proportionate Legal and Regulatory Framework for 4.3:  22 Digital Financial Inclusion 4.4: G20 HLP 4: Expand the DFS Infrastructure Ecosystem 23 4.5: G20 HLP 5: Establish Responsible Digital Financial Practices to Protect Consumers 23 4.6: G20 HLP 6: Strengthen Digital Financial Literacy & Awareness 23 4.7: G20 HLP 7: Facilitate Customer Identification for Digital Financial Services 24 4.8: G20 HLP 8: Track Digital Financial Inclusion Progress 24   iii iv   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings PART FIVE: FUTURE RESEARCH 26 ANNEXES Annex A: E-money accounts offering financial return 28 Annex B: Digitally-enabled, market-based wealth-building products 30 Annex C: Saving-oriented digital transaction accounts 32 Annex D: Savings patterns across focus countries 33 Annex E: Digital savings-relevant indicators from Global FICP survey 34 Glossary of Key Terms 39 References 41 BOXES, FIGURES, AND TABLES Box 1. M-Shwari (Kenya) 14 Box 2. Digital Savings Potential at Payments Banks in India 18 Box A: E-Money Profit-Sharing Arrangements in Tanzania 29 Box B: Digitally Enabled, Market-Based, Wealth-Building Products in Kenya 30 Box C: Saving-oriented digital transaction accounts in Uganda 32 Figure 1: Saving Patterns across Focus Regions (% age 15+) (excluding high income countries) 9 Figure 2.  Reason for not having a financial institution account (% without a financial institution account, age 15+) 9 (excluding high income countries) Figure 3. Trends in Saving Patterns: 2014 and 2017 (% of age 15+) 10 Figure 4. Three common digital savings account delivery models 13 Figure 5. Basic Savings Account Activity under the PMJDY Program 21 Figure 6. Percentage of Unregistered Population in Focus Regions (2017) 25 Figure D.1: Saving Patterns among SSA Focus Countries 33 Figure D.2: Saving Patterns among Asia Focus Countries 33 Table 1: Summary of Digital Savings Policy Considerations 3 Table 2: Saving at a Financial Institution among Vulnerable Segments (2017, Percent of Age 15+) 10 Table 3: Documented Digital Savings Accounts in Focus Countries 11 Table 4: Primary Driver of Technology and Distribution among Documented Digital Savings Accounts 13 (Entity Type, Number of Instances, by Country) Table 5: NBEI Frameworks and Agent Banking in Focus Regions 23 Table 6: State of Customer Funds Protection in Focus Countries 24 Table 7: National Identification Systems in Focus Countries 24 Table 8. Future research questions 28 Table E.1: Select policy approaches that encourage digital savings 34 Table E.2: Institutions for which legal/regulatory framework is in place 34 Table E.3: Select permitted activities among institutional categories 35 Table E.4: Select permitted activities of retail agents, by institutional category 35 Table E.5: Requirement to store customers’ e-money funds in a segregated account at one or more 36 prudentially regulated financial institutions Table E.6: Disclosure requirements for deposit products at shopping or pre-contractual stage 37 Table E.7: Specific rules exist which indicate that financial service providers are liable for any actions or 38 omissions of the agent ACKNOWLEDGMENTS This report is a product of the Financial Access and Inclusion team in the World Bank Group’s Finance, Competitiveness and Innovation Global Practice. The team was led by Oya Ardic and Ivor Istuk and included Helen Gradstein and Loretta Michaels. Jeffrey Allen conducted the research and contributed significantly to the drafting. The team is grateful for the substantive inputs provided by the peer reviewers Gregory Chen (Lead Financial Sector Specialist, CGAP), Matthew Saal (Principal Industry Specialist, CFGDF and GFCFI), and Mehnaz Safavian (Lead Financial Sector Specialist, GFCSS), as well as members of the Financial Access and Infrastructure team, including Jennifer Chien, Massimo Cirasino, Karol Karpinski, Bal- akrishnan Mahadevan, Margaret Miller, Harish Natarajan, Douglas Randall and Ghada Teima. The team benefitted from inputs and the overall guidance of Douglas Pearce and Mahesh Uttamchan- dani. Charles Hagner provided editorial assistance, and Naylor Design, Inc. designed and laid out the report. This report would not be possible without the generous support of the Ministry of Foreign Affairs of the Netherlands and the Bill and Melinda Gates Foundation, provided through the World Bank Group’s Financial Inclusion Support Framework program.   v ACRONYMS AND ABBREVIATIONS ADB Asian Development Bank GSMA Groupe Spéciale Mobile Association AFI Alliance for Financial Inclusion HLP High-Level Principle API application program interface IFC International Finance Corporation ATM automated-teller machine IMF International Monetary Fund BB Bangladesh Bank ITU International Telecommunication Union BCBS  Basel Committee on Banking Supervision KCB Kenya Commercial Bank BCEAO Banque Centrale des Etats de l’Afrique de KDIC Kenya Deposit Insurance Corporation l’Ouest KWFT Kenya Women’s Finance Trust BOT Bank of Tanzania LMI Lower-middle income BOU Bank of Uganda MCB Mwanga Community Bank BOZ Bank of Zambia MNO mobile network operator BSP Bangko Sentral ng Pilipinas MoFP  Ministry of Finance and Planning of Tanzania CB Commercial bank MVNO mobile virtual network operator CBA Commercial Bank of Africa NBC National Bank of Cambodia CBK Central Bank of Kenya NBEI nonbank e-money issuer CDD customer due diligence NMB National Microfinance Bank CFP customer funds protection ODTI Other deposit-taking institution CGAP Consultative Group to Assist the Poor PMDJY Pradhan Mantri Jan-Dhan Yojana CPMI  Committee on Payments and Market POS point of sale Infrastructures PPP purchasing power parity DBBL Dutch-Bangla Bank Limited RBA Retirement Benefits Authority DFI digital financial inclusion RBBL Rastriya Banijya Bank Ltd. DFS digital financial services RBI Reserve Bank of India DTMFI deposit-taking microfinance institution SBI State Bank of India EAP East Asia & Pacific SSA Sub-Saharan Africa EBL Everest Bank Ltd. SoV Store of Value FAFT Financial Action Task Force TPB Tanzania Postal Bank FICP  Financial inclusion and consumer protection UNCDF United Nations Capital Development Fund FCP financial consumer protection VSLA Village Savings and Loan Association FSD Financial Sector Development WAEMU West African Economic and Monetary Union GPFI  Global Partnership for Financial Inclusion WBG World Bank Group   vii EXECUTIVE SUMMARY Innovative, technology-driven savings products are In analyzing digital savings deployments across the focus emerging across the developing world. Access to reliable countries, the report finds that digital technology and savings products at regulated financial institutions is innovative business models enable three broad product important for helping low-income and financially under- and market properties that advance the savings aspects served segments safely meet their saving goals. Adult of digital financial inclusion: (1) disaggregation of the dig- populations in many low-income countries demonstrate ital savings account value chain, (2) product tailoring and strong saving propensities, yet saving at financial institu- customization, and (3) leveraging of existing DFS ecosys- tions is low. Recognizing this gap, digital financial ser- tems. Value chain disaggregation, which occurs when vices (DFS) providers are deploying digital savings banking institutions partner with nonbanks for the tech- products that have the potential to unlock powerful sav- nology and distribution aspects of digital savings ing tendencies in developing countries. Nevertheless, accounts, allows for expanded access channels, improve- digital savings is still nascent, and success has been ments in the economics of low-cost savings accounts, uneven. It is important to identify the market, product, leveraging of different entities’ comparative advantages, and policy factors that have both facilitated and con- and scaling up of microbanking institutions. Digital tech- strained digital savings deployments. nology and innovative business models allow providers to incorporate greater degrees of accessibility, flexibility, The purpose of this report is twofold: (1) to ascertain the affordability, and customization in their savings offerings. characteristics of digital savings products and business Finally, an existing DFS ecosystem can help foster com- models that enhance savings product access, and (2) to petition in the savings product space and facilitate access identify the policy issues that appear most important for through use of existing infrastructure. fostering digital savings market development. The report pursues these objectives by analyzing digital savings The report discusses key policy issues that enable and deployments and DFS policy landscapes in a variety of constrain digital savings market development and offers markets across Sub-Saharan Africa and Asia. The report policy considerations within the context of the G20’s focuses primarily on digitally-accessible interest-bearing High-Level Principles (HLPs) for Digital Financial Inclu- deposit accounts held by regulated deposit-taking insti- sion. Framing the policy considerations within the context tutions, although nonbank entities are frequently integral of the G20 HLPs is meant to facilitate consistency and to the deployment models.1 Annexes A-C also discuss clarity, as countries consult the HLPs when formulating alternative non-deposit digital savings products that national financial inclusion strategies and action plans. enhance consumer choice. Table 1 summarizes the digital savings policy consider- ations, which are geared toward DFS-relevant policy mak- ers. Based on current market observations, three policy NOTE 1. Much of the report refers to regulated deposit-taking institutions as banking institutions or banks.   1 2   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings considerations seem most important for facilitating digi- ply-side factors in the digital savings market. As products tal savings account deployments: mature and more data become available, researchers will be able to evaluate questions that bring together supply • Enable banking institutions to pursue digital savings and demand side factors, thus developing a clearer pic- partnerships with nonbank entities. ture of what works best in the digital savings market. Part • Support the development of interoperability between 5 highlights a series of research questions meant to eluci- banks and nonbank e-money issuers. date key outstanding issues. These focus on the digital savings product attributes that drive responsible uptake • Harmonize customer due diligence standards for e- and usage, as well as product economics and competi- money wallets and low-risk bank deposits. tion. Policymakers should consider these future research The report concludes by outlining a future digital savings topics in concert with the policy considerations discussed research agenda that will help calibrate and prioritize dig- in this report, as they may judge that certain takeaways ital savings policy considerations. Digital savings rep- are tentative for their own markets until important ques- resents a relatively new area of inquiry for digital financial tions can be addressed. inclusion research. This report largely focuses on sup- Executive Summary   3 TABLE 1: Summary of Digital Savings Policy Considerations HLP 1: Promote a digital approach to Incorporate saving elements in national financial inclusion strategies. financial inclusion Highlight the importance of affordability, flexibility, accessibility, and customization in digital savings account offerings. Facilitate the integration of digital savings account options with govern- ment-to-person payments, and encourage providers to offer options for earmark- ing portions of salaries for digital savings accounts. HLP 2: Balance innovation and risk to Establish policy practices for enabling digital savings competition while facilitating achieve digital financial inclusion cooperation and effective partnerships. Support a “multispeed” approach to digital savings inclusion, as some consumers may be ready to move beyond digital savings accounts to digitally-enabled, market-based wealth-building products. HLP 3: Provide an enabling and Develop a legal and regulatory framework that allows banking institutions to proportionate legal and regulatory pursue digital savings partnerships with nonbank entities and conduct limited- framework for digital financial inclusion purpose banking services through retail agent networks. Where appropriate, consider regulatory sandboxes for limited- purpose, technology-driven digital savings account deployments. Harmonize, where prudent, the application of a risk-based approach to customer due diligence for e-money wallets and bank deposits, as imbalances can hinder the acquisition of digital savings customers. HLP 4: Expand the digital financial Support the development of nonbank e-money issuer-to-bank interoperability, services infrastructure ecosystem which serves as the technological backbone for digital savings partnerships and distribution strategies. HLP 5: Establish responsible digital Ensure customer funds protection standards are robust for bank deposits and financial practices to protect consumers e-money accounts. Ensure customers are afforded critical information about digital savings accounts at point of opening, noting that information sharing may occur unconventionally, such as directly on a mobile phone or through an agent-facilitated document- collection process. HLP 6: Strengthen digital and financial Incorporate saving elements in financial education strategies. literacy and awareness HLP 7: Facilitate customer identification Continue to implement, refine, and expand national identification systems, and for digital financial services align know-your-customer requirements for basic transaction accounts and savings accounts. HLP 8: Track digital financial inclusion In cooperation with digital savings providers, gather and publish data on deposits progress facilitated through digital channels, as such information is critical for understanding digital savings opportunities and risks. 1 INTRODUCTION While significant progress has been made in advancing strong potential of digital savings, a variety of entities access to digital transactional platforms and payments involved in DFS across Africa and Asia have deployed dig- services, research and support for second-generation ital savings products. Nevertheless, these products are forms of digital financial inclusion (DFI), such as digital sav- young, and success has been uneven. Identifying the ings, credit, and insurance, are more limited. The G20 product, market, and policy factors that have both enabled describes digital financial inclusion as involving the and constrained digital savings development is important “deployment of digital means to reach financially for policymakers who are seeking to advance DFI. excluded populations with a range of formal financial ser- vices suited to their needs” (GPFI 2016b, 46). Most DFI This report analyzes digital savings account deployments. work thus far has concentrated on digital transaction The report focuses primarily on digitally-accessible, accounts and payment services. These services form the interest-bearing deposit accounts held by regulated foundations of DFI and serve as the gateway to full finan- deposit-taking institutions. We refer to these products as cial inclusion. However, DFS providers are expanding their digital savings accounts. Importantly, nonbank entities, range of product offerings to other critical financial ser- such as nonbank e-money issuers (NBEIs), are often vices areas, including savings. involved in digital savings account deployment models, even though they do not hold the contractual relationship Access to savings products at regulated financial institu- with the customer. Additionally, the report principally exam- tions is a vital component of financial inclusion. Savings ines digital savings accounts that are accessible on basic products help low-income and underserved populations mobile devices or agent-administered point-of-sale (POS) withstand income shocks, manage unpredictable cash terminals. The report’s findings and policy considerations flows, meet emergency needs, stay ahead of inflation, are based on an analysis of digital savings account deploy- access credit, make personal or professional investments, ments and DFS policies in 12 developing economies and prepare for future financial needs, such as school fees across Sub-Saharan Africa (SSA), South Asia, and East Asia and old age. Savings products also provide a safe place & Pacific (EAP) (collectively, “focus regions”). Annexes for storing wealth, rather than in cash at home or through A-C also take stock of alternative digital savings products other informal and potentially risky mechanisms. that are expanding consumer choice in this space. Accessible, flexible, and affordable digital savings prod- The report proceeds by clarifying the scope of research, ucts could unlock a powerful saving potential, even in presenting product and market findings, offering policy extremely low-income countries, and bring existing infor- considerations, and outlining a future research agenda. mal saving into the regulated financial sector. Although Part 2 clarifies the financial product, geographic, access saving at financial institutions is low in the focus regions, channel, and temporal scope of the report. Part 3 analyzes saving frequency can be quite high. Recognizing the digital savings deployments in 12 countries across the 4 Introduction    5 focus regions. Based on the findings in part 3 and addi- questions focus on product economics, competition, and tional analysis of DFS policy factors in the focus countries, perhaps most importantly, factors that drive responsible part 4 organizes a series of digital savings policy consider- digital savings uptake and usage. We recommend policy- ations within the context of the G20’s HLPs for DFI. Part 5 makers consider these future research topics in concert concludes by introducing future research topics that will with the findings and policy considerations, as certain refine stakeholders’ knowledge of digital savings dynam- takeaways may remain tentative in local markets until ics and help prioritize policy measures. These research additional questions can be investigated. 2 SCOPE OF REPORT 2.1  FINANCIAL PRODUCT SCOPE deployment of digital means to reach financially excluded and underserved populations with a range of formal finan- This report focuses primarily on digitally-accessible inter- cial services suited to their needs, delivered responsibly at est-bearing deposit accounts held at regulated depos- a cost affordable to customers and sustainable for provid- it-taking institutions. For ease of reference, the report ers” (GPFI 2016b, 46). The GPFI further sets out “essential refers to these products as digital savings accounts. All components” of DFI, which include a “digital transactional of the digital savings accounts examined in this report platform” and “additional financial services via the digital are ultimately held by regulated deposit-taking institu- transactional platform” (GPFI 2014, 3). The digital savings tions (collectively, “banking institutions”), even if they are accounts under review represent a next step in access- facilitated by or pass through financial services offered by ing a range of formal financial services enabled by digital nonbanks. Consumers can save through a variety of finan- transactional platforms. Having access to wealth-building cial products beyond interest-bearing deposits, including products that offer a financial return is an important step more basic store of value (SoV) accounts and more sophis- in financial inclusion and diversification. ticated market-based wealth-building products, such as stocks, bonds, and pension funds. Basic SoV accounts, in Although this study focuses primarily on digitally-acces- particular, are well-suited to meet many saving purposes sible interest-bearing deposits, market developments in in low-income areas, such as withstanding income shocks, some of the focus countries reveal important trends in managing unpredictable cash flows, meeting emergency other innovative types of digital savings products. Annex needs, and providing a safe place to store wealth. The key A looks at e-wallet accounts offering customers a finan- difference between the digital savings accounts studied cial return. Given their nascence, the policy implications in this report and digital SoV accounts is that the former of these return-generating e-money accounts are not well group seeks to explicitly incentivize saving by offering a understood, but they represent an innovative alternative contractually specified financial return and compensating to traditional interest-bearing deposits. Annex B explores customers for the time value of money. As such, these two digitally-enabled, market-based wealth-building digital savings accounts help customers build wealth over products, the Mbao pension plan and M-Akiba govern- time and save for long-term purposes. ment bond in Kenya. While some market-based products may technically constitute investment rather than savings Consistent with a holistic understanding of digital financial products, they are important to highlight in concert with inclusion, the product scope focuses on formal financial digital savings accounts, as they represent a further step in services offered in connection with, but that go beyond savings-related DFI for those individuals seeking to diver- digital transaction accounts. The Global Partnership for sify their portfolios. Finally, Annex C explores a number of Financial Inclusion (GPFI), the G20 body focused on finan- efforts in which providers have focused on offering digi- cial inclusion, defines DFI as “the use of digital financial tal transaction accounts specifically designed to facilitate services to advance financial inclusion. It involves the saving. 6 Scope of Report   7 2.2  GEOGRAPHIC SCOPE work, and (2) the account is accessible either on a basic mobile device or an agent-administered POS terminal. To guide the analysis, the study examines digital savings The GPFI defines DFS as “financial products and services, deployments and DFS policies in 12 markets across SSA, including payments, transfers, savings, credit, insurance, South Asia, and EAP (collectively, “focus regions”), the securities, financial planning and account statements” regions most committed to promoting a digital approach that “are delivered via digital/electronic technology to financial inclusion. According to the 2016 Maya Dec- such as e-money (initiated either online or on a mobile laration Progress Report, DFS represents the top the- phone), payment cards and a regular bank account” (GPFI matic target area among SSA members of the Alliance 2016a, 3). The universe of digital channels through which for Financial Inclusion and the second most frequent consumers can access savings accounts is broad. Such thematic target area for Asian members of the alliance channels include internet banking, smartphone-enabled (AFI 2016a). Furthermore, in a 2015 report investigating banking applications, automated-teller machines (ATMs), mobile credit, savings, and insurance, the Groupe Spé- POS terminals, and basic mobile devices, among others. ciale Mobile Association (GSMA) reported that mobile This report focuses on access channels that have played savings products are most prevalent in SSA and Asia a significant role throughout the focus regions in reaching (GSMA 2015d). Within the regions, the study analyzes the unbanked and underbanked population segments. Nev- digital savings markets in: Bangladesh, Cambodia, Côte ertheless, Internet access and smartphone penetration d’Ivoire, India, Kenya, Nepal, Niger, Philippines, Tanzania, are expanding rapidly in SSA and Asia. Providers and poli- Uganda, Vietnam, and Zambia (collectively, “focus coun- cymakers should continue to leverage these technologies tries”). Country selection was based on the availability of in pursuing innovative DFI strategies. information on the countries’ digital savings landscapes and was intended to represent a range of digital savings experiences, rather than focus only on successful cases. 2.4  TEMPORAL SCOPE For instance, at the conclusion of the product research in late 2017, digital savings accounts do not appear to have Research for this report was conducted in 2017. As such, emerged in Niger and Vietnam. Incorporating insights some product characteristics and policy issues discussed from these 2 countries’ DFS markets has been valuable in this report may not reflect their most recent status upon in isolating some constraining factors not clear in the 10 publication. Certain report elements were updated during other jurisdictions. the review process in late 2018. To avoid temporal imbal- ances, updates were limited to a few select topics. For example, the report was updated to incorporate 2017 2.3  ACCESS CHANNEL SCOPE Findex data, which was released in 2018. The research conducted for this study constituted desk research and The digital savings accounts studied in this report gen- analysis of publicly available data, laws, regulations, and erally meet two criteria: (1) account holders can conduct analytical publications, along with information published cash-in, cash-out transactions through a retail agent net- by the digital savings providers. 3 MARKETS, MODELS, AND PRODUCTS This section investigates how digital technology and Saving at a financial institution is low across the focus innovative business models enhance savings account regions. In 2017, only 15 and 17 percent of adults saved at accessibility. Section 3.1 provides an overview of the a financial institution in SSA and South Asia, respectively, digital savings opportunity in the focus regions and while 31 percent of adults saved at a financial institution countries. Section 3.2 analyzes delivery models and in EAP (figure 1). Less than 10 percent of adults saved at a key product features for a selection of digital savings financial institution in Bangladesh, Cambodia, Côte d’Ivo- accounts in the focus countries. Section 3.3 outlines the ire, Niger, and Tanzania (annex d). primary ways in which digital savings delivery models and account characteristics advance the saving aspects Low formal saving likely derives from limited access to of DFI. Part 3 focuses primarily on supply-side factors. savings products among low-income and rural popula- Readers should pair the analysis in part 3 with the future tions, and from the perception among low-income indi- research questions proposed in part 5, given limited viduals that their savings are not large enough to warrant data on uptake and usage. Part 5 recommends that an account at a financial institution, which may entail future research focus on which product attributes are maintenance fees, minimum balance requirements, and particularly important for successful uptake and usage. high indirect access costs (e.g., transportation, time). Fin- Part 5 also recommends additional exploration of prod- dex data indicate that the primary reason adults in the uct viability and competition dynamics. focus regions do not have a financial account is because they believe they have insufficient funds to warrant an account (figure 2). Distance to financial institutions, cost ASSESSING THE DIGITAL SAVINGS 3.1  of financial services, and documentation requirements MARKET OPPORTUNITY are also significant barriers to account ownership. This suggests that affordable, accessible, and flexible digital Healthy propensities to save coupled with low formal savings accounts could fill a significant formal savings gap saving in the focus regions indicate a distinct opportu- among low-income populations. nity for affordable, flexible, and accessible digital savings accounts.2 Figure 1 captures broad saving patterns across Digital savings providers who recognize local saving cus- the focus regions reflected in the 2014 and 2017 Findex toms and tailor their products accordingly could intro- surveys. Adults’ propensity to save has historically been duce formal saving opportunities to important market higher in SSA and EAP than in South Asia, though saving segments. At 25 percent of adults, saving with a savings was lower across all 3 regions in 2017 compared to 2014. group definitively surpasses saving at a financial institu- Saving propensity remains high in many of the focus coun- tion in SSA (figure 1). Among the South Asia and EAP tries (annex d). The percent of adults who save in Kenya, focus countries, more adults save with groups in Bangla- Uganda, Zambia, Philippines, Vietnam, India, and Nepal is desh, Cambodia, and Nepal than in formal institutions higher than in their respective regions. (annex d). Roughly the same number of Vietnamese adults 8 Markets, Models, and Products   9 FIGURE 1: Saving Patterns across Focus Regions (% age 15+) (excluding high income countries) 2014 2017 East Asia & 71 East Asia & 53 Pacific 37 Pacific 31 6 9 36 33 South Asia 13 South Asia 17 9 10 60 54 Sub-Saharan Sub-Saharan Africa 16 Africa 15 24 25 0 10 20 30 40 50 60 70 80 0 10 20 30 40 50 60 Saving Saving Saving at a financial institution Saving at a financial institution Saving with a savings group Saving with a savings group Source: World Bank Global Findex Database FIGURE 2. Reason for not having a financial institution account (% without a financial institution account, age 15+) (excluding high income countries) 63 Insufficient 56 funds 73 29 Family account 34 11 24 Distance 21 27 20 Cost 24 27 18 Documentation 19 25 9 Trust 17 14 0 10 20 30 40 50 60 70 80 East Asia & Pacific South Asia Sub-Saharan Africa Source: World Bank Global Findex Database, 2017 save with groups as with formal institutions. Thus, savings financial institutions than the broader population in the groups represent a distinct digital savings opportunity, focus regions. Digital savings providers could play an provided products offered can be adapted to meet sav- important role in expanding access to savings products ings group patterns. among these segments. Women, low-income, and rural segments would espe- Formal saving did not drop as significantly as overall sav- cially benefit from accessible digital savings options. ing between 2014 and 2017. Saving propensity was lower Table 2 indicates that women, low-income, and rural across all 3 focus regions in 2017 compared to 2014 (figure segments have lower access to saving opportunities at 3). Formal saving also decreased in EAP and SSA, while   9 10   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings TABLE 2: Saving at a Financial Institution among it increased in South Asia. Meanwhile, formal savers as a Vulnerable Segments (2017, Percent of Age 15+) percent of total savers increased across all 3 regions. More research is needed to investigate these saving dynamics Poorest Women 40% Rural and their relation to product offerings, including digital savings products. The drop in saving propensity may owe East Asia & Pacific 28 16 28 to a variety of factors. Likewise, while the increase in share of formal savers may owe to more stable access to savings South Asia 15 10 16 products at financial institutions, it could also be that more Sub-Saharan Africa 11 9 14 informal savers dropped out of the saving pool. Source: World Bank Global Findex Database DIGITAL SAVINGS ACCOUNT DELIVERY 3.2  FIGURE 3. Trends in Saving Patterns: 2014 and 2017 MODELS AND CHARACTERISTICS (% of age 15+) The digital savings accounts described in this section Difference in 2017 and 2014 saving patterns (%) Formal savers as a percent of total savers (%) 4.5 cover 35 digital savings account deployments in 10 of the 57.7 5 60 focus countries and, while not exhaustive, 12 51.7 51.8 are repre- 0 50 sentative of each country’s digital savings market. Two of the focus countries, Niger and Vietnam, did not have any –1.0 –3.1 40 digital savings accounts that met the scope of this report 35.0 –5 –5.1 at the time of the drafting. Table 3 catalogues the digital –6.1 30 26.6 27.3 savings accounts in the focus countries. –10 20 –15 3.2.1 Digital Savings Account Delivery Models 10 Banking institutions serve as the holder of the contrac- –17.9 –20 0 tual relationship with the customer for digital savings East Asia South Asia Sub-Saharan South from East AsiaThis differs accounts. Asia other Sub-Saharan forms of DFS, such as & Pacific Africa & Pacific Africa e-wallets, in which NBEIs, in addition to banking institu- Saving Formal saving 2014 2017 tions, can serve as the holder of the contractual relation- ship. NBEIs include a variety of entities, such as mobile 14 saving patterns (%) Formal savers as a percent of total savers (%) network operators (MNOs), financial-technology compa- 4.5 60 57.7 nies, and other retail chains. Regulation generally pro- 51.7 51.8 hibits NBEIs from holding deposits that can be 50 intermediated. The World Bank Group (WBG)’s 2017 –1.0 Global Financial Inclusion and Consumer Protection –3.1 40 35.0 (FICP) survey indicates that 86 percent of responding 5.1 30 26.6 27.3 jurisdictions prohibit NBEIs from using customer funds for purposes other than redeeming e-money and execut- 20 ing fund transfers (WBG 2017a). These restrictions are more common in the focus regions. 10 The types of banking institutions holding the savings 0 uth Asia Sub-Saharan East Asia South Asia Sub-Saharan account relationship with the customer range from Africa & Pacific Africa full-service commercial banks to more limited scope rmal saving 2014 2017 niche banking entities. Among the 35 documented digi- tal savings accounts in this report, 21 are held by a single Source: World Bank Global Findex Database commercial banking entity, an arrangement that occurs in 8 of the 10 countries. In 4 instances in India and Nepal, a technology platform connects savers to a variety of banking institutions. Ten digital savings accounts are held by more limited-purpose banking entities, includ- ing deposit-taking microfinance institutions (DTMFIs) in Markets, Models, and Products   11 TABLE 3: Documented Digital Savings Accounts in Focus Countries DRIVER OF TECHNOLOGY ACCOUNT ACCOUNT HOLDER AND DISTRIBUTION TECHNOLOGICAL INTERFACE [Account type] [Entity class] [Entity class] [Service name] Bangladesh Dutch-Bangla Bank Limited (DBBL) Biometric DBBL Mobile phone and POS Acct. [CB] [DBBL Biometric, Rocket Mobile] [Dedicated] Monthly savings scheme Mercantile Bank Ltd. (MBL) Mobile phone [Legacy] [CB] [MYCash: MY Bank Deposit] Cambodia AMK savings acct. AMK Co. Mobile phone [Legacy] [DTMFI] [AMK Mobile Banking] Mobile savings acct. Amret Co. Mobile phone [Dedicated] [DTMFI] [Amret Mobile Teller] Côte d’Ivoire Mobile phone Advans Savings Acct. Advans MTN, Orange [MTN Mobile Money, Orange [Legacy] [DTMFI] [NBEI: MNO] Money] India Savings accts Eko India Mobile phone Multiple banks [Legacy: broad platform] [NBEI: non-MNO] [SimpliBank] Savings accts. Fino Paytech POS Multiple banks [Legacy: broad platform] [NBEI: non-MNO] [MicroATM, kiosk banking] State Bank of India (SBI) Oxigen POS No Frills Acct. SBI [CB] [NBEI: non-MNO] [Oxigen CSP Kiosk] [Legacy] Savings acct. Airtel Payments Bank Airtel Mobile phone [Dedicated] [payments bank] [NBEI: MNO] [Airtel Money] Fino Payments Bank Fino Paytech Mobile phone and POS Savings accts. [Legacy] [payments bank] [NBEI: non-MNO] [Mobile banking, micro ATM, kiosk] Kenya M-Shwari Commercial Bank of Africa [Dedicated] (CBA) [CB] Kenya Commercial Bank (KCB) M-Pesa [Dedicated] KCB Bank Kenya Ltd. [CB] Safaricom Mobile phone KCB M-Benki [NBEI: MNO] [M-Pesa] [Dedicated] M-Kesho Equity Bank [Dedicated] [CB] Stanbic Savings Acct. Stanbic Bank [Legacy] [CB] Kenya Women’s Finance KWFT KWFT, Safaricom [DTMFI], Mobile phone and POS Trust (KWFT) Savings Acct. [DTMFI] [NBEI: MNO] [KWFT Mobile, M-Pesa] [Legacy] PostBank, Safaricom PostBank Savings Acct. PostBank Mobile phone [savings bank], [Legacy] [savings bank] [M-Sawa, M-Pesa] [NBEI: MNO] Akiba Mkononi United Bank for Africa Airtel Mobile phone [Dedicated] [CB] [NBEI: MNO] [Airtel Money] EazzySave Equity Bank [ Equity Bank, Equitel [CB], Mobile phone and POS [Legacy] CB] [MVNO (subsid.)] [Equitel] continued 12   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings TABLE 3, continued DRIVER OF TECHNOLOGY ACCOUNT ACCOUNT HOLDER AND DISTRIBUTION TECHNOLOGICAL INTERFACE [Account type] [Entity class] [Entity class] [Service name] Nepal Savings accts. eSewa Mobile phone Multiple banks [Legacy: broad platform] [NBEI: non-MNO] [eSewa] Savings accts. HelloPaisa Mobile phone Multiple banks [Legacy: broad platform] [NBEI: non-MNO] [HelloPaisa] Everest Bank Ltd. (EBL) EBL Mobile phone Savings Bank Acct. [CB] [Mobile ATM] [Legacy] Rastriya Banijya Bank Ltd. RBBL Mobile phone and POS [RB Mobile (RBBL) Savings Acct. [CB] Banking, EFTPOS] [Legacy] Philippines PondoKO BanKO Mobile phone [Dedicated] [DTMFI] [BanKO] Tanzania M-Pawa CBA Vodacom Mobile phone [Dedicated] [CB] [NBEI: MNO] [M-Pesa] Tanzania Postal Bank (TPB) TPB, Airtel, Tigo, Mobile phone and POS TPB Savings Acct. Vodacom, Zantel [CB], [Popote, Airtel Money, Tigopesa, [CB] [Legacy] [NBEI: MNO] M-Pesa, EzyPesa] National Microfinance NMB NMB, Tigo, Vodacom [CB], Mobile phone and POS [NMB Bank (NMB) Savings Acct. [CB] [NBEI: MNO] Mobile, M-Pesa, Tigopesa] [Legacy] FINCA, Airtel, Tigo, Mobile phone and POS FINCA Savings Acct. FINCA Vodacom [CB], [FINCA Mobile, Airtel Money, [Legacy] [CB] [NBEI: MNO] Tigopesa, M-Pesa] CRDB Savings Acct. CRDB Mobile phone and POS [Legacy] [CB] [SimBanking] MCB, Airtel, Tigo, Mwanga Community Bank Mobile phone MCB Vodacom (MCB) Savings Acct. [MCB Mobile Banking, Airtel [community bank] [community bank], [Legacy] Money, Tigopesa, M-Pesa] [NBEI: MNO] Uganda MoKash CBA MTN Mobile phone [Dedicated] [CB] [NBEI: MNO] [MTN Mobile Money] Barclays Group Acct. Barclays Bank Barclays, Airtel Mobile phone [Dedicated] [CB] [CB], [NBEI: MNO] [eKeys, Airtel Money] Zambia Zanaco Savings Acct. Zanaco Mobile phone and POS [Legacy] [CB] [Xapit] Eaze Save Investrust Mobile phone [Legacy] [CB] [InvestMobile] Abbreviations: CB: commercial bank. DTMFI: deposit-taking microfinance institution. NBEI: nonbank e-money issuer. POS: point-of-sale terminal. MNO: mobile network operator. Account type: Legacy describes instances in which a digital channel links customers directly to a savings account within the banking institution’s existing suite of products. Dedicated refers to accounts that have been created specifically for digital savings. Legacy: broad platform refers to a few mechanisms in which nonbank entities establish savings account connections with a wide range of banking institutions. Markets, Models, and Products   13 Cambodia, Côte d’Ivoire, Kenya, the Philippines, and FIGURE 4. Three common digital savings account delivery models Zambia, specialized payments banks in India, a postal savings bank in Kenya, and a designated community Banking MNO institution Retail agent Savers bank in Tanzania. A distinguishing factor among the models for delivering digital savings accounts revolves around the institutions driving the product’s technology and distribution and, cor- FinTech respondingly, whether the banking institution that holds the contractual relationship with the customer pursues a Icon source: Shutterstock.com (subscription) substantive partnership with a nonbank entity in furnish- ing the digital savings account. An entity is said to drive the digital savings account’s technology and distribution if the 15 documented accounts involve partnerships, 6 of it owns and operates the product’s primary technological which involve non-MNO NBEIs. interface and drives the distribution strategy. The entity itself does not need to perform the distribution function 3.2.2 Key Digital Savings Account Characteristics alone; rather, it determines or selects the agent distribu- tion model for the account. About two-thirds of the products reviewed involve new digital channels to legacy bank savings accounts, while Partnerships between banking institutions and NBEIs are the remaining products are customized accounts, cre- common in the provision of digital savings accounts. Table ated for the purpose of digital savings. In 23 of 35 cases, 4 captures the classes of entities primarily responsible for the product involves a digital channel linking customers digital savings account technology and distribution in the directly to a savings account within the banking insti- 10 focus countries where accounts exist. Figure 4 depicts tution’s existing suite of products. Of these, 2 mecha- three common digital savings account delivery models. nisms in India, managed by Fino Paytech and Eko, and Among the 35 documented digital savings accounts, 23 2 in Nepal, managed by eSewa and HelloPaisa, consti- involve partnerships between banking institutions and tute “broad platforms,” whereby the entities establish NBEIs. Of these, 6 accounts involve distinctly shared tech- savings account connections with a number of banking nology and distribution responsibilities between banking institutions. In the remaining 12 cases, an account has institutions and MNOs. In the remaining 12 cases, the been created for digital savings. The report refers to banking institution holding the contractual relationship these as “dedicated” accounts, though they may offer with the customer also drives the product’s technology other services, such as short-term loans. Nine of these and distribution. dedicated accounts involve partnerships between bank- ing institutions and MNOs, while the remaining three are MNO partnerships account for a greater share of the managed entirely by banking institutions. Perhaps the digital savings account models in SSA than in Asia. most well-known of the dedicated accounts is M-Shwari, The historically MNO-centric DFS approach in SSA the Commercial Bank of Africa (CBA) and Safaricom and contrasting bank-oriented DFS patterns in a num- M-Pesa digital savings account in Kenya. Box 1 explores ber of Asian countries likely contribute to the relative M-Shwari in more detail. CBA has launched similar prod- share of MNO digital savings partnerships. Of the 21 ucts in Tanzania (M-Pawa) and Uganda (MoKash) and is documented accounts in SSA, 16 involve partnerships expected to launch an analogous product in Côte d’Ivo- between banking institutions and MNOs. In Asia, 7 of ire (Mumo 2016). TABLE 4: Primary Driver of Technology and Distribution among Documented Digital Savings Accounts (Entity Type, Number of Instances, by Country) CÔTE BANGLADESH CAMBODIA D’IVOIRE INDIA KENYA NEPAL PHILIPPINES TANZANIA UGANDA ZAMBIA Banking institution 2 2 — — 1 2 1 1 — 3 MNO NBEI — — 1 1 6 — — 1 2 — Non-MNO NBEI — — — 4 — 2 — — — — Shared (MNO and bank) — — — — 2 — — 4 — — 14   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings BOX 1 M-Shwari (Kenya) Launched in November 2012, M-Shwari is a CBA sav- However, Safaricom reported 30-day active users at ings and loan product available to M-Pesa customers. 3.9 million at the end of fiscal 2016 (Safaricom CBA holds the savings account relationship with the 2016). Outstanding M-Shwari deposits stood at K customer, while Safaricom drives the technology and Sh 7.6 billion (about $74 million) at the end of fiscal distribution. M-Shwari is completely branchless and 2015 and K Sh 8.1 billion (about $79 million) in May paperless. M-Pesa users open an M-Shwari account of 2016 (CBA 2016; Safaricom 2016).d M-Shwari via their M-Pesa mobile interface simply by accepting points to how effective partnerships between banks the M-Shwari terms and conditions.a Thereafter, users and nonbanks can be in furnishing digital savings can transfer money directly from their M-Pesa account accounts. to M-Shwari. M-Shwari has no minimum balance, no maintenance fees, and no charges on transfers Total M-Shwari Users (Millions) between M-Pesa and M-Shwari.b M-Shwari depositors 14 earn 7.35 percent interest per annum on their aver- age daily balance, which is paid quarterly. Users can 12 also open a “Lock Savings Account,” which has a 10 maturity of one to six months. Despite being a time 8 deposit, the Lock account has no penalty for early withdrawal. M-Shwari offers 30-day loans for a fixed 6 charge of 7.5 percent.c 4 M-Shwari has had strong uptake in its five years of 2 existence. According to CBA, M-Shwari customers have grown from 2.9 million in the first quarter of 0 2013 to 12.6 million at year-end 2015, representing Q1 2013 YE 2013 YE 2014 YE 2015 about 47 percent of the Kenyan adult population. Source: CBA annual reports CBA, “Activate M-Shwari,” http://cbagroup.com/m-shwari/activate-m-shwari/, accessed May 10, 2017. a.  CBA, “How M-Shwari Works,” http://cbagroup.com/m-shwari/how-m-shwari-works/, accessed May 10, 2017. b.  CBA, “M-Shwari: FAQs,” http://cbagroup.com/m-shwari/faqs/, accessed May 10, 2017. c.  Box 1 conversions utilize the year-end 2016 exchange rate of $1 = K Sh 102.49 (Central Bank of Kenya). d.  Basic mobile phones, also known as feature phones, its digital savings channel. In 10 cases, digital savings represent the most common technological interface accounts are accessible through both mobile phones through which users access their accounts, although a and agent-administered POS devices, offering more sizable segment of the accounts can be accessed through flexibility for consumers. In three cases in Tanzania both basic mobile phones and agent-administered POS involving Tanzania Postal Bank, National Microfinance devices. Just over 60 percent of the documented digital Bank, and FINCA, as well as one case in Kenya involving savings accounts are accessed via basic mobile phones. Kenya Women’s Finance Trust (KWFT), savers can access Among these, accounts are accessible through a mix of their digital accounts through mobile options furnished the banking institution’s own mobile-banking platform by both the banking institution and an MNO, as well as and through a partner NBEI’s mobile-money service. through POS terminals. Access via an MNO’s mobile-money service is most com- mon in SSA, where the services of Safaricom, Vodacom, Most of the digital savings accounts offer some level of MTN, and Airtel all link to digital savings accounts. In remote account opening, either directly through a basic Asia, where regulations have often blocked MNOs from mobile phone or via an agent-facilitated document-col- directly offering DFS, it is far more common for banks to lection process, but complete savings account opening utilize their own mobile-money applications or partner at a retail agent location is rare. It is uncommon for retail with a non-MNO NBEI. However, in India, the recently agents to have full authority to open a savings account launched Airtel Payments Bank utilizes Airtel Money as on behalf of a banking institution. In six observed Markets, Models, and Products   15 cases, savers must visit a bank branch to open a savings Many of the documented accounts offer additional fea- account, while the status of non-branch account opening tures and options, such as: is unclear for a few cases. In a handful of cases that are • Short-term loans. A number of digital savings primarily concentrated in India, direct savings account accounts offer customers the possibility of accessing opening appears possible at a retail agent location. For short-term loans. In fact, six accounts are directly mar- four digital savings accounts in Kenya and one each in keted as savings and loan products. Four of these are Tanzania and Uganda, customers can open a digital sav- in Kenya, all involving the Safaricom M-Pesa mobile- ings account directly on their mobile device. A common money service. The remaining two are in Tanzania approach entails retail agents collecting account-open- and Uganda. Although very convenient, these loans ing information for evaluation by the banking institution. can be costly. In the case of the Safaricom/CBA According to the Global FICP survey data, about three- M-Shwari loan, a 30-day loan-facilitation fee is set at fourths of responding jurisdictions permit retail agents 7.5 percent, amounting to an annual effective interest to receive and submit to commercial banking institu- rate of 138 percent.3 Part 5 recommends that future tions deposit account applications (Annex E, Table E.4). research explore to what extent demand savings and Less than half (42 percent) of all responding jurisdictions loan products is driven by demand for credit. allow retail agents to open a customer account follow- ing a commercial banking institution’s policy (Annex E, • Term- or recurring-deposit accounts. While some of Table E.4). the documented digital savings accounts are avail- able only as term deposits, many others offer the The digital savings accounts reviewed in part 3 con- option to open a term- or recurring-deposit account. stitute deposits held by banking institutions and are As an example, Dutch-Bangla Bank Limited (DBBL) in eligible for deposit insurance, where regimes exist. Bangladesh offers the Deposit Plus Scheme, a recur- Explicit deposit insurance regimes exist in 8 of the focus ring deposit, and the Fixed Deposit Receipt, a term countries (see: table 6, part 4). This stands in contrast deposit, through agent-administered biometric POS to e-money accounts, which are generally not insured terminals or mobile banking.4 In most cases, the (Izaguirre, Lyman, McGuire and Grace 2016). However, banking institution markets the term deposit itself, two of the focus countries, Kenya and India, have pur- but this is not universally true. For instance, the non- sued innovative policy approaches in this area. Kenya is MNO NBEI Fino Paytech directly markets fixed and developing pass-through deposit insurance for e-money recurring deposit accounts.5 Additionally, dedicated accounts (Izaguirre et al. 2016). In India, payments bank digital savings accounts offer term-deposit options in deposits are insured (see: Box 2). Part 5 recommends certain cases. For example, M-Shwari and MoKash future research on whether knowledge of deposit insur- offer the Lock and Fixed Savings Accounts, respec- ance coverage affects account uptake. tively, both of which offer flexible early withdrawal options.6 Most the digital savings accounts reviewed here are low- • Group accounts. At least six of the documented dig- cost, marked by low or no maintenance fees and mini- ital savings accounts offer the ability to access group mum balance requirements, and offer flexible withdrawal accounts digitally. These options appear in India, policies. Low-cost account features, such as low main- Kenya, Tanzania, and Uganda. Five of the six repre- tenance fees and minimum balance requirements, are sent digital channels to legacy group savings accounts likely important for digital savings uptake among low-in- at banking institutions. One account, offered through come segments. Most of the documented accounts also a partnership between Barclays and Airtel in Uganda, have flexible withdrawal options, while few stipulate is a dedicated, interest-bearing digital savings group withdrawal limits. In most cases, providers’ decisions account (Barclays, CARE, Plan 2016). As discussed in to offer low-cost account accounts for certain customer section 3.1, group saving is widespread in SSA and segments appear market driven. No more than 10 per- certain other Asian countries. Digital group savings cent of Global FICP survey respondents mandate low- accounts represent an important effort among DFS cost deposit features, such as limits on opening costs, providers to forge synergies between their savings maintenance fees, overdraft penalties, and minimum products and local populations’ traditional, familiar balance requirements (WBG 2017a). saving patterns. 16   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings  OW INNOVATIVE BUSINESS MODELS 3.3 H vices by 80 to 90 percent” (Manyika et al. 2016, 36). ENHANCE SAVINGS ACCOUNT Digital savings accounts also provide an opportunity ACCESSIBILITY for banking institutions to improve their cost-of-fund- ing profile. Local deposit mobilization can reduce 3.3.1 Disaggregation of the Digital Savings banking institutions’ reliance on expensive brokered Account Value Chain deposits, wholesale funding, and long-term debt, much of which may also be priced in foreign currency. Disaggregation of the digital savings account value MGI estimates banking institutions in developing chain allows for expanded access channels, improve- economies could raise $4.2 trillion in deposits via dig- ments in the economics of low-cost savings accounts, ital channels (Manyika et al. 2016). Finally, digital sav- the leveraging of different entities’ comparative advan- ings accounts entail an opportunity for providers to tages, and scaling of microbanking institutions. DFS achieve economies of scope through diversity in business models are frequently characterized by horizon- product offerings. tal structures, whereby providers strike partnerships with third parties to fulfill one or more aspects of product • Leveraging comparative advantage among differ- development and delivery. Disaggregation of the digital ent classes of entities. Through partnerships between savings account value chain primarily takes two forms. banking institutions and nonbank entities, digital sav- First, banking institutions can partner with a NBEI, which ings accounts benefit from the relative strengths of assumes primary responsibility for a digital savings each party. When banking institutions partner with account’s technology and distribution. Second, a bank- MNO NBEIs in developing and distributing digital ing institution may contract with a third party to conduct savings accounts, both customers and providers can some or all of the digital savings account distribution benefit from the MNO’s distribution and coverage responsibilities. Such value chain disaggregation carries potential, as well as the presence of existing mobile distinct financial inclusion advantages that are extremely phones that can serve as the primary account inter- important for the provision of savings accounts: face. Moreover, MNOs have an economic incentive to distribute the product, despite potentially low mar- • Expanded access channels. Through a combination gins, as the savings account may enhance loyalty to of retail agents and basic devices, digital savings the MNO’s core product offering. Except for the accounts provide customers with a wider range of mobile device, partnerships with non-MNO NBEIs access channels than traditional branch-based bank- that have a large retail presence offer similar advan- ing. Across the focus countries, the primary access tages. Partnerships between banking institutions and mechanisms involved in digital savings accounts— financial-technology companies can benefit from the retail agents, POS terminals, and basic mobile latter’s flexibility, agility, and ability to develop inno- devices—are far more widespread than analogous vative, customizable products. access channels for traditional savings accounts, such as commercial bank branches. Expanded access chan- • Broadening reach and scale of microbanking institu- nels are important not only for digital savings account tions. Digital savings business models allow institu- opening but also for accessibility and flexibility, two tions that specialize in microsavings, such as DTMFIs, qualities that are vital for low-income savers, who need to serve a wider base of customers, thereby expanding easy access to savings in case of emergencies. the reach of their expertise. Globally, DTMFIs, commu- nity banks, savings banks, and other microfinance enti- • Improved economics of providing low-cost savings ties maintain expertise in serving local communities, accounts. Disaggregating the digital savings value including individual small savers, yet expanding their chain improves the economics of providing low-cost customer base can be challenging. Pursuing partner- savings accounts by lowering distribution costs and ships with MNOs or other NBEIs can provide an effi- helping banks mobilize local deposits. Digital tech- cient avenue for these institutions to achieve scale. In nology and value-chain disaggregation can lower the Tanzania, for instance, the Mwanga Community Bank cost of distributing digital savings accounts. Working (MCB) has integrated its mobile-banking service with through retail agent networks is more affordable than Vodacom M-Pesa, Airtel Money, and Tigo Pesa, allow- developing full-scale branch outlets. Partnering with ing customers to access MCB savings accounts from a nonbank entities and leveraging digital technology substantial number of outlets and channels. Likewise, also helps banking institutions achieve faster econo- in Kenya, the DTMFI KWFT has supplemented its own mies of scale. The McKinsey Global Institute (MGI) KWFT mobile and agent banking service with a Safar- estimates that digital technologies and DFS business icom M-Pesa partnership. models can lower “the cost of providing financial ser- Markets, Models, and Products   17 3.3.2  Product Tailoring and Customization 3.3.3  Leveraging Existing DFS Ecosystems Digital technology and innovative business models A prevailing DFS ecosystem can facilitate the develop- allow for more accessible, flexible, and affordable sav- ment and uptake of digital savings accounts through ings accounts. Substantial gaps exist in the focus regions existing infrastructure and customer familiarity. Digital sav- between overall and formal saving. As established in ings accounts are built on many of the same information section 3.1, perceptions among low-income segments and communication technology elements as digital trans- that their savings are too small to warrant an account, action accounts and payment services. Digital transaction along with cost of financial services and distance to accounts themselves serve as a gateway to digital savings financial institutions, are central impediments of formal accounts. Furthermore, when low comfort with traditional account uptake in developing economies. Moreover, branch banking is a major hurdle to savings-account adults may save informally for easier access to their sav- uptake, the digital savings account market benefits from ings in case of an emergency or for other nearer-term the elements of the DFS ecosystem that enhance trust uses. Digital savings accounts seek to address many of and familiarity, such as community-based agents and the barriers to formal saving, with low cost features, basic mobile phones. A robust DFS market can also help more proximate access channels, and flexible with- customers develop confidence and financial capability to drawal options. Part 5 highlights future research ques- move on to more sophisticated products, including digital tions geared toward exploring more precisely the savings. Kenya’s digital savings market, with digital connections between digital savings product attributes wealth-management products such as pensions and and uptake. bonds, exemplifies the influence a strong DFS ecosystem can have on market development. DFS actors are leveraging technology to tailor products to more effectively meet local saving patterns. An exam- A robust DFS market can foster healthy competition in ple of the compatibility between digital savings and the savings account space. A thriving market for digi- local customs involves digital group savings accounts. tal transaction accounts and payment services can spur To be sure, group accounts are not unique to DFS. banking institutions to seek more efficient channels for Indeed, most of the digital savings accounts with group delivering banking services, including savings. In Kenya, options captured in this study represent digital paths to for instance, a 2017 CGAP report documented a striking existing group accounts at banking institutions. How- correlation between growth in mobile money accounts ever, DFS business models allow greater reach to rural and bank accounts (Cook and McKay 2017, 2). In some areas, where savings groups are common. Additionally, prosperous DFS settings, particularly where nonbank enti- digital savings accounts allow a better opportunity for ties have introduced significant competition to the finan- customization. For instance, the Barclays-Airtel digital cial services industry, dynamic digital savings markets group account and Airtel Weza (annex C), mimic group have developed. In Tanzania and Kenya, various banks savings customs by requiring three-PIN authentication, and DTMFIs have entered the digital savings space, both analogous to group lock-box procedures. Such a fea- by pursuing partnerships with MNOs and by developing ture is difficult with traditional branch-based banking, as their own digital channels. Part 5 recommends that future it would require multiple individuals to travel to a bank research further investigate the impact of digital savings branch. In addition to Airtel Weza, annex C examines accounts on competition, including whether terms have other non-interest-bearing digital transaction accounts improved for savers. that are specifically designed to facilitate saving. For instance, certain providers are leveraging technology to The DFS ecosystem, often in concert with policy action, influence saving behavior through features such as SMS can give rise to new classes of entities that are well posi- saving reminders and labeled products, in which cus- tioned to offer digital savings accounts without traditional tomers can easily earmark funds for specific purposes, branch-based banking. Examples of new classes of enti- including healthcare and education. A successful labeled ties exist in a number of focus countries. In the Philip- account example is the M-Tiba mobile health wallet.7 pines, for instance, BanKO, a “mobile phone-based, Annex C also profiles SmartMoney’s digital transaction microfinance-focused savings bank,” aims to serve account, which is designed to facilitate saving in rural the unbanked and underserved segments through its communities, particularly in Uganda. PondoKO savings account, which users access entirely through mobile banking and retail outlets.8 Similarly, India’s payments banks (Box 2), such as Airtel Payments Bank, offer digital savings accounts entirely through mobile devices and retail outlets. 18   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings Digital savings providers can effectively pool program- a continuum from wholly private to partially open for a ming improvements and spur innovations through specified set of partners to fully open to the public (Bank- application program interfaces (APIs). APIs are software able Frontier Associates 2016). Nevertheless, select DFS programs that specify how software components should actors are taking advantage of at least some degree of interact and how user interfaces should function. An API openness to develop digital savings accounts. For open API can enable third-party developers to innovate instance, M-Shwari was built on top of the M-Pesa plat- freely and to build new features, functionalities, or sepa- form (Bankable Frontier Associates 2016). Open APIs rate applications on top of preexisting products without can offer a tremendous opportunity for digital savings needing to establish a specific agreement or partner- providers to crowd-source high-quality programming ship with the original developer. In practice, fully open expertise at a potentially much lower cost than develop- APIs are not the norm in the DFS ecosystem. Rather, the ing technology in house. degree of accessibility among DFS providers’ APIs runs BOX 2 Digital Savings Potential at Payments Banks in India Historically, the Reserve Bank of India’s (RBI) DFS legal place a maximum of 25 percent of funds in commer- and regulatory framework favored bank-oriented cial bank deposits (RBI 2014b, 5 [5]). As of now, pay- DFS. Recognizing the need to leverage digital chan- ments bank accounts have a limit of Rs 100,000 (about nels better to promote financial inclusion, the RBI $1,472), but the RBI says it will review the limit as war- established a new category of institution in 2014— ranted (RBI 2014b, 3 [4]).b Payments banks must also payments banks—a development that may have a maintain a minimum capital adequacy ratio of 15 per- significant impact on India’s digital savings landscape. cent of risk-weighted assets, a minimum Tier 1 capital As the RBI explained in its 2014 Guidelines for Licens- ratio of 7.5 percent of risk-weighted assets, and a ing Payments Banks, “the primary objective of setting leverage ratio of 3 percent (RBI 2014b, 5–6 [6]). Pay- up of payments banks will be to further financial inclu- ments bank risk-weighted assets will be low, given the sion by providing (i) small savings accounts and (ii) limited asset classes in which they can invest and the payments/remittance services” among underserved relatively low-risk nature of those classes. The RBI also segments (RBI 2014b, 2 [2]). The RBI makes clear that recognizes the need for proportional prudential regu- payments banks should leverage technology to reach latory standards for payments banks, as they take on remote and underserved areas through an extended limited to no credit risk. The RBI suggests prudential set of access points. In 2015, the RBI granted 11 enti- requirements for payments banks will largely revolve ties “in-principle” licenses, along with an 18-month around operational and liquidity risk management window to set up a payments bank. (RBI 2014b, 7 [10]). In general, payments banks must Airtel, which became the first to launch its pay- comply with all relevant risk-management, consum- ments bank in early 2017, offers a fully digital savings er-protection, and financial integrity laws and regula- account with no minimum balance, low withdrawal tions, and they are responsible for the actions of their fees, and a 4 percent per annum interest rate.a Cus- business correspondents. Payments bank accounts tomers visit one of Airtel’s 250,000 banking points to are eligible for simplified know-your-customer and open an account, needing only their Aadhaar number anti-money laundering/combating the financing of to do so. A customer’s mobile number becomes his or terrorism standards, provided they meet “small her account number. Fino Payments Bank, which fol- account” standards (RBI 2014b, 3 [4]). lowed Airtel, also offers a suite of savings products Despite their promise, restrictions on revenue that customers can access through mobile or POS opportunities and competition from traditional banks technology. India Post and Paytm Payments Banks are offering Pradhan Mantri Jan-Dhan Yojana accounts also operational, and both appear poised to offer dig- may present viability challenges for the payments ital savings accounts soon. banks. In fact, CDSL, Shri Dilip Shantilal Shanghvi, and From a regulatory perspective, payments bank Tech Mahindra surrendered their payments bank deposits are considered deposits and eligible for licenses before launching (Bhakta 2016). The most deposit insurance, one of the many properties that established payments bank, Airtel, has not been prof- distinguishes the payments bank license from com- itable in its first 2 years, but this is not surprising for an mon NBEI licenses. The RBI prohibits payments banks early-stage, growth-oriented company, and there are from lending. They must invest a minimum of 75 per- cent of customer funds in government securities and continued Markets, Models, and Products   19 BOX 2, continued encouraging trends.c Airtel’s savings deposits grew Notes: substantially over FY 2018, and net interest income is Airtel Payments Bank, “Savings Account,” https://www.airtel. a.  positive and growing. Those payments banks that in/bank/saving-account. b. Note: Conversions in box 2 utilize the year-end 2016 position themselves to capitalize on unmet formal exchange rate of $1 = Rs 67.95 (Reserve Bank of India). savings demand should find good opportunities in  ote: Comments on Airtel’s performance were updated in c. N the Indian market. 2018. Source: Airtel Payments Bank Ltd, Financial Statements (March 31, 2018), https://www.airtel.in/about- bharti/equity/results. NOTES In this paper, we use the term propensity to save to represent the share of adults who save in a given jurisdiction. Formal saving in 2.  Global Findex refers to saving at a financial institution. 3. https://sites.tufts.edu/inclusivecommerceblog/2014/01/08/m-shwari-unconventionally-affordable-at-an-apr-of-138/. Dutch-Bangla Bank, “Agent Banking,” https://www.dutchbanglabank.com/agent-banking/agentbanking.html, accessed May 10, 4.  2017. Fino Paytech, “Savings,” http://www.finopaytech.com/industry-sectors/banking/savings, accessed May 20, 2017. 5.  CBA Bank, “M-Shwari: Lock Savings Account,” http://cbagroup.com/m-shwari/lock-savings-account/, accessed May 15, 2017; 6.  MTN, “MoKash-My Saving, My Loans: Terms and Conditions,” https://www.mtn.co.ug/Mobile%20Money/Banking/Pages/MoKash. aspx, accessed May 15, 2017. M-Tiba, http://m-tiba.co.ke/, accessed August 4, 2017. 7.  BanKO, “PondoKO,” http://www.banko.com.ph/savings/pondoko-savings-account/, accessed May 5, 2017. BanKO (2015). 8.  4 DIGITAL SAVINGS POLICY CONSIDERATIONS The purpose of this section is to discuss key policy issues G20 HLP 1: PROMOTE A DIGITAL 4.1  that enable and constrain digital savings account develop- APPROACH TO FINANCIAL INCLUSION ment and to offer corresponding considerations within the context of the G20 HLPs for DFI. Recognizing the central 4.1.i) Incorporate savings-specific elements in national role digital technologies can play in driving financial inclu- financial inclusion strategies. Eleven of 12 focus countries sion and inclusive growth more broadly, the G20 developed either have or are preparing a dedicated national finan- a set of eight HLPs for policy makers and market leaders cial inclusion strategy. One country maintains a national around the world to consult as they contemplate digitally development strategy with a financial inclusion compo- enabled financial inclusion methods (GPFI 2016a). This sec- nent. Including savings-specific goals in these strategies tion provides specific policy considerations supported by may help accelerate digital savings market development. policy and market observations for each of the eight HLPs. Over half (54 percent) of Global FICP survey respondents These observations derive from the digital savings product require deposit-taking institutions to offer basic finan- findings in part 3, as well as a broader analyses of the dig- cial products (Annex E, Table E.1). A 2016 World Bank ital savings markets and policy landscapes in the 12 focus Group analysis of 17 publicly available national financial countries. The discussion below also draws on findings inclusion strategies found that 13 incorporate savings/ from the WBG’s 2017 Global FICP survey results. Annex E pension-related policy areas (WBG 2016, 8). Both Tan- details key digital savings-relevant FICP data elements. zania’s and India’s strategy, two of the longer-standing strategies among the focus countries, include savings-re- Policymakers should use part 4 as a guide for analyzing lated targets and action items. These countries maintain their local digital savings markets. Given that digital sav- two of the more diverse digital savings markets. Tanza- ings account deployments are in their early stages and nia’s National Financial Inclusion Framework sets a target future research is needed to evaluate uptake and usage, of 25 percent of adults maintaining “two weeks’ worth of the policy takeaways below should be read as consider- income in formal savings” (Tanzania National Council for ations, rather than recommendations. The future research Financial Inclusion 2013, v). The Government of India sets agenda outlined in part 5 will allow for a more compre- ambitious savings goals in its Pradhan Mantri Jan-Dhan hensive calibration and prioritization of digital savings Yojana (PMJDY) strategy, a core pillar of which involves policy considerations. In the meantime, the policy issues the “Opening of Basic Saving Bank Account of every adult discussed in part 4 can help policymakers evaluate digi- citizen” (Ministry of Finance, India 2014, 20 [7.2]). The tal savings developments in their local markets. Based on Government of India requires banking institutions to offer current research, policies that support bank-NBEI part- a PMJDY basic savings account that has no minimum bal- nerships (see: 4.3.i), NBEI-to-bank interoperability (see: ance and pays interest (Ministry of Finance, India 2014). 4.4.i), and harmonization of customer due diligence stan- As of year-end 2016, over 260 million PMJDY accounts dards between banks and NBEIs (see: 4.3.iii) appear most had been opened, the majority of which are rural accounts important for digital savings development. (figure 5). However, nearly a quarter of these accounts had 20 Digital Savings Policy Considerations   21 FIGURE 5. Basic Savings Account Activity under the PMJDY Program 300 90 80 250 70 200 60 50 150 40 100 30 20 50 10 0 0 2014-Q3 2014-Q4 2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3 2016-Q4 Total Urban Accounts (LS, millions) Total Rural Accounts (LS, millions) Percentage of Accounts with Zero Balance (RS, %) Source: Government of India Department of Financial Services, PMJDY Progress Report a zero balance in 2016, which, although improving, still (Annex E, Table E.1). Globally, one of the chief methods indicates low usage. Nevertheless, the relatively high level for saving involves the earmarking of recurring salary pay- of financial account ownership in India owes, in part, to ments for specific accounts. Many digital savings provid- the PMDJY program. Importantly, these savings accounts ers already facilitate these services. For example, Tanzania are often available digitally. Fino Payments Bank directly Postal Bank offers customers a salary account accessible markets PMJDY accounts in its suite of savings products.9 through agent and mobile banking.10 Meanwhile, Fino Payments Bank in India allows customers both to open a 4.1.ii) Highlight the importance of incorporating afford- designated interest-bearing salary account and to receive ability, flexibility, accessibility, and customization in Aadhaar benefits directly into their savings accounts.11 In digital savings account product offerings. Section 3.1 Côte d’Ivoire, cocoa farmers have an option to designate demonstrates that among excluded and underserved pop- a portion of their earnings from the agriculture value chain ulations, demand is potentially strong for flexible, accessi- for a savings account with the DTMFI Advans, through an ble, and affordable digital savings accounts. Encouragingly, Advans-MTN digital savings partnership (Riquet 2016). most of the digital savings accounts analyzed in this study The actual landing account for G2P payments should be offer good withdrawal options, charge minimal fees, and that which reaches the client most easily. In many cases, maintain low or no minimum balance. Additionally, in light this may be an e-money account offered by an NBEI. Pro- of the strong savings group culture and other unique sav- viding consumers with options for redirecting portions of ing patterns in many developing countries, customized large-value payments from landing accounts to digital accounts could formalize powerful saving patterns. Here, savings accounts could enhance uptake. too, DFS providers are improving upon existing models. 4.1.iii) Facilitate the integration of digital savings G20 HLP 2: BALANCE INNOVATION AND 4.2  account options with government-to-person pay- RISK TO ACHIEVE DIGITAL FINANCIAL ments, and encourage digital savings providers to INCLUSION offer options for earmarking portions of salaries for digital savings accounts. The G20’s recommendation 4.2.i) Establish policy practices for enabling digital surrounding the leveraging of large-volume recurrent savings competition while facilitating effective partner- payment streams points to an opportunity in the digital ships. Among the focus countries, Tanzania maintains the savings space. Sixty-seven percent of Global FICP survey best variety of actors and partnerships in the digital sav- respondents encourage or mandate recipients of govern- ings space. Neighboring Kenya, which has a similar policy ment transfers to open an account to receive their funds framework as Tanzania, also maintains good diversity in its 22   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings digital savings market but a greater degree of market con- nership and agreement with a banking institution to con- centration among entities providing technological and duct e-money or payment services on behalf of the bank. distribution services. Safaricom dominates these aspects Fifty-nine percent of Global FICP survey respondents indi- of digital savings in Kenya. Kenyan policy makers have cate their jurisdiction maintains a legal/regulatory frame- adopted innovative policy approaches to alleviate some work for NBEIs (Annex E, Table E.2). In the focus regions, a of the competition challenges. For instance, to ameliorate solid majority of FICP respondents in EAP and SSA report channel access issues, the Communications Authority of having NBEI frameworks, while less than half of respon- Kenya has established specialized mobile virtual network dents from South Asia report such frameworks (table 5). operator (MVNO) licenses. Equity Bank, through its sub- Tanzania and Kenya, which historically followed an MNO- sidiary Equitel (Finserve), acquired an MVNO license in led DFS model, have seen the most successful bank-NBEI 2014, which it utilizes to offer digital savings (Muthiora digital savings partnerships. Countries such as Cambodia, 2015). In other countries, intense competition between India, and Nepal, which historically required bank-based banks and NBEIs has likely inhibited digital savings devel- DFS, have taken steps to level the DFS playing field. opment. For example, distrust between banking insti- tutions and NBEIs in Côte d’Ivoire, which has a mature 4.3.ii) Enable banking institutions to conduct limit- DFS market relative to its counterparts in the West African ed-purpose banking services through retail agent net- Economic and Monetary Union (WAEMU), has impeded works. Some markets have seen digital savings accounts digital savings partnerships (Vasudevan 2016). driven primarily by banks. The best policy enabler in this regard is a clear, legally sound standard that permits 4.2.ii) Support a “multispeed” approach to digital sav- banking institutions to offer limited-purpose banking ser- ings inclusion, as some consumers may be ready to move vices through an agent network. The status of such agent beyond digital savings accounts to digitally-enabled, banking standards is uneven across the focus countries. market-based wealth-building products. As discussed in Although 11 of 12 focus countries allow agent banking section 2.3 and annex B, digitally-enabled, market-based arrangements in some form, the clarity of these standards wealth-building products that advance financial inclusion is inconsistent. In the focus regions more broadly, most have begun to emerge in select markets. Such products— FICP survey respondents indicate that agent banking stan- which allow users to access tax-advantaged retirement dards are in place (table 5). Fewer, but still a high per- accounts (such as Mbao in Kenya), participate in collective centage of respondents, permit banks’ agents to collect investment funds (for example, Yu’e Bao in China), and deposits. Globally, 81 percent of responding jurisdictions acquire individual debt and equity securities (for exam- permit commercial banks to contract with retail agents as ple, M-Akiba in Kenya)—offer innovative opportunities for third-party delivery channels (Annex E, Table E.3), while 65 certain users to move beyond basic savings and diversify percent of respondents permit commercial banks’ agents their portfolios. However, they also carry risks that should to collect deposits (Annex E, Table E.4). be well understood by regulators and consumers. 4.3.iii) Harmonize, where prudent, the application of a risk-based approach to customer due diligence (CDD) G20 HLP 3: PROVIDE AN ENABLING 4.3  for e-money wallets and bank deposits. As with other AND PROPORTIONATE LEGAL AND DFS, risk-based application of anti-money laundering REGULATORY FRAMEWORK FOR standards and requirements for combating the financing DIGITAL FINANCIAL INCLUSION of terrorism can help consumers more easily acquire digi- tal savings accounts. Although 60 percent of Global FICP 4.3.i) Develop a legal and regulatory framework that survey respondents report having established CDD simpli- allows banking institutions to pursue digital savings fications or exceptions for certain accounts or customers, partnerships with nonbank entities. In the most diverse many report requirements beyond basic identification, digital savings markets, banking institutions strike sub- particularly for commercial bank accounts (WBG 2017a). A stantive partnerships with NBEIs for the technological and unique challenge arises in digital savings when an imbal- distribution aspects of digital savings accounts. The best ance exists between CDD requirements for e-money ser- policy enabler in this regard is a clear legal/regulatory vices and bank accounts. For instance, a jurisdiction may framework for NBEIs. Broadly, NBEI participation devel- specify CDD tiers in its e-money standard but not in its ops in two ways. First, a nonbank entity may be granted bank regulatory requirements. This poses challenges for an independent NBEI license, which gives it autonomy in customer acquisition that utilizes an e-money service as a issuing and distributing e-money. Alternatively, in a bank- channel to digital savings accounts. Where prudent, reg- based DFS market, regulation might permit a nonbank ulators should strive to harmonize CDD requirements for entity to participate in DFS, but only through a direct part- e-wallets and bank deposits. Digital Savings Policy Considerations   23 TABLE 5: NBEI Frameworks and Agent Banking in Focus Regions EAST ASIA & PACIFIC SOUTH ASIA SUB-SAHARAN AFRICA Legal/regulatory framework in place for NBEIs 82% 43% 70% Commercial banks can contract with retail 91% 86% 95% agents as third-party delivery channels Commercial banks’ agents can receive 70% 67% 75% deposits Data source: WBG 2017 Global Financial Inclusion and Consumer Protection survey. Figures represent percent of responding jurisdictions. See Annex E for additional information. G20 HLP 4: EXPAND THE DFS 4.4  hold 100 percent of the value of customers’ funds in a INFRASTRUCTURE ECOSYSTEM segregated account at one or more prudentially regulated financial institutions. Eighty-six percent of Global FICP 4.4.i) Support the development of NBEI-to-bank interop- survey respondents report such a requirement (Annex E, erability. NBEI-to-bank interoperability is the technologi- Table E.5). Eight of the 12 focus countries have clear CFP cal backbone of digital savings partnerships. Twenty-three standards in place for both bank deposits and e-money of the 35 products documented in this report demon- accounts (table 6). strate NBEI-to-bank interoperability. Most products are enabled by bilateral interoperability between NBEIs and 4.5.ii) Ensure customers are afforded critical savings banks. Multilateral arrangements, which would also sup- account information at point of opening, noting that port digital savings development, are more limited. information sharing may occur unconventionally, such as directly on a mobile phone or through an agent-fa- cilitated document-collection process. Digital savings G20 HLP 5: ESTABLISH RESPONSIBLE 4.5  account disclosure should cover, at a minimum, mainte- DIGITAL FINANCIAL PRACTICES TO nance fees, withdrawal limits and fees, deposit insurance PROTECT CONSUMERS coverage, interest rates, when to expect interest pay- ments, which banking institution holds the account, and 4.5.i) Ensure customer funds protection (CFP) stan- how to submit grievances. Holders of digital savings con- dards are robust for both bank deposits and e-money tractual relationships are often further removed from the accounts. Digital savings accounts present unique CFP point of transaction than in traditional banking or e-wallet challenges, as they often invoke two sets of CFP standards, and payment services. Strong, transparent FCP standards those applicable to bank deposits and others that apply and practices are important for responsibly providing digi- to e-money accounts. Relative to basic e-wallets, digital tal savings accounts. Table E.6 (Annex E) details disclosure savings accounts often entail heightened CFP risk, due to requirements for deposit products among FICP survey higher monetary values and longer horizons. Additionally, respondents. These requirements are uneven across as opposed to generally strict intermediation standards regions and institutional class. Notwithstanding catch-all for e-wallets, banking institutions can intermediate the liability clauses for providers vis-à-vis their agents (see: funds generated from digital savings accounts, since they Annex E, Table E.7), mechanisms for ensuring that sav- constitute bank deposits. Thus, it is important that regu- ings account–related information is transmitted through lators ensure CFP standards for both bank deposits and unconventional account-opening processes, such as e-money accounts, through which digital savings often directly over a mobile phone or through an agent-facili- pass, are sound. Countries without explicit deposit insur- tated document-collection process, are not entirely clear. ance have to rely on a strong safety-and-soundness reg- ulatory structure to protect bank deposits from run-risk. Even when deposit insurance is in place, resolution and G20 HLP 6: STRENGTHEN DIGITAL 4.6  payout mechanisms have not been thoroughly tested in FINANCIAL LITERACY & AWARENESS many jurisdictions around the world. More work needs to be done to strengthen supervision and resolution 4.6.i) Incorporate saving-specific elements in financial mechanics. E-money accounts are generally not consid- education strategies. Nearly 60 percent of Global FICP ered deposits or eligible for deposit insurance, but NBEIs survey respondents report that a financial capability strat- present lower risks than banking institutions and are often egy either exists or is in development in their jurisdiction subject to strict use-of-funds requirements. For instance, (WBG 2017a). Financial education programs should incor- they usually cannot intermediate e-money and often must porate important saving-specific elements, including but 24   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings TABLE 6: State of Customer Funds Protection in Focus Countries BANGLADESH CAMBODIA INDIA KENYA NEPAL PHILIPPINES TANZANIA UGANDA VIETNAM WAEMU ZAMBIA Has explicit deposit- ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ insurance regime Law or regulation requires customers’ e-money funds to be separated from the funds of the e-money ✔ ✔ ✔12 ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ issuer and held in an account (e.g., trust, escrow) at one or more prudentially regulated institutions Note: as of 2017 TABLE 7: National Identification Systems in Focus Countries CÔTE BANGLADESH CAMBODIA D’IVOIRE INDIA KENYA NEPAL NIGER PHILIPPINES TANZANIA UGANDA VIETNAM ZAMBIA Has national ID ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Year established 1973 1975 2001 2009 1971 2011 1999 2014 2014 1975 1994 e-ID13 ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Source: World Bank ID4D dataset not limited to: the benefits of saving; setting saving goals; G20 HLP 8: TRACK DIGITAL FINANCIAL 4.8  risk versus return; characteristics of various classes of avail- INCLUSION PROGRESS able savings products; the importance of utilizing savings rather than credit, where possible, for income smoothing; 4.8.i) In cooperation with banking institutions and and the importance of seeking financial return to outpace NBEIs, policymakers should gather and publish data inflation. The final concept is a serious matter, as high and on deposits facilitated through digital channels, as volatile inflation rates in certain developing regions can such information is critical for understanding opportu- put savings value at risk, even over short periods of time. nities and risks. Gauging the impact of and appetite for digital savings accounts is challenging due to data con- straints and the nascent status of most products. Many G20 HLP 7: FACILITATE CUSTOMER IDEN- 4.7  of the future research topics outlined in part 5 depend TIFICATION FOR DIGITAL on more robust digital savings data. Bank regulators may FINANCIAL SERVICES be in a good position to work with banking institutions to develop a tracking framework through regulatory reports. 4.7.i) Continue to implement, refine, and expand As a positive example in this regard, Safaricom has pub- national identification systems. As with all financial ser- lished helpful metrics on M-Shwari and KCB M-Pesa per- vices, lack of identification can inhibit access to digital sav- formance in its investor presentations. Better collection ings accounts, particularly when digital savers face uneven and dissemination of digital savings data would help reg- identification requirements between different classes of ulators, researchers, and the providers understand oppor- entities involved in providing a digital savings account. tunities and risks. Eleven of 12 focus countries have national identification systems in place, while 8 countries’ national IDs have e-ID features (table 7). Although progress has been made in developing and disseminating national IDs, substantial population segments still have no official identification. Among the focus regions, the issue is most severe in SSA and South Asia (figure 6). Digital Savings Policy Considerations   25 FIGURE 6. Percentage of Unregistered Population in Focus Regions (2017) Sub-Saharan Africa 7 South Asia 32 East Asia & Pacific 46 0 10 20 30 40 50 Source: World Bank ID4D dataset NOTES Fino Payments Bank, “Savings Accounts,” http://www.finobank.com/personal/products/savings-account/, accessed August 10, 9.  2017. 10. TPB Bank, “Salary Account,” http://www.tpbbank.co.tz/personal-banking/salary-account, accessed August 20, 2017. Fino, “Saral Salary Account,” http://www.finobank.com/personal/products/savings-account/saral-salary-account/, and “FAQs: 11.  Accounts and Deposits,” http://www.finobank.com/personal/customer-care/faqs/accounts-and-deposits/, accessed August 10, 2017. This reflects the RBI’s standard applicable to nonbank prepaid issuers (RBI 2016b, 8). Payments banks are required to hold a 12.  maximum of 25 percent and a minimum of 75 percent of customer deposits in bank deposits and government securities, respectively (RBI 2014b, 5 [5]). A physical token that proves an individual’s identity and is used to identify, authenticate, and act as an electronic signature. A 13.  smart card that contains a contact or contactless chip (World Bank ID4D dataset). 5 FUTURE RESEARCH Digital savings accounts represent a relatively young advancement in DFI. At this time, it is difficult to thoroughly assess certain research questions related to product sustainability, market impact, and key drivers of uptake and usage. While not exhaustive, table 8 outlines research questions that will be important to address as digital savings products mature and more data become available. TABLE 8. Future Digital Savings Research Questions. TOPIC RESEARCH QUESTIONS Product economics Are digital savings accounts viable on a standalone basis? Do digital savings accounts complement or cannibalize institutions’ existing product offerings? Competition and market impact Does the introduction of digital savings accounts improve terms for savers? Do digital savings accounts complement or compete with traditional savings products? Is there evidence of optimization behavior among consumers between digital savings accounts and SoV accounts? Product attributes and design How do product performance and design characteristics, such as reliability and ease of use, affect uptake and usage? Are there specific product attributes that will help close the formal saving gender gap? To what extent is uptake of credit-linked digital savings accounts driven by demand for credit? What are the risks associated with saving via digital channels that are not present in traditional savings products? Is there evidence consumers recognize the unique value proposition of digital savings accounts? Do policy-oriented product attributes, such as deposit insurance coverage, drive uptake? Financial inclusion programs or Have financial inclusion programs or policies (e.g., requirements, exceptions, tax policies incentives, subsidies) driven digital savings deployment or uptake relative to traditional savings accounts? Which financial inclusion-related legal and regulatory issues have been most conse- quential for digital savings uptake and usage? 26 ANNEXES ANNEX A E-MONEY ACCOUNTS OFFERING FINANCIAL RETURN Certain e-money accounts offer customers a financial these arrangements create a contractual obligation to return, without requiring users to open a separate digital share profits with customers or pay them interest. Even savings account. These e-wallet profit-sharing arrange- if consistent, the programs may be discretionary in cer- ments provide a simple, accessible, and convenient mech- tain cases, and the payout often depends on how much anism for storing wealth and earning a productive return. interest the financial institution generates on the e-money The arrangements also introduce healthy competition to pool in a given period. Third, the e-wallets are generally the digital savings account market, which may incentivize subject to balance limits. Finally, their regulatory treatment more banking institutions to seek methods for expanding is uneven across jurisdictions. Whereas Tanzania’s and savings to the unbanked and underserved. In the focus Bangladesh’s e-money standards create a clear path for countries, the e-wallet products Airtel Money, Tigo Pesa, e-money issuers to offer a return on e-wallets, most focus and M-Pesa in Tanzania, as well as bKash, Ucash, Trust countries’ e-money standards either prohibit such activity Bank Mobile Money, and Islami Bank’s mCash in Bangla- or are ambiguous on the matter. According to the WBG’s desh, pay customers a return on their e-wallet balance. 2017 Global FICP survey data, 13 percent of responding Box A discusses the mechanics behind these arrange- jurisdictions allow NBEIs to pay interest on e-money bal- ments in Tanzania. ances and 8 percent allow profit sharing (WBG 2017a).14 A few elements distinguish these products from the digital Nevertheless, where they exist, these arrangements en- savings accounts on which the report primarily focuses. hance consumer choice in the savings product space and First, they do not constitute deposits and are not eligi- generally serve the same functional role as digital savings ble for deposit insurance. However, customer funds are accounts from the customer perspective. Thus, more work generally protected by ring-fencing requirements and should be done to evaluate these products’ role in savings intermediation restrictions. Second, it is not clear whether product markets, as well as their regulatory implications. NOTE 14. Number of responding jurisdictions to question addressing e-money interest and profit sharing: 62 out of 124. 28 Annex A   29 BOX A E-Money Profit-Sharing Arrangements in Tanzania In 2014, Tigo Tanzania, an MNO, became the first hold in segregated trust accounts at commercial NBEI in the world to initiate a profit-sharing arrange- banks. Tanzania’s 2015 E-Money Regulation requires ment on its customers’ Tigo Pesa e-wallet balances. that the “interest accrued in the trust account shall Since then, Tigo has made 11 quarterly payments to be used for the direct benefit of the electronic customers in the amount of T Sh 58.1 billion (about money holders” (BOT 2015a). Prior to the E-Money $26.6 million) (Tigo Tanzania 2017).a Other Tanzanian Regulation, a 2014 Bank of Tanzania circular stipu- MNOs have followed Tigo’s lead. As of January lated the same requirement (Di Castri and Gidvani 2017, Airtel completed its fifth quarterly distribution, 2014). As of June 2016, the cumulative balance in returning T Sh 11.8 billion (about $5.4 million) to e-money trust accounts stood at T Sh 605 billion customers (National Newspaper Daily News 2017). (about $277 million). Vodacom also offers a similar service for M-Pesa cus- Although providers are required to utilize earned tomers called M-Pesa Faida.b Tigo and Airtel calcu- interest for the benefit of customers, there is evi- late a customer’s return based on their daily e-wallet dence the arrangements are highly beneficial for the balance, while Vodacom ties return to customer providers themselves. Tigo, the first mover in the “throughput,” a combination of the wallet balance customer returns area, experienced significant net and other activity, such as transfers and payments cash inflow into Tigo Pesa accounts upon offering (Tigo Tanzania 2017; National Newspaper Daily the program. Furthermore, the customer returns News 2017). The rate of customer return can fluctu- programs are likely to enhance loyalty, increase ate based on the earnings of the trust balance. mobile transactions, and facilitate agent liquidity Profit sharing derives from the interest each provider management (GSMA 2015a). earns on the balance of e-money it is required to Balance on Tanzanian Trust Fund Accounts (billions of T Sh) 700 600 500 400 300 200 100 0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jun-15 Oct-15 Jan-16 Apr-16 Source: Bank of Tanzania; Note: May 2015 value imputed due to anomalous value  ote: Conversions in box A utilize the year-end 2016 exchange rate of $1 = T Sh 2,186.21 (Bank of Tanzania). a. N Vodacom, “M-Pesa Faida: What is M-Pesa Usage Benefit?,” https://vodacom.co.tz/mpesa/consumers/m-pesa-faida, accessed b.  June 10, 2017 ANNEX B DIGITALLY-ENABLED, MARKET-BASED WEALTH-BUILDING PRODUCTS In select markets, digitally-enabled, market-based wealth- lated DFI for those individuals seeking to diversify their building products have emerged, which, from the DFI per- portfolios. These products are often accessible via digital spective, represent a step beyond digital savings accounts. transactional platforms. For instance, Kenyans can access While some market-based products may technically certain digitally enabled, market-based, wealth-building constitute investment rather than savings products, they products through mobile-money platforms. Box B profiles are important to highlight in concert with digital savings two of these products, the Mbao pension scheme and the accounts, as they represent a further step in savings-re- M-Akiba government bond. BOX B Digitally-Enabled, Market-Based, Wealth-Building Products in Kenya Blue MSME Jua Kali Retirement Benefit Scheme withdrawals are tax-exempt for individuals over the (Mbao Pension Plan). Mbao is a digitally furnished age of 65.d pension scheme available to all Kenyans over the Mbao is the largest “Individual Retirement Benefits age of 18 who are M-Pesa or Airtel Money custom- Scheme” in Kenya by total members, representing 46 ers. The service, which is registered and regulated percent of industry membership (RBA 2015). As of by Kenya’s Retirement Benefits Authority (RBA), orig- year-end 2015, Mbao had 75,415 total members, up inally began as a retirement product for the informal from 39,013 in 2013. However, its share of total indi- sector in 2009.a However, it has been expanded to vidual pension assets is not commensurately large. In all Kenyans due to high demand. Customers transfer 2013, the RBA estimated Mbao’s share of industry funds to the retirement account via M-Pesa or Airtel assets to be less than 0.5 percent (RBA 2013). Money, which charge a small transaction fee.b The plan requires members to deposit at least K Sh 20 M-Akiba Government Bond. The Kenya National (about $0.20) per day, K Sh 500 (about $4.90) per Treasury launched M-Akiba, a product it describes as month, and K Sh 6,000 (about $58.50) per year.c the “world’s first mobile-based government bond,” Mbao maintains age-dependent distribution restric- through a pilot offering in March 2017 and subse- tions of 3, 10, 15, or 30 years. Savings withdrawals quently through a larger issuance in June 2017 are tax-exempt in retirement, unless they eclipse K (National Treasury 2017). Kenyans can purchase an Sh 20,000 (about $195) per month, and all savings M-Akiba bond for as little as K Sh 3,000 (about $29). Mbao Pension Plan Entities and Roles ENTITY ROLE Kenya Commercial Bank (KCB) Custodian, trustee, legal account owner CO-OPTRUST Investment Services Ltd. Fund manager (subsidiary of Co-operative Bank of Kenya) Eagle Africa Insurance Brokers Ltd. Scheme administrator Safaricom M-Pesa, Airtel Money Transfer platforms Source: Eagle Africa Insurance Brokers Ltd., Products: Individual Pension Plan 30 Annex B   31 BOX B, continued Previous government bonds required a minimum The government is aiming to raise K Sh 5 billion investment of K Sh 50,000 (about $488). The bond (about $49 million) through M-Akiba, the proceeds has a three-year maturity and carries 10 percent of which will be used to fund infrastructure projects.e interest, which is tax free and paid semiannually. Upon release, the National Treasury suggested that Customers use their M-Pesa or Airtel Money M-Akiba “is about financial inclusion” and “encour- accounts to purchase an M-Akiba bond. The bonds aging a strong savings and investment culture” can also be sold on the secondary market via M-Pesa (National Treasury 2017). and Airtel Money on the Nairobi Securities Exchange. Mbao Pension Plan Membership 80,000 50 70,000 49 48 60,000 47 50,000 46 40,000 45 30,000 44 43 20,000 42 10,000 41 0 40 2012 2013 2014 2015 Total members (LS) Share of total individual plan membership (%, RS) Source: RBA, Retirement Benefits Industry Reports (2013-2015); RBA Annual Report (2012–2013)  BA, “Mbao Pension Plan,” http://www.rba.go.ke/index.php/en/mbao-pension-scheme, accessed March 22, 2017. a. R RBA, “Mbao Pension Plan FAQs,” http://www.rba.go.ke/index.php/en/component/content/article?id=56, accessed April 20, 2017. b.   BA, “Mbao Pension Plan FAQs”; Note: Box A conversions utilize the year-end 2016 exchange rate of $1 = K Sh 102.49 (Central c. R Bank of Kenya). RBA, “Mbao Pension Plan.” d.   he National Treasury, “M-Akiba Retail Bond: Frequently Asked Questions (FAQs),” http://treasury.go.ke/makiba/FREQUENTLY%20 e. T ASKED%20QUESTIONS%20-%20M-AKIBA.pdf, accessed June 10, 2017. ANNEX C SAVING-ORIENTED DIGITAL TRANSACTION ACCOUNTS Various DFS providers in the focus countries have devel- accounts and labelled accounts geared toward a specific oped non-interest-bearing digital transaction accounts purpose, such as healthcare or education. A successful that work to incentivize saving through careful user-cen- labeled account example is the M-Tiba mobile health wal- tric customization. Although these accounts do not offer let.15 Box C further examines two examples of remarkable a financial return, their features are specifically tailored to customization efforts in Uganda. facilitate saving. Examples include digital group savings BOX C Saving-oriented digital transaction accounts in Uganda Ugandan DFS providers have put tremendous effort cess, as it sends out group SMSs detailing transactions. into customizing their basic, non-interest-bearing Users visit Airtel agents to deposit and withdraw funds. e-wallet products to accommodate local saving SmartMoney. Founded in 2010 and headquartered needs. Airtel Weza and SmartMoney demonstrate in Kampala, Uganda, SmartMoney, a financial-tech- the potential to unlock savings in remote areas, if nology company, offers a digital savings account to products are tailored to particular saving customs. rural African farmers through its proprietary cloud- Airtel Weza. Airtel Weza is an Airtel Money-enabled based platform, which is operable across all mobile group savings account available to Ugandan Village networks.b Users need only a basic mobile device to Savings and Loan Associations (VSLAs). Airtel, access the service. The SmartMoney mobile account Grameen Foundation, and Plan Uganda developed is designed to facilitate saving and small-value pay- and launched Weza in 2014.a Grameen drove the ments.c SmartMoney places a heavy emphasis on product design process via a human-centered education and community involvement. It has a approach, which identified security, convenience, strong on-the-ground presence, helping communi- transparency, and access to credit as key features of ties to build ecosystems that facilitate DFS, called any VSLA digital savings product (GSMA 2015). Airtel “E-Villages.”d SmartMoney accounts are free for Weza offers a group wallet, ministatements, and the individual users, while businesses and institutional ability to link the wallet to formal bank accounts. customers, such as agriculture companies, schools, Importantly, Weza is customized to mimic the VSLA and churches, pay fees for certain transactions. administration process, including a three-PIN authori- SmartMoney currently has more than 200,000 indi- zation system akin to the lock-box system in many vidual customers, 2,500 merchant partners, and 150 VSLAs (Grameen Foundation 2014). Weza provides institutional partners.e Its primary geographic focus added transparency to the VSLA administration pro- is rural Uganda. It also operates in Tanzania.  rameen Foundation, “Introducing Airtel Weza in Uganda,” http://www.grameenfoundation.org/introducing-airtel-weza-uganda. a G SmartMoney, “Communications Technology,” http://www.smartmoneyinternational.com/communications-technology/, accessed b  April 10, 2017. SmartMoney, “Mobile Savings and Payments,” http://www.smartmoneyinternational.com/mobile-savings-and-payments/, accessed c  April 10, 2017. SmartMoney, “E-Money Ecosystems,” http://www.smartmoneyinternational.com/e-money-ecosystems/, accessed April 10, 2017. d  SmartMoney, “Media and Press,” http://www.smartmoneyinternational.com/mediaandpress/, accessed April 10, 2017. e  NOTE 15. M-Tiba, http://m-tiba.co.ke/, accessed August 4, 2017. 32 ANNEX D SAVINGS PATTERNS ACROSS FOCUS COUNTRIES FIGURE D.1: Saving Patterns among SSA Focus Countries (2017) 49 Côte d’Ivoire 6 21 70 Kenya 27 35 25 Niger 2 12 48 Tanzania 6 18 69 Uganda 13 37 59 Zambia 14 23 0 10 20 30 40 50 60 70 80 Saving Saving at a financial institution Saving with a savings group FIGURE D.2  Saving Patterns among Asia Focus Countries (2017) 28 Bangladesh 10 12 52 Cambodia 5 11 34 India 20 8 46 Nepal 17 24 59 Philippines 12 8 57 Vietnam 14 14 0 10 20 30 40 50 60 Saving Saving at a financial institution Saving with a savings group   33 ANNEX E DIGITAL SAVINGS-RELEVANT INDICATORS FROM GLOBAL FICP SURVEY Annex E details key data points from the WBG’s 2017 (SSA). The sub-groups reflect the focus regions and income Global Financial Inclusion and Consumer Protection (FICP) classes on which the report’s findings are based. Where survey that are referenced throughout the report. As in the relevant, the annex details survey results from the follow- body of the report, Annex E only incorporates Global FICP ing institutional classes: commercial banks (CBs), other results that have relevance for digital savings, but it is not banks, other deposit-taking institutions (ODTIs), and non- intended to capture all factors from the Global FICP survey bank e-money issuers (NBEIs). These institutional classes that could potentially affect digital savings development are most relevant for digital savings development and and uptake. The annex organizes data categories by the play a role in many of the product deployments detailed policy considerations (see: Part 4) to which they are most in the report. For definitions of these institutional classes, applicable. For each data element below, the annex cap- see the report’s “Glossary of Key Terms.” One-hundred, tures survey results for all countries and the following sub- twenty-four jurisdictions participated in the survey. Where groups: lower-middle income (LMI), low income, East Asia relevant, the tables below list the number of respondents & Pacific (EAP), South Asia (SA), and Sub-Saharan Africa per category. POLICY CONSIDERATIONS 1.1 AND 1.3 TABLE E.1: Select policy approaches that encourage digital savings All LMI Low income EAP SA SSA Tax incentive savings schemes 24% 18% 9% 45% 14% 13% Deposit-taking institutions required to offer basic financial 54% 53% 55% 64% 57% 61% products, such as a basic account Encouraging (or mandating) recipients of government 67% 76% 55% 100% 71% 65% transfers to open an account to receive their funds Number of responding jurisdictions 124 34 11 11 7 23 POLICY CONSIDERATIONS 2.1 AND 3.1 TABLE E.2: Institutions for which legal/regulatory framework is in place No. of responding CBs Other banks ODTIs NBEIs jurisdictions All 100% 57% 56% 59% 124 LMI 100% 68% 71% 59% 34 Low income 100% 45% 73% 64% 11 EAP 100% 82% 82% 82% 11 SA 100% 71% 71% 43% 7 SSA 100% 70% 78% 70% 23 34 Annex E   35 POLICY CONSIDERATIONS 1.1 AND 1.3 TABLE E.3: Select permitted activities among institutional categories CBs OTHER BANKS ODTIs NBEIs Issue e-money All 82% 54% 38% 100% LMI 81% 55% 42% 100% Low income 90% 60% 17% 100% EAP 70% 56% 0% 100% SA 50% 25% 25% 100% SSA 95% 57% 56% 100% Contract with retail All 81% 70% 61% 91% agents as third-party LMI 82% 65% 55% 89% delivery channels Low income 80% 60% 63% 83% EAP 91% 67% 50% 100% SA 86% 50% 50% 67% SSA 95% 71% 61% 92% Act as an agent of a All 78% 64% 73% 74% financial services LMI 82% 60% 75% 78% provider Low income 67% 60% 75% 43% EAP 90% 78% 67% 86% SA 50% 50% 75% 33% SSA 89% 71% 67% 67% Number of responding jurisdictions 123 67 60 72 TABLE E.4: Select permitted activities of retail agents, by institutional category CBs OTHER BANKS ODTIs NBEIs Identify and/or verify the All 65% 60% 72% 76% identity of a customer LMI 59% 62% 60% 76% Low income 25% 67% 80% 80% EAP 60% 33% 0% 67% SA 33% 50% 50% 0% SSA 60% 67% 80% 82% Receive and submit to All 74% 79% 88% 55% the institution a deposit LMI 79% 77% 80% 50% account application Low income 50% 100% 100% 75% EAP 70% 50% 100% 20% SA 83% 100% 100% 0% SSA 65% 67% 90% 75% Open a customer All 42% 45% 52% 54% account following the LMI 46% 38% 30% 73% institution’s policies Low income 25% 33% 60% 75% EAP 30% 17% 0% 38% SA 17% 50% 50% 50% SSA 40% 33% 40% 90% continued 36   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings TABLE E.4, continued CBs OTHER BANKS ODTIs NBEIs Open a basic account All 49% 56% 61% 51% LMI 57% 54% 60% 69% Low income 50% 100% 80% 75% EAP 33% 17% 0% 33% SA 33% 50% 100% 50% SSA 50% 56% 60% 88% Receive deposits All 65% 74% 85% 61% LMI 74% 69% 90% 46% Low income 75% 100% 80% 67% EAP 70% 67% 100% 50% SA 67% 100% 100% 0% SSA 75% 67% 80% 70% Number of responding jurisdictions 93 43 32 58 POLICY CONSIDERATION 5.1 TABLE E.5: Requirement to store customers’ e-money funds in a segregated account at one or more prudentially regulated financial institutions 100 PERCENT OF A FRACTION OF NO. OF RESPONDING CUSTOMER FUNDS CUSTOMER FUNDS NO REQUIREMENT JURISDICTIONS All 86% 6% 7% 71 LMI 95% 5% 0% 19 Low income 100% 0% 0% 7 EAP 89% 0% 11% 9 SA 100% 0% 0% 3 SSA 93% 0% 0% 15 Annex E   37 POLICY CONSIDERATIONS 5.2 TABLE E.6: Disclosure requirements for deposit products at shopping or pre-contractual stage CBs OTHER BANKS ODTIs NBEIs Minimum balance All 67% 67% 63% 42% requirements LMI 66% 58% 55% 50% Low income 50% 60% 57% 33% EAP 60% 57% 67% 50% SA 67% 50% 50% 0% SSA 68% 62% 67% 38% Account opening fee All 74% 65% 65% 42% LMI 67% 56% 53% 14% Low income 63% 80% 71% 33% EAP 60% 57% 33% 0% SA 67% 50% 50% 100% SSA 73% 69% 75% 14% Account maintenance fee All 75% 62% 63% 50% LMI 68% 56% 58% 29% Low income 63% 80% 57% 33% EAP 80% 71% 67% 50% SA 67% 40% 50% 100% SSA 77% 69% 67% 14% Account closure fee All 74% 65% 59% 44% LMI 66% 58% 47% 14% Low income 63% 80% 57% 33% EAP 70% 57% 50% 0% SA 67% 50% 50% 100% SSA 73% 69% 63% 14% Deposit insurance All 65% 58% 53% 29% coverage availability LMI 60% 47% 41% 13% Low income 38% 60% 43% 33% EAP 50% 57% 33% 0% SA 60% 50% 67% 0% SSA 45% 46% 50% 25% Number of responding jurisdictions 110 53 51 26 38   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings TABLE E.7: Dpecific rules exist which indicate that financial service providers are liable for any actions or omissions of the agent CBs OTHER BANKS ODTIs NBEIs All 90% 92% 80% 91% LMI 89% 92% 78% 93% Low income 86% 100% 60% 100% EAP 70% 80% 50% 86% SA 100% 100% 100% 100% SSA 89% 86% 78% 92% No. of responding 87 36 30 58 jurisdictions GLOSSARY OF TERMS Agent banking (also, branchless banking)  Third-party “business arrangements of banks and non-bank payment service providers that are typically local entities, such as small shops, to provide basic payment and transaction account-related services on their behalf” (CPMI and WBG 2016, 69). Commercial Bank  “A commercial bank is an institution licensed for taking deposits from the general public that is subject to supervision in the meaning of the Basel Core Principles for Effective Banking Supervision (BCBS 2012)” (WBG, 2017a, 12). Digital financial inclusion (DFI)  “The use of digital financial services to advance financial inclusion. It involves the deployment of digital means to reach financially excluded and underserved populations with a range of formal financial services suited to their needs, delivered responsibly at a cost affordable to customers and sustainable for providers” (GPFI 2016b, 46). Digital financial services (DFS)  “Financial products and services, including payments, transfers, savings, credit, insurance, securities, financial planning and account statements that are delivered via digital/electronic technology such as e-money (initiated either online or on a mobile phone), payment cards and a regular bank account” (GPFI 2016a, 3). E-money  “Monetary value represented by a claim on the issuers which is stored on an electronic device such as a chip card or a hard drive in personal computers or servers or other devices such as mobile phones and issued upon receipt of funds in an amount not less in value than the monetary value received and accepted as a means of payment by undertakings other than the issuer” (Committee on Payment and Settlement Systems 2012, 5). E-money account  “Prepaid instrument based on e-money that can be offered by banks and other authorized deposit-taking financial institutions, as well as by non-deposit-taking payment service providers such as mobile network operators. Such accounts include prepaid accounts” (CPMI and WBG 2016, 69). E-money issuer  An entity that issues e-money. Typically, the entity must be specifically licensed to issue e-money by the relevant financial services regulator. Interoperability  “The ability for different systems to connect with one another” (Arabéhéty et al. 2016, 1). Mobile banking  Banking transactions and services carried out through a mobile phone.   39 40   Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings Mobile financial services  “Use of a mobile phone to access financial services and execute financial transactions” (GSMA 2015a, 72). Mobile money account/wallet  “An e-money account primarily accessed using a mobile phone” (GSMA 2015a, 73). Mobile network operator (MNO)  “A company that has a government-issued license to provide telecommunications services through mobile devices” (GSMA 2015a, 73). Nonbank e-money issuer (NBEI)  “An issuer of e-money that is not a bank.” (WBG 2017a) Other Bank  “A bank other than a commercial bank” (e.g., regional rural banks, agriculture banks, postal banks) (WBG 2017a, 12). Other Deposit Taking Institutions (ODTIs)  An institution authorized to collect deposits or savings that does not fit the definition of bank or Financial Cooperative” (e.g., deposit-taking microfinance corporations) (WBG 2017a, 12). Over-the-counter service  Services in which “a mobile money agent performs the transactions on behalf of the customer, who does not need to have a mobile money account to use the service” (GSMA 2015a, 74). Payment system provider  “An entity that provides payment services, including remittances. Payment service providers include banks and other deposit-taking institutions, as well as special- ised entities such as money transfer operators and e-money issuers” (CPMI and WBG 2016, 69). Point of sale (POS)   “A retail location where payments are made for goods or services. A ‘POS device’ denotes a specialised device which is used to accept the payment, e.g. a card reader” (GSMA 2015a, 74). Proportionality  “The balancing of risks and benefits against costs of regulation and supervision to the regulator, supervisor, and to the regulated and supervised institutions” (GPFI 2016b, 8). “Proportionate regulation and supervision involves a supervisory approach commensurate with the systemic importance and risk profile of supervised institutions” (BCBS 2015, 5). Risk-based approach  A principle established by the Financial Action Task Force for compliance with anti-money laundering standards and requirements for combating the financing of terrorism. Generally, the principle prescribes that enhanced measures should be directed toward areas of higher money-laundering and terrorist-financing risk, while simplified or calibrated measures should be taken where risks are lower (FAFT 2007). Transaction account  “Broadly defined as an account held with a bank or other authorised and/or regulated service provider (including a nonbank) which can be used to make and receive pay- ments. 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