Digital Financial Services (DFS) are fast evolving in the Pacific, one of the most financially excluded regions of the world. PFIP sees digital channels as an effective delivery channel for improving access to and usage of financial services, where the high cost of building and operating traditional bank branches has been a major obstacle for reaching remote, sparely-populated communities. Poor infrastructure and high travel costs make traveling to urban areas unaffordable for many rural Pacific.
While DFS is still in its infancy in the Pacific, it is already being harnessed by financial service providers such as banks, microfinance institutions and mobile network operators (MNOs), who use mobile phones and point-of-sale devices, along with networks of small-scale agents, to offer basic financial services at greater convenience and sometimes at a lower cost than traditional banking.
PFIP continues to support a variety of digital financial service initiatives including mobile banking & money, branchless banking, mobile-enabled insurance and digitizing government-to-person (G2P) payments where we see the potential for innovating to create compelling customer value.
Banks and MNOs are increasing their presence and penetration into remote rural areas through authorized agents and merchant points, where customers can interact with agents (often small or microenterprise owners) to conduct financial transactions such as depositing and withdrawing cash, paying bills and transferring money.
For financial service providers, managing the agency channel is an on-going challenge, and holds the key to the success of digital finance business models. Agents play a crucial role in raising awareness, educating and signing up new customers, as well as delivering a customer experience that keeps customers returning.
PFIP is working with HFC and BSP (Solomon Islands) in this space.
Mobile phones present the greatest opportunity for reaching the financially excluded, with 7 billion mobile subscriptions worldwide in 2015, compared with less than 1 billion in 2000. In the Pacific Region, mobile penetration reached 37% by 2014, with 4.1 million unique mobile users. Recent significant advances in technology and affordability of mobile technology offers a promising channel to provide access to the formal financial system to the financially underserved, in turn expected to improve living standards and reduce poverty. Mobile money, mobile wallets or e-wallets allow customers to make payments and transfers, save money securely, purchase phone top-ups and more.
The next generation of mobile money aims to harness mobile money platforms to provide simple, convenient ways of meeting real customer needs, for example paying electricity bills, or paying off solar energy loans, in order to improve their quality of life.