Assessing Risk in Digital Payments

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This report aims to help accelerate this process, with a particular focus on digital payments serving the poor in developing countries. It has three primary objectives:

  • Provide a common language and framework to guide dialogue on risk associated with digital payments, and its bearing on financial inclusion
  • Examine whether inclusion of non-bank providers or development of innovative distribution channels creates new types of risk for consumers (particularly the poor), providers, or the financial system at large
  • Describe approaches for assessing the economic impact of risk in digital payments from the perspectives of consumers, providers, and the system

In working towards these objectives, we have built our framework so it can be extended to risks associated with digital financial services beyond payments and to risks associated with overall provider sustainability. The ultimate goal of financial inclusion requires strong risk manage- ment and deliberate regulation across these areas as well as in digital payments.

This report contributes to the discussion started by our Fighting poverty profitably: Transforming the economics of payments to build sustainable, inclusive financial systems (2013). That report offered an extensive analysis of the economics of payment systems around the world. It concluded that digital technologies can significantly reduce the cost of payment systems, and make them more efficient, sustainable, and accessible to poorer consumers, while at the same time boosting revenues for financial providers by supporting activities, both financial and non-financial, that generate non-payments revenue. Risk is a contributing part of the equation.

The authors have developed the perspectives in this report based on three primary activities. First, we drew on the latest risk management thinking in banking, payments, and other areas, in- cluding manufacturing and capital-intensive industries. Second, we assessed risk in digital payments in India and Kenya, two large markets with different payments system structures and levels of maturity. Kenya is the most developed mobile money market in the world. In India, emerging digital payments are linked largely to bank accounts, and increasingly en- abled by a universal ID system. To examine these two systems, we conducted field visits to more than 10 organizations across the value chain. Third, we supplemented our fact base with research on digital money and agent banking in Tanzania, Uganda, Nigeria, Ghana, Indonesia, Pakistan, Bangladesh and Brazil.

After a brief summary of the key findings emerging from this work, the body of this report first offers a framework for understanding digital payments systems and the risks inherent in them. Next, the report discusses three broad categories of risk. Section I covers opera- tional risk and Section II covers solvency and liquidity risk, both in digital payments. Section III provides an overview of other risks associated with digital financial services beyond payments and overall provider sustainability. The report concludes with some advice and implications for stakeholders who choose to embark on the journey to improving financial inclusion.

Assessing risk in digital payments  -  Anglais (en)

Document Information

Document Type Report
Auteur The Gates Foundation
Year of Publication 2015
Éditeur The Gates Foundation
Nombre de pages 71 pp.
Région / Pays Globale /
Langue principale Anglais (en)
Mots-clés digital finance, digital financial service, digital financial services
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