DFS Provider Business Models
Last updated
Last updated
Seven main stakeholders within the DFS ecosystem are considered: the DFS user, a merchant, government or non-government institution etc., Mobile Network Operator (MNO), the bank, a third party and a Mobile Virtual Network Operator (MVNO). We also consider the five main functions across the DFS value chain for these stakeholders: deposit holder, e-money issuer, payment service provider, agent network manager, and mobile communications provider.
Depending on the role/s played by each of the stakeholders, we consider the four most common DFS provider business models:
Bank led
MNO led
MVNO
Hybrid
In this model, financial services offered by the bank are extended to mobile users, the signup process may be at the bank or through an agent network. In this model, the bank performs the key financial roles, i.e. is the deposit holder, e-money issuer and payment service provider. The communications network to deliver these financial services to the user is provided by the MNO, through their different channels, which could be Unstructured Supplementary Service Data (USSD), Short Messaging Service (SMS), Interactive Voice Response (IVR), or through the SIM Application Toolkit (STK). Examples are Ucash offered by the United Commercial bank in Bangladesh
Figure 2 below, shows an illustration of the bank-led model.
In an MNO led model, in parallel with the traditional role of providing the communications network, the MNO also undertakes the bulk of the financial roles and thus will issue the e-money, manage the agent network and the customer relationship and is the payment service provider. The MNO manages a wide DFS agent network that registers DFS users and receives physical cash from them in exchange for e-money on behalf of the MNO. Depending on financial regime, the MNO may be required to collaborate with a partner bank in which the DFS agents will deposit the physical funds collected from the customers on behalf of the MNO. The e-money issued by the MNO is backed by the funds in the trust or escrow account in the partner bank, examples are, M-PESA by Safaricom, Airtel Money, and MTN Mobile Money.
In some implementations, there is Mobile Virtual Network Operator (MVNO) that provides the telecommunications services required for DFS. The MVNO may be either independent or owned by a bank. An example is Equity Bank in Kenya, which owns Equitel, an MVNO that extends the bank’s financial services to its mobile network customers in the form of mobile money. MVNOs make use of the infrastructure provided by an MNO, but will offer their customers a different range of telecom services including digital financial services. Airtel, which is an MNO, provides the wireless network infrastructure for Equitel.
In a hybrid model, the critical roles are shared between the bank and MNO. They may involve a third party in the ecosystem who provides services that are not provided by either the MNO or the bank. For example, a third party could own the agent network and also plays the role of the payment service provider. Example is the Visa Qiwi wallet
