Competition as a Catalyst for Digital Financial Services Usage : Chapeau Paper

Overview & Synopsis

This paper examines the role of competition as a catalyst for the adoption and usage of digital financial services and financial inclusion in developing economies. While foundational regulatory enablers such as e-money issuance, agent networks, risk-based customer due diligence, and consumer protection are essential, the report argues that they are not sufficient on their own to drive widespread usage of digital financial services. Drawing on experiences from countries with differing levels of success, the paper highlights the importance of open and interoperable payment infrastructure, pro-competition regulation, open-finance frameworks, digital identification systems, and effective governance arrangements in fostering innovation and market participation. It also identifies persistent barriers, including market concentration, limited access to payment infrastructure, weak consumer trust, inadequate institutional coordination, and gaps in market conduct supervision. The report emphasizes that the design and governance of digital financial infrastructure are critical to ensuring competitive and inclusive markets and provides policy recommendations to strengthen competition, improve interoperability, enhance consumer protection, support data sharing, and promote the broader adoption of digital financial services as a driver of financial inclusion, economic growth, and poverty reduction.