Bank of Papua New Guinea (BPNG), an AFI member institution, along with the Centre for Excellence in Financial Inclusion (CEFI) and Pacific Financial Inclusion Programme (PFIP), organized a workshop on “’Opportunities and Challenges for Digital Financial Services” on 5 November in Port Moresby.

The workshop was part of a set of programs on financial Inclusion, consistent with the government’s increased focus on extending financial services to the rural areas of the country. Participants included a variety of policymakers, donors and stakeholders from around the nation.

Loi M. Bakani, Governor at BPNG, delivered the keynote address at the event, using the opportunity to focus on the central bank’s perspective in relation to the progress, opportunities and challenges for digital financial services in Papua New Guinea (PNG), setting the tone for discussions, interactions and assessment of the future prospects for DFS in PNG.

The meeting’s deliberations focused on the current state of digital financial services in the country, noting that financial inclusion and financial literacy in PNG have received active support from the national government and the private sector, particularly the financial sector, resulting in a diverse range of service providers, financial products and delivery channels. However, due to a lack of data to regularly map access, quality and usage of financial services, the policy and investment interventions in financial inclusion remains ad-hoc. In order to address this gap, actions were taken to produce a National Strategy for Financial Inclusion & Financial Literacy 2014-2015 (NSFIFL), which was operationalized in early 2014.

Bakani drew attention to the importance of realizing that when it comes to digital financial services, it is critical to have an efficient payment system platform. In 2013, the PNG national parliament enacted the National Payments System Act for PNG. In 2014, the Central Bank in collaboration with the commercial banks and key stakeholders, completely rolled out a world class Kina Automated System (RTGS). While the KATS is dominated only by banks, there is plan underway to establish a national payments switch which will enable inter-operability between all providers of electronic and mobile payment services.

BPNG’s approach to the promotion of mobile payment solutions encourages different models of mobile payment services rolled out, including bank-led, MNO-led and non-bank-led. As a result of this approach the bank has seen a number of initiatives taken out by several institutions and organizations.

“There have been continuous efforts by mobile network operators to widen the communication coverage across PNG. Currently between 80 to 90 percent of the country is covered by the two telecommunication service providers enabling approximately 2 million Papua New Guinean users, said Bakani. “The country is experiencing a rapid change in access to modern communication technologies including having access to internet and the upgrade of network from 2G to 3G and now 4G. The rate in the uptakes and usage of mobile phones in PNG has been exponential since its introduction less than a decade ago.”

It was outlined that there are good reasons which make DFS essential for addressing the 80 percent unbanked population in PNG, including, that it: increases convenience by reducing travelling from remote villages as well as reducing queuing times; increases the safety of transactions for users; and through agents and outlets, users have a greater control on where to transact, which helps protect privacy and reduce fraud.

“I hope that the establishment of the national payments switch in the near future will establish an ecosystem for interoperability that would enhance efficiency, low transaction costs and to some extent merchants who provide the service will benefit from adequate cash flows because more people will be able to use the same access point(s) regardless of which service provider they align with,” said Bakani.

In regard to DFS challenges in PNG, the findings from the National Financial Capability study suggest that the current National Financial Inclusion and Financial Literacy Strategy may need to be further developed, in particular to facilitate significant strengthening of the rural financial services architecture. This is a pre-condition for enhancing rural financial inclusion and in particular DFS. The findings also indicate significant strengthening of financial inclusion and financial literacy programs, in particular urban programs will be required in order to increase financial inclusion by women.

Levels of financial knowledge, in particular knowledge of the cost of financial services, suggest a continuing commitment is required to further strengthen consumer protection.

“I believe uptake and customer retention will continue to be pressing issues for DFS providers. It brings no return on investment for digital financial service providers if end users are not using it,” said Bakani. “Inactivity and account dormancy are challenges for DFS providers globally. Furthermore, keeping customers happy and loyal is a daunting task in a jurisdiction where there are several players.”

Financial illiteracy is arguably the biggest challenge throughout PNG. In addition, there is still lack of information about the location of access points. And where there are already points of access, there is still lack of customer service. These challenges were discussed, along with issues surrounding agent management.