1、The Opportunity for Digital and E-commerce Payments in the Pacific RegionCheck out our websitewww.uncdf.org TwitterUNCDFdigitalFacebookUNCDFThis publication is brought to you by the Pacific Digital Economy Programme(PDEP)which is jointly administered by the United Nations Capital Development Fund(UN

2、CDF),United Nations Development Programme(UNDP)and United Nations Conference on Trade and Development(UNCTAD).The programme receives funding from the Australian Government.This research was conducted and written by LFS Advisory,Chris Statham,Konstantin Schroeter,Marius Siebert,and Samuel Chari.Revie

3、ws of the report and additional inputs were provided by Kapronasia(KA),Zennon Kapron and Sri Ranjani Mukundan with contributions from UNCDF Country Coordinator in Solomon Islands Sam Mulawa,UNCDF Regional Technical Specialist Ecosystem and Incubation Ajay Jagannath and UNCDF Pacific Lead,Bram Peters

4、.Copyright July 2021 UN Capital Development Fund.The views expressed in this publication are those of the author(s)and do not necessarily represent the views of UNCDF,the United Nations or any of its affiliated organizations or its Member States.3Pacific Island countries have unique demographic attr

5、ibutes characterized by low and scarce populations and high migration rates.Due to this,the economic heft of the Pacific Islands is also limited,with a cumulative regional GDP of USD 32 billion(GDP per capita of USD 3,600)as of 2020,as compared to neighboring Australia with USD 1.3 trillion(GDP per

6、capita of USD 51,812).The Pacific Islands are also one of the least densely populated regions in the world,with 34 people per square kilometer.Apart from the demographic constraints,the Pacific Island countries have limited natural resources and a large proportion of the Pacific Islander population

7、living overseas in Australia and New Zealand,thus leaving the region highly dependent on inward remittances.Despite efforts taken by individual Pacific Island countries to develop payments infrastructure,several challenges have constrained progress.Firstly,the demographic challenge of small and scar

8、ce populations,characterized by low economic resources and poor financial and technology literacy rates,has limited the uptake of newer technologies.Secondly,the ecological fragility of the countries locations makes infrastructure projects such as undersea data cables challenging.Thirdly,the current

9、 payment infrastructures are not interoperable,making cross-border transactions highly cumbersome.Finally,a lack of uniform regulations to govern digital payments,rigid existing regulatory requirements,and the lack of ancillary regulations covering areas such as data privacy and cybersecurity furthe

10、r exacerbates the challenge and has left one-third of the regions population lacking access to formal financial services.Executive Summary The emergence of FinTech and other non-bank financial services providers could be an opportunity for the Pacific Island countries to increase financial inclusion

11、 and support overall economic growth,especially if the region focuses on establishing interoperable and accessible digital payment infrastructure.In many other regions and jurisdictions worldwide,digital payments have helped bring individuals into the formal financial ecosystem and find new sources

12、of economic growth including E-commerce.Digital payments also provide the base-level digital finance infrastructure on top of which other services such as lending and investing can be built.However,the current payment infrastructure in the Pacific Islands is lacking,both in terms of provision and up

13、take.To overcome these challenges,the region needs to focus on three areas:Firstly,to overcome infrastructural challenges,governments should setup up a pan-regional central payment infrastructure to enable real-time,interoperable cross-border payments.The system should be based on open banking princ

14、iples and best practices including APIs and ISO20022 messaging standards to allow for seamless implementation and interoperability.The platform should also include an E-commerce gateway and standardized and interoperable QR code functionality to enable E-commerce payments as well as simplify in-pers

15、on point of sale payments.As intra-regional payment volumes are somewhat low,the focus should be on central payments infrastructure that both aggregates existing digital payments platforms,such as those in Papua New Guinea,as well as allows for other Pacific Island financial institutions without exi

16、sting central payment infrastructure,to connect into the regional payment system.i4Secondly,to overcome regulatory hurdles,governments should look at establishing uniform payment regulations in general and more specifically around licensing,easing current onboarding regulations without compromising

17、on AML/CFT requirements,and developing ancillary regulations covering data privacy and cybersecurity based on international standards.The Pacific Island countries should also look to establish a National Digital ID system to help service providers carry out eKYC for onboarding and digital authentica

18、tion to streamline digital finance transactions.Lastly,to increase consumer adoption of digital payment solutions,financial and technology literacy rates should be improved by mandating short courses as part of the school curriculum as well as conducting workshops and public awareness campaigns to r

19、each people in remote locations.This will help not only spur adoption of digital payments and financial services,but will equip the next generation with value-added skills for the new economy.In conclusion,the Pacific Island countries have an opportunity to leverage digital payment solutions to help

20、 provide equitable access to financial services as well as potentially improve economic conditions.However,what is necessary for the success of these recommendations is a multi-stakeholder engagement strategy to make sure all parties are involved,well-informed,and on the same page which will be a ke

21、y element of success.5iiAbbreviationsResearch methodologyIntroductionKey findingsRecommendations Conclusion and way forwardAnnexure iii0Contents1234567ii6Figure 1:Total population(in thousands)and percentage of rural people,2020 Figure 2:Select economic indicators in Pacific Island countr

22、ies,2020 Figure 3:Mobile ownership and internet coverage rates in the Pacific,2019 Figure 4:GSMA mobile connectivity Index for select Pacific Island countries,2019Figure 5:Personal remittances received in select countries,2020 Figure 6:Transaction costs of sending remittances,2011-2017 Figure 7:Aver

23、age cost of sending remittances by type of channel,2016 Q2 to 2018 Q4Figure 8:Online platforms operating in the Pacific Figure 9:Digital channel access points Figure 10:Financial inclusion in Pacific Island countries,2015 Figure 11:Digital frontiers institute enrolment Figure 12:Policy and regulator

24、y areas Figure 13:Number of laws or regulations in the Pacific Islands relating to digital paymentsFigure 14:Forecasted average growth rate(202126)of E-commerce in Fiji and Papua New GuineaFigure 15:International tourist arrivals(in 000s),2010 2019Figure 16:Cybersecurity index,2019Figure 17:Summary

25、of key challengesFigure 18:RACI MatrixFigure 19:Percentage of adults that are aware of financial access pointsFigure 20:Number of mobile money transactions842627283031384951List of Figuresiiiii7Table 1:List of regional service providers Table 2:ATM and EFTPOS statistics Table 3

26、:Use of mobile money in Fiji Table 4:Use of mobile and internet banking in Fiji Table 5:E-Government regulations in PNG Table 6:Regulations enabling digital payments in PNG Table 7:E-commerce regulations in Tonga Table 8:Mobile and internet banking statistics Table 9:Key performance indicators(KPIs)

27、of mobile money in 2020Table 10:Financial service access points Table 11:Financial service access points Table 12:List of key informant interviewees204343434546484950515253List of Tablesii iv8List of abbreviationsADB Asian Development BankAFI Alliance for Financial InclusionAML Anti-money laundering

28、 API Application Programming InterfaceBPNG Bank of Papua New GuineaCAGR Compounded Annual Growth RateCBS Central Bank of SamoaCDD Consumer Due DiligenceCFT Combating the Financing of TerrorismCOMESA Common Market for Eastern and Southern AfricaDFAT Department of Foreign Affairs and Trade(Australia)D

29、FS Digital Financial ServicesDSS Demand Side SurveyEFT-POS Electronic Funds Transfer at Point of SaleEGDI E-Government Development IndexEIB European Investment BankEMV Europay,Mastercard and VisaEU European UnionEODB Ease of Doing BusinessGDP Gross Domestic ProductGSMA GSM AssociationHR Human Resour

30、ceICT Information and Communication TechnologyIFC International Finance CorporationITU International Telecommunication UnionKYC Know Your Customer MCIL Ministry of Commerce,Industry,and LabourMFAT Ministry of Foreign Affairs and Trade(New Zealand)MNO Mobile Network Operatorsv9 viMSME Micro,Small,Med

31、ium Enterprises MTO Mobile Telecommunication OperatorNFIS National Financial Inclusion StrategiesNZD New Zealand DollarsPAPRI Pacific Payment,Remittances and Securities Settlement InitiativePWGR Pacific Working Group on RemittancesPFIP Pacific Financial Inclusion ProgrammePNG Papua New Guinea POS Po

32、int of SaleQR code Quick Response Code RACI (Stakeholder)Responsible,Accountable,Consulted,Informed MatrixSDG Sustainable Developmental GoalsTDB Tonga Development BankTVET Technical and Vocational Education and TrainingUNCDF United Nations Capital Development FundUNCTAD United Nations Conference on

33、Trade and DevelopmentUNESCAP United Nations Economic and Social Commission for Asia and the PacificUSA United States of AmericaUSD United States DollarUSP University of South PacificWMBL Womens Micro-Bank Limited10The primary objective of this report is to explore how to increase the adoption of dig

34、ital payments in the Pacific Islands region and the potential for regional payment aggregation.The key research objectives that guide the structure of the report are as below:Key research objectives:1.Assess current state and trends of the payments sector of Papua New Guinea,Fiji,Solomon Islands,Van

35、uatu,Samoa,and Tonga.a.High-level mapping of the payment sector emphasizing the regulatory oversight and policy environmentb.Access levels and usage of various payment instruments in the marketsc.A timeline of the introduction of policies and market developments(including infrastructure developments

36、)related to digital paymentsd.Current legal and policy issues of concern to regulators and market participants.1.Research Methodology 2.Deep dive into current state and trends of digital payments in Papua New Guinea,Fiji,Solomon Islands,Vanuatu,Samoa,and Tonga.a.Quantify current demand and future pr

37、ojections for E-commerce payments in the Pacific region b.Identify opportunities and barriers in the digital payments ecosystem across the Pacific Island countriesc.Potential legal and regulatory constraints 3.Develop a roadmap that includes:a.Recommendations for ways in which the governments,privat

38、e sector,and other stakeholders can promote the uptake of E-commerce payments.b.Specific recommendations for potential solutions/incentives to address opportunities and constraints for E-commerce payments aggregation services.The existing report by LFS Advisory has been used as the primary reference

39、 point for gathering and reorganizing the information.On top of existing documents used for secondary research by the LFS Advisory Team,Kapronasia conducted secondary research where necessary and updated figures/tables based on the latest data.11The Pacific Islands region consists of 14 countries wi

40、th an overall population of about 11 million people,75 percent of whom live in Papua New Guinea.The countries are archipelagic and are characterized by their remote and isolated geography.This study focuses on six of the 14 countries:Fiji,Papua New Guinea,Samoa,Solomon Islands,Tonga,and Vanuatu.Thes

41、e countries share similar demographic characteristics and are in nearly identical phases of development.However,according to the World Bank,some of the Pacific Island countriesVanuatu and Samoa,are among the least-developed countries in the world as measured by GDP per capita.Several studies have co

42、ncluded that E-commerce could be a way for the Pacific Islands to increase their overall economic growth.1 However,any existing successful E-commerce market has relied on a solid payment infrastructure to enable the development of the industry.Chinas E-commerce industry began when Alibaba launched t

43、he C2C focused Taobao and B2C-focused Tmall platforms.Still,the industry only started to grow measurably when Alibaba launched Alipay as a purpose-built E-commerce payments platform.Amazon largely relies on credit cards,and eBay had PayPal as their primary payment method,at least initially.However,d

44、espite a significant amount of discussion,the Pacific Islands payments infrastructure is still underdeveloped,and the region remains one of the least banked geographies globally.2 With low economic development and a small and disbursed population characterized by poor financial literacy and technolo

45、gy uptake,establishing robust payment infrastructure has remained challenging for the region.The regions 2.Introductiongeographic layout and ecological fragility have also curtailed further extending physical infrastructure such as undersea data cables.However,with new FinTech platforms and solution

46、s,and more accessible payment systems,there is a unique opportunity to increase financial inclusion in the Pacific Islands especially as the COVID-19 pandemic has pushed more of the regions population to adopt digital payments.3 As more of the population has access to the internet and smart devices,

47、there is a new possibility of digital-first payment solutions similar to what we have seen in other emerging and underserved markets across Asia.Yet,a basic payment infrastructure capable of supporting both online and offline payments remains a critical prerequisite.The development of such an infras

48、tructure requires the involvement of multiple actors within the ecosystem,including private and public parties.As the development of payments infrastructure is typically costly without a clear breakeven,regulators need to be part of the discussion and instigators in developing innovative and new pay

49、ments infrastructure.The possibility of accomplishing the same in the Pacific Islands requires commitment,a clear strategy,as well as economic incentives.The objective of this report is to explore how to advance digital payment adoption in the Pacific Islands and how digital payments aggregation cou

50、ld help drive economic development.We will start by discussing the current demographic and digital landscape,then we will look at the key challenges and opportunities in developing digital payment infrastructure,and finally we will end by putting forward a number of recommendations to establish digi

51、tal payment platforms which may help in the overall uptake of digital financial solutions.1Pacific Islands Forum;Asia Development Bank2UNDPs Pacific Financial Inclusion Programme(PFIP):http:/www.pfip.org/about/what-we-do/deepening-access/3https:/blogs.adb.org/blog/covid-19-has-created-digital-opport

52、unities-pacific122.1.Demographic and economic outlookFIGURE 1:Total population(in thousands)and percentage of rural people,202054World Development Indicators,World Bank,20185Ibid(see footnote 2)6World Risk Report 2020,Relief Web,https:/reliefweb.int/sites/reliefweb.int/files/resources/WorldRiskRepor

53、t-2020.pdfTo better understand the feasibility of a pan-regional central payments infrastructure in the Pacific Islands,it is important to understand the existing regional landscape.The six countries in this study share similar demographic and economic characteristics and challenges.The region is on

54、e of the least densely populated globally,with only 34 people per square kilometer and the majority Due to the small and scarce population,economic growth and opportunities in the region are limited,leading to a significant financial dependence on the nearby economies of Australia and New Zealand.Th

55、e Pacific Islands have also been identified as one of the most disaster-prone regions globally,primarily due to climate change,and face a considerable risk of flooding and frequent cyclones.According to the World Risk Report 2020,five out of the six Pacific Island countries included in this report a

56、re ranked in the top 15 countries most vulnerable to natural disasters globally,with Vanuatu topping the list with the highest risk in the world.This risk often hinders the commissioning of infrastructure projects in these countries.6 living in rural areas(see Figure 1).With a total regional populat

57、ion of 10.7 million in 2018,PNG,Fiji,and the Solomon Islands account for almost 94 percent of the overall population.4 Emigration is high,with many migrants searching for better jobs and livelihoods outside of the region,especially in Australia and New Zealand,leaving the Pacific Islands heavily dep

58、endent on inward remittances.Source:World Bank Development Indicators,2018The GDP of the Pacific Islands has grown at an average of 6.3 percent CAGR in the last three decades(1990 to 2019).Most of the regions GDP is dominated by trade in goods and services with a significant amount of the regions ex

59、ports coming from commodities;the much smaller services trade is dominated by tourism and tourism-related services.The small size of the economy and production base has led to diseconomies of scale for many businesses,hindering the growth of services in the island countries.Apart from the economic i

60、ndicators,the Ease of Doing Business(EODB)score for many of the countries is also relatively low,with Fiji ranking 102 out of 190 countries with a score of 61.4 out of 100 and Vanuatu ranking 107 with a score of 60.7.This compares to global leaders New Zealand,ranked first with 86.8,and Singapore ra

61、nked second with 86.2.132.2.Digital infrastructure and accessFIGURE 2:Select economic indicators in Pacific Island countriesThe Pacific Island countries have made a significant effort to expand their digital infrastructure in the last few years,enabling more people to go online.As a result,mobile ow

62、nership rates have increased by an average of 16.0 percent over the five years(2014-19),led by Vanuatu,where mobile ownership grew 26.3 percent over the same period.The average mobile ownership rates in the Pacific Islands countries stood at 62.0 percent in 2019;however,the inter-country differences

63、 are still highwith Fiji at 97.8 percent and PNG as low at 32.9 percent.In addition,there are differences among and within the countries,with urban areas having widespread access to mobile phones and networks and rural regions still lagging.Regarding internet coverage,the region has high 2G and 3G c

64、overage at 96.0 percent and 81.4 percent respectively on average;however,the 4G connections are still low at 64.0 percent,mainly due to poor 4G coverage rates in PNG and the Solomon Islands.Source:World Bank Development Indicators,2020Fiji23,591.5*4,376.0807.01,551.3512.4854.8*Line break added to th

65、e value*For Merchandise and Trade in Services,numbers for PNG,Samoa,Tonga and Vanuatu are from 2018 or 2019 as it is the latest data availableGDP in current prices,GDP per capita,PPPTrade in goods and servicesMillion USD,2020USD,2020%of GDP,2020*Papua New GuineaSamoaSolomon IslandsTongaVanuatu4,881.

66、52,636.84,067.52,258.44,903.02,783.0Trade in servicesTrade in goods20.78.743.739.551.742.650.454.313.043.247.758.114FIGURE 3:Mobile ownership and internet coverage rates in the Pacific,201977GSMA Mobile Connectivity Index,2019;https:/ Mobile Connectivity Index,2019Apart from the basic digital infras

67、tructure metrics such as mobile ownership rates and internet coverage,the Pacific Island countries have a relatively low score on other digital readiness dimensions such as mobile phone and service affordability and basic ICT skills,as captured by the GSMA Mobile Connectivity Index(see Figure 4),whi

68、ch examines and ranks different countries based on a host of data pointsfrom infrastructure to consumer readiness.With the exception of Fiji and PNG,whose GSMA Mobile Connectivity Index scores are high due to consumer readiness and basic skills,most Pacific Island countries perform poorly on all dim

69、ensions.Furthermore,all countries(including Fiji and PNG)perform poorly in terms of affordability,and content and services dimensions,highlighting a clear challenge.FijiPapua New GuineaSamoaSolomon IslandsTongaVanuatuMobile ownership rates,Network coverage,in%,2019%,20192G coverage3G coverage4G cove

70、rageHandset cost,indexed to 100,201997.7998.0089.0097.0095.0098.0098.0096.0067.5095.0045.0095.0094.0496.0027.0090.0021.5075.0075.4742.6446.3239.0238.7344.5435.9832.9154.0956.0670.6065.3415FIGURE 4:GSMA mobile connectivity index for select Pacific Island countries,201988Ibid 9The Mobile Economy Pacif

71、ic Islands,2019,GSMA;https:/ Submarine Cable Map,https:/ Mobile Connectivity Index,2019The region has also recently upgraded its international network connectivity.In 2018,Fiji was connected to the Tui-Samoa undersea cable,which then connects to the South Cross cable,which has direct links to the US

72、 and New Zealand.9 At the end of 2020,the Pacific Islands were connected by 12 fiber-optic submarine cables through the World Banks Pacific Regional Connectivity Programme.10 In addition,the Coral Sea Cable System,a 4,700km long fiber-optic submarine cable system linking Australia,PNG,and the Solomo

73、n Islands,was launched in June 2020.These connectivity improvements have decreased the cost of internet access and consequently increased internet penetration.AffordabilityInfrastructure1000Consumer ReadinessContent and ServicesBasic SkillsFijiPapua New GuineaSamoaSolomon IslandsVanuatuTonga16The ke

74、y findings from the research have been summarized into three areas:Firstly,the report looks at the current trends in regional digital payment systems,including an overview of existing service providers and the current digital adoption rates.Secondly,The financial sector in the Pacific Islands is dom

75、inated by the banking sectorwith total assets of the latter ranging from as low as 50 percent of GDP in the Solomon Islands to over 100 percent in Vanuatu.However,retail bank deposits as a percentage of GDP remain low,signaling a large underbanked population in these countries.Only a few banks opera

76、te in the Pacific Islands,with some countries served by only one institution.Most of these are foreign-owned,operating through partnerships with regional banks.With the introduction of mobile banking and other digital financial services in the region,financial inclusion is expected to increase along

77、 with improvements in access to banking services.12 Online banking in the Pacific Islands is primarily delivered through traditional banks.13 PNGs MiBank was one of the first movers to introduce a mobile wallet(MiCash)in 2012 to promote banking among the rural population living in isolated parts of

78、the country.Many other big banks in the region,such as Bank South Pacific,ANZ Group,and Westpac,have also developed their own mobile money wallets 3.Key Findings 11https:/www.imf.org/external/pubs/ft/wp/2015/wp1596.pdf12Ibid13Digital Financial Services in the Pacific,Asian Development Bank,https:/ww

79、w.adb.org/sites/default/files/publication/182300/digital-financial-services-pacific.pdfthe report examines the current state of the E-commerce payments system and quantifies the future demand by sector.Finally,the report reviews the key challenges in digital payment aggregation in the Pacific Island

80、s,including infrastructure,regulations,and demographics.3.1.Trends in digital paymentsand online banking services.In addition,many mobile network operators(MNOs)have initiated digital payment services in the region,including Vodafones M-PAiSA and Digicels Mobile Money.The high migration(rural-urban)

81、and international emigration rates in the Pacific Island countries have led to inward remittances becoming an integral part of the regions GDP.In 2013,the PAPRI initiative(Pacific Payment,Remittances and Securities Settlement Initiative)by the World Bank conducted assessments of the existing nationa

82、l payment systems in the Pacific Island countries and suggested ways to ease the process of remittances and reduce transaction costs due to the high dependence of these economies on remittances.In 2019,personal inbound remittances accounted for 37 percent of GDP in Tonga and 17 percent of GDP in Sam

83、oa,compared to the global average of 0.7-0.8 percent of GDP.This trend of high dependence on personal remittances has been increasing over the last decade.17However,despite the massive dependency on remittances,transaction costs of sending remittances are still high(see Figure 6).Though transaction

84、costs fell from 14 percent of total transaction value in 2011 to 12 percent in 2012,they have remained stubbornly high ever since and are higher than other developing countries.Despite banks promoting online banking and improving agent distribution channels,transaction costs have not decreased signi

85、ficantly.To address this issue,new online channels have been promoted by the regulators and developmental partners in these countries.FIGURE 5:Personal remittances received in select countries,202014 312.5050100FijiIn USD MillionAs a%of GDPTongaSamoaVanuatuSolomon IslandsPapua New Guinea0

86、350193.6150.076.027.52.07.14%37.15%18.58%8.89%1.77%0.01%Note:The latest data available for personal remittance as%of GDP for Tonga is as of 2019Source:World Bank Daevelopment Indicators18With newer FinTechs entering the market,the average transaction cost of sending remittances through digital chann

87、els has come down,To help lower costs and create efficiencies,the Pacific Working Group on Remittances(PWGR)is working on the regional integration of payment systems to settle remittances and foreign currency exchanges.The target is to reduce the transaction costs of migrant remittances to less than

88、 three percent and eliminate remittance corridors with 15Ibid 16Ibidapproaching the global average costs.As a result,there has been a substantial shift to digital remittances,a transition accelerated by COVID-19.16costs higher than five percent,in line with the UNs Sustainable Development Goals 2030

89、.While this is a notable effort,it may just create a patchwork solution rather than a future-proofed approach to payment innovation;this is discussed in the recommendations.FIGURE 7:Average cost of sending remittances by type of channel,2016 Q2 to 2018 Q416FinTechFinTechFinTechFinTechFinTechFinTechF

90、inTechFinTechTraditionalFiji024681012141618SamoaTongaVanuatuPacific SIDSWorldAsia-PacificLDCsTraditionalTraditionalTraditionalTraditionalTraditionalTraditionalTraditionalAverage cost%of transaction valueMobileOnlineBankMTOOtherSource:FinTeching Remittances in Paradise,UNESCAPFIGURE 6:Transaction cos

91、ts of sending remittances,Source:FinTeching Remittances in Paradise,UNESCAP202%of transaction value200162017Pacfic SIDSLDCsOECD membersWorldSub-Saharan Africa193.1.1.High volume use casesMany local banks,FinTechs,telecom operators,and even central banks are engaged i

92、n providing digital payments in the Pacific Island nations.A few examples are as follows:In 2017,Tonga Development Bank(TDB)launched the Ave Paanga Pau voucher that enabled Tongan diaspora and seasonal workers in New Zealand to remit funds to Tonga.Using this service,the remitter could deposit money

93、 into their New Zealand TDB account,and the recipient would be able to receive it in Tonga.Completing the transaction required the recipient to have an account with TDB,which simultaneously helped address the issue of financial inclusion in Tonga.The cost of sending remittances using this voucher wa

94、s 4.6 percent compared to the average of 9.7 percent across both online and traditional remittance channels.Between June 2019 and February 2020,Tongans received remittances worth the equivalent of USD 5.2 million.Following its success in New Zealand,this service was launched in Australia as well in

95、2020,with the help of the PFIP.In 2017 in Fiji,Vodafone deployed 1.2 million E-Transport cards to help the local transport system go digital.The cards allow users to load money via M-PAiSA,which has been used by nearly 85 percent of Fijians with over 550,000 cards active on a 30-day basis.In 2018,PN

96、G launched the Mama-Bank Access Point,an online banking solution to provide essential financial services to unbanked women in rural areas.17 This is a pilot initiative undertaken by the Womens Micro-Bank Limited(WMBL)in partnership with the PFIP.Through this program,almost 10,000 women have been enr

97、olled biometrically and also have been helped to save more of their income.In 2020,SolaPayGo,a solar power provider in PNG,came up with a pay-as-you-go service using airtime credit(for Bmobile Vodafone users)and other mobile banking platforms such as those operated by Bank South Pacific and MiBank.T

98、hrough this,they have reached over 9,000 households in PNG.In 2019,Solomon Islands launched youSave,a voluntary pension saving scheme.The account allows members to save money for a pension through either their offices or ANZ Banks goMoney digital channel and their agents.Over 25,000 Solomon Islander

99、s have signed up for the service so far.Since 2018,the National Bank of Vanuatu has been converting 27,000 existing passbook-based manual account holders to a digital POS-based account platform.They also aim to add 14,000 more new accounts,primarily targeting farmers and the rural population.3.1.2.A

100、ctors in the ecosystem Several challenges limit the growth potential of payment solution providers in the Pacific Islands,the most prominent of which is the small and dispersed population.This impedes realizing economies of scale,thereby threatening the sustainability of these businesses.However,the

101、 cost-efficiency digital payments provide has attracted many players in recent years.This sub-section will briefly discuss existing playersboth traditional(banks)and non-traditional service providers(such as MNOs,and online service providers of payments)including telecom players who provide the enab

102、ling environment for transactions to take place.The below table gives a quick overview of current service providers in the region,and the countries they operate in.2017PHB Development,https:/ 1:List of regional service providersName(Regional)HQCountries of operationMNOsVodafoneFijiSamoa,Tonga,Vanuat

103、u(also Kiribati,American Samoa and the Cook Islands),Solomon IslandsDigicelPapua New GuineaFiji,Nauru,PNG,Samoa,Tonga,VanuatuBanks(excluding Central Banks and Regulators)National Bank of VanuatuVanuatuVanuatuMiBankPapua New GuineaPapua New GuineaTonga Development BankTongaTongaNational Development B

104、ank of PNGPapua New GuineaPapua New GuineaNational Bank of SamoaSamoaSamoaBred BankIndependent Offices Fiji,New Caledonia,PNG,Solomon Islands,Tahiti,VanuatuBank South PacificPapua New GuineaCook Islands,Fiji,Samoa,Solomon Islands,Tonga,VanuatuANZ BankIndependent OfficesFiji,PNG,Samoa,Solomon Islands

105、,Tonga,VanuatuWestpac Bank/Kina BankIndependent OfficesWestpac PNG and Westpac Fiji were sold to Kina Bank in 2021PSPsKovinaAustraliaRegional merchant payments targeting the tourism sectorKlickExNew ZealandRegional payments system provider,MTO,currently developing the Tonga national switchUnionPays

106、Quick PassN/APartnered with ANZ to launch Quick Pass,a tap&go payment solution for UnionPay cardholders operating in Fiji,Tonga,Samoa,Solomon Islands and VanuatuSource:Kapronasia analysisApart from existing MNOs,Banks,and PSPs,multiple online payment gateways exist in these countries.These online pa

107、yment gateways play a huge role in inward and outward remittances from one country to another.Oftentimes,the existence of such online platforms helps reduce the overall transaction costs involved in remittances.21FIGURE 8:Online platforms operating in the Pacific18FIGURE 9:Digital channel access poi

108、nts19FijiAve Paanga PauCompass Global MarketsKlickEx PacificOrbit RemitWorld RemitXE Money TransferXendpayPNGSamoaSolomon IslandsTongaVanuatuSource:Kapronasia and LFS Advisory analysisSource:Kapronasia and LFS Advisory analysisWhile the number of digital channel access points such as ATMs and POS te

109、rminals has grown across the region in recent years,these are still low due to their low business viability.The below figure summarizes the current digital channel access points in the six countries.FijiPNGSamoaSolomon IslandsTongaVanuatuMobile Money Agents3673395,81714,380947073572788391

110、116164524Automated Teller Machines(ATMs)Point of Sale(POS)18Ibid 19IMF,2020 For PNG:CEFI Graphs and Infographics 3rd Quarter 2018(thecefi.org)22FIGURE 11:Financial inclusion in Pacific Island countries,201522FijiSamoaSolomon IslandsExcludedInformal services onlyOther formal servicesBankedTongaVanuat

111、uSource:PFIP surveys(Note:PFIP survey was not done for PNG)22PFIP demand side surveys,http:/www.pfip.org/our-work/work-streams/market-information/national-demand-side-surveys/In addition to the service providers,end-consumers and merchants play a critical role in digital payments.For physical or onl

112、ine merchants to be able to use digital payments,there are a few essential considerations,namely:availability of payment acquirers,suitable POS terminals(whether dedicated or smart-device)and gateways,settlement time,and basic infrastructure such as power and network connectivity.For the above menti

113、oned reasons,many Pacific Island business owners have not transitioned to digital payments.Indeed,in the E-commerce space,even though many products and services provided by SMEs are marketed online through social media or otherwise,actual E-commerce transactions are often completed in cash.However,a

114、 few local marketplaces,such as Vitikart,Pacifikart,CyberFood,Fiji Eats,Maua App,etc.,have started addressing this gap by providing seamless e-payment options during checkout.One exception to this trend of completing transactions in cash is in the tourism sector.As foreign tourists often prefer to p

115、ay using debit/credit cards,digital payment acceptance in the tourism sector was growing,at least pre-pandemic.Financial inclusion in the Pacific Island countriesFinancial inclusion remains a challenge in the Pacific Islands.Although current data is difficult to come by,as of 2016,30 percent of the

116、population in these countries are entirely excluded from any formal or informal financial services.On top of this,roughly 10-35 percent of the population in these countries rely on informal financial services,a number that is far higher in rural populations.However,in the past five years,financial i

117、nclusion rates have improved.For instance,in Fiji,financial inclusion rates have increased to as high as 80 percent per the PFIP survey conducted in 2020.20 It should be noted that the other Pacific Island countries financial inclusion rates might also have improved,however have improved due to the

118、lack of more recent data.Pacific Island governments have designed a number of initiatives to improve financial inclusion rates.For example,in Tonga,the number of ATMs and Electronic funds transfer at point of sale(EFT-POS)branches branches tripled between 2015 and 2020,and agent penetration rose fro

119、m three to every 10,000 adults to 52.23273423It is important to note that the adoption of digital payments improves with the level of education.23 However,the tertiary and post-secondary non-tertiary education system in the Pacific Islands is limited to a single regi

120、onal university with presence in multiple countries in the regionthe University of South Pacific(USP).In addition,the few small national universities and many Technical and Vocational Education and Training(TVET)programs,except USP,have a weak focus on ICT and an even weaker focus on digital skills(

121、website,API development,etc.)relevant to digital payments and E-commerce.In addition,the uptake has also been poor,with enrollment numbers not crossing double-digits.Two others sources of training specific to e-commerce include:1.General support provided by business incubators and accelerators and p

122、ayments support provided by the Digital Frontier Institute(which receives scholarships from the PFIP)(refer to figure 11).23World Economic Forum,http:/www3.weforum.org/docs/WEF_Accelerating_WWDigital_Inclusion_in_the_New_Normal_Report_2020.pdfFIGURE 11:Digital Frontiers Institute EnrolmentSource:Dig

123、ital Frontiers InstituteFijiUnique students enrolledCourse completion rate*,%UNCDF scholarship rate*,%Papua New GuineaSamoaSolomon IslandsTongaVanuatu227211N/A345%77%58%75%N/AN/A0%0%70%59%45%33%Note:*Course completion rate:Total courses completed to total courses taken;*UNCDF scholarship rate:Number

124、 of students on UNCDF scholarship versus self-paid243.1.3.Current policy and regulatory landscapeWhile few regulations in the Pacific Islands relate specifically to digital payment systems,there are a number of regulatory and policy initiatives worth 1.Payment infrastructure:The payment system infra

125、structure in most Pacific Island countries is underdeveloped.PNG is the only country in the region with a national payments switch,which makes interbank transfers very arduous.Consequently,interbank payments are mostly completed via cheques,and thus retail payment settlement times are very long.In f

126、act,a settlement between accounts in the same bank in two different countries is faster than settlement between accounts in two different banks in the same country.An online payment gateway is being developed in PNG,which will be rolled out in phases and should ease the challenges around settlement

127、both online and off.In other countries,due to the lack of national switches,many banks have entered into bilateral interchange agreements exploring across four different areas:payment infrastructure,mobile money policy,cyber and data protection,and AML/CFT regulations.Source:Kapronasia analysisPayme

128、nt infrastructureMobile money policyAML/CFT regulations and de-riskingCyber security and Data privacyFIGURE 12:Policy and regulatory areas1243Current policy and regulatory landscapefor domestic card issuance,acquiring,and clearing networks.For instance,in Fiji,Bank South Pacific partnered with Bank

129、of Baroda,HFC partnered with Westpac,and most recently,in 2018,ANZ partnered with Bred Bank.These bilateral agreements allow customers of one bank to access the ATM and EFT-POS machines of the partner banks.Due to the lack of a national switch,there is also a regulatory/policy vacuum for payment inf

130、rastructure in these countries.For example,in Fiji,the Fiji Interchange Network(Payments)Bill 2016 regulated payment systems and interchange services.The Bill also provided a foundation to realize a national switch;however,it has not been passed into an Act,and implementation of the national switch

131、has also been pending.252.Mobile money regulations:None of the Pacific Island countries have a dedicated mobile money policy/regulation,although individual regulators have come up with stop-gap solutions.For example,in Fiji,Vodafone and Digicel(the only mobile money providers)entered into a Trust De

132、ed with the Reserve Bank of Fiji.As a result,the two providers commit to holding customers funds in a trust with strict terms and conditions governing its operations.In contrast,the Central Bank of Samoa(CBS)has issued No-objection certificates to Vodafone and Digicel to offer mobile money through e

133、lectronic wallets in order to refrain from limiting mobile money growth.As we have seen in countries like China,while having a robust set of mobile payment regulations may not be an absolute must-have for digital payments to grow,they do eliminate a certain amount of uncertainty,which can help drive

134、 adoption.Consumer protection,Data privacy,and Cybersecurity:Most Consumer Protection Acts in the Pacific Islands do not cover the interests of consumers online.Fiji,Samoa,Tonga,and the Solomon Islands all have Consumer Acts,but except for Samoa,all these legislations are over twenty years old.They

135、do not include provisions for online or E-commerce transactions.Samoa introduced the Competition and Consumer Act in 2016,but the legislation is ambiguous.While the Act covers credit and insurance and gives direction to the Ministry of Commerce,Industry,and Labour to ensure consumer protection,it do

136、es not regulate payment services,which is still with the Central Bank of Samoa.In Vanuatu,an initiative to draft a legislative framework by the Ministry of Tourism,Trade,Industry,Commerce,and Ni-Vanuatu Business has been undertaken,but this has not yet been tabled in Parliament.PNG does not have any

137、 consumer protection legislation in place.In addition to consumer protection,the Pacific Islands have yet to pass formal laws or regulations covering data protection and privacy.However,some provisions have been included in domestic telecommunications acts that cover a few aspects of data privacy.24

138、 Another important pillar of regulation for E-commerce is cybersecurity.Fiji and PNG have recently updated their cybersecurity laws(the Online Safety Act of 2018 for Fiji and the Cybercrime Code Act of 2016 for PNG).Experts note that the cybercrime laws in Samoa(2008)and Tonga(2003)will need to upda

139、te regulations to ensure consumers protection as more and more citizens go digital;Vanuatu and the Solomon Islands do not even have a cybercrime legislation.25 3.AML/CFT regulations and de-risking:Anti-Money laundering(AML)and Combating the Financing of Terrorism(CFT)regulations in the Pacific islan

140、ds are based on existing Australian and New Zealand regulations which are considered quite comprehensive and strict.Still,in recent years,many international financial institutions have been de-risking their businesses by restricting,or even terminating business relationships with Pacific Island bank

141、s.This has become challenging,especially in countries highly dependent on inward remittances.According to the Financial Stability Board(2018),the Pacific Islands region recorded the highest decline in Money Transfer Operator(MTOs)accounts from 2011-2017 due to a decline in correspondent banking.26 F

142、or instance,in Vanuatu,the number of correspondent banks declined 59 percent from 2012 to 2018,and the Solomon Islands saw a decrease of 37 percent over the same period.PNG and Fiji also saw a decline of 35 percent and 34 percent,respectively.One of the main reasons banks shy away from managing thei

143、r 24Such as the Cook Islands Telecommunications Act 2019(Section 3,Competition and consumer protection),or Vanuatus Telecommunications and Radiocommunications(Consumer Protection)Regulations Order n157 of 2015(Section 5,Protection of Consumer Information)25In Vanuatu,cybercrime Bill has been drafted

144、 but yet to be enacted in the Parliament.26https:/www.fsb.org/2018/11/fsb-correspondent-banking-data-report-update-2/26AML/CFT related risks with the Pacific Islands is that these are relatively small markets,and thus it becomes cost-prohibitive to serve them.To address the challenges posed by de-ri

145、sking,the IMF Technical Mission to Samoa in 2017 proposed developing a KYC mechanism to strengthen MTO AML/CFT compliance.In 2019,the governors of all the central banks in the South Pacific(Australia,Fiji,New Zealand,Papua New Guinea,Samoa,Solomon Islands,Timor-Leste,Tonga,and Vanuatu)agreed to deve

146、lop a regional KYC utility.A steering committee was set up in 2020 alongside a working group.By the end of 2020,both the committee and the group were in the middle of Phase I,addressing four main issues:Consumer Due Diligence(CDD)requirements,interoperability requirements,KYC utility use,and MTO com

147、pliance capabilities.However,currently,compliance and storage of CDD information in the Pacific Island countries are challenged by the lack of digital National IDs.While some countries such as Fiji and Vanuatu have rolled out national IDs,the other countries in the region have yet to take the step,t

148、hereby stalling progress.In essence,digital payment-related regulations in the Pacific Island countries need to be updated to ensure clear regulations and governance mechanisms are in place to include more recent developments in the digital payments space.The below figure summarizes the regulatory l

149、andscape in the six countries under study.27UNCTAD Global Cyberlaw Tracker;Pacific Islands Legal Information Institute.Accessed on 13 August 2020.FIGURE 13:Number of laws or regulations in the Pacific Islands relating to digital payments27PNGSamoaSolomon IslandsTongaE-TransactionsData ProtectionCons

150、umer ProtectionNumber of laws presentCybercrimeFiji01234VanuatuSource:UNCTAD Cyberlaw tracker;Kapronasia and LFS Advisory analysis2627As mentioned previously,several studies have explored the potential for E-commerce to help drive economic development across the Pacific Islands.However the lack of v

151、iable E-commerce payment options hinders growth in the sector and has left businesses struggling to find solutions.As discussed previously,there are a few small players providing services in specific countries,but a lack of synergy across countries regarding E-commerce payments aggregation is a miss

152、ed opportunity to further boost E-commerce growth in the region.While the existing overall digital payments landscape also largely influences the provision of E-commerce payment services,it should be noted that other factors such as increased E-commerce trade also impact the future growth potential

153、of E-commerce payments services.Therefore,in the coming section,the report will try to quantify the future demand and growth of E-commerce in the Pacific Island nations covered here.3.2.1.Future growth of E-commerce in the Pacific IslandsMultiple factors can influence the demand and growth of E-comm

154、erce in general.However,specifically for the countries under study,certain unique factors influence the sectors growth,owing to the regions distinctive characteristics.These include GDP,population,smartphone adoption,digital infrastructure,physical 3.2.E-commerce payments in Pacific Island countries

155、infrastructure(e.g.,road/port connectivity for last-mile delivery),network coverage,and personal remittances(which is also a unique factor impacting E-commerce payments in the region).Using data from these metrics,we have forecasted potential future growth rates for E-commerce by assigning different

156、 weights to these indicators based on their importance and impact on E-commerce in general and/or E-commerce payments.The methodology for the same has been detailed in the Annex.By using three different methodologies:1)All indicators weighted equally;2)groups of indicators independently weighted;and

157、 3)each indicator independently weighted,it is possible to ascertain a range within which the growth rate may fall.Given the shocks from the COVID-19 pandemic,the authors expect E-commerce growth to be slower than expected,It must be noted that this model is based on different assumptions(outlined i

158、n the Annex),and must not be taken at face value.This models objective is to act as a guiding tool to understand what are some possible factors that could influence E-commerce growth and the extent to which each of these indicators can influence the same.FIGURE 15:Forecasted average growth rate(2021

159、26)of E-commerce in Fiji and Papua New GuineaFiji7.2%9.2%Papua New GuineaSource:Kapronasia analysis28Overall,E-commerce is expected to grow in all the Pacific Island countries.The economic model above is used as an example to forecast the growth of the E-commerce sector in Fiji and Papua New Guinea.

160、Due to a lack of data for Tonga,Samoa,Solomon Islands and Vanuatu,these countries have not been included in the model.However,if the required data becomes available,the same model can be easily extended to forecast the growth rate for these countries as well.What is important to note is how fast the

161、 Pacific Island countries are predicted to rebound from the shocks of the COVID-19 pandemic.Depending on the speed and efficiency of recovery,E-commerce growth rates can go higher or lower than expected.But despite the pandemic,if the appropriate steps are taken,the potential for E-commerce growth i

162、s there.Source:World Bank Development Indicators;Kapronasia analysisFIGURE 15:International tourist arrivals(In 000s),Fiji69220.0%change(2010-19)Papua New Guinea14621144.5%Samoa13018139.2%Solomon Islands20.528.941.0%Tonga659444.6%Vanuatu237.72567.7%29World Bank Development Indi

163、cators,2019,https:/data.worldbank.org/indicator/ST.INT.ARVLhttps:/www.forumsec.org/wp-content/uploads/2019/09/2018-1st-Quadrennial-Pacific-Sustainable-Development-Report_final-as-of-July-4-2019.pdfhttps:/www.adb.org/sites/default/files/publication/430171/tourism-growth-pacific.pdfhttps:/documents1.w

164、orldbank.org/curated/en/8157320/pdf/ACS22308-PUBLIC-P154324-ADD-SERIES-PPFullReportFINALscreen.pdf;2017Tourism as a driver of E-commerce growthThe high dependence of the regions countries on tourism has led to the Pacific Islands Forum Secretariat acknowledging tourism as a necessary“pill

165、ar of economic growth.”The Asian Development Bank(ADB)has also recognized this.A recent report by the Bank highlights how tourism is a major driver of E-commerce growth in the region.With tourism growing in these countries,many E-commerce service providers have cropped up,providing online services f

166、or booking accommodation,adventure activities,and for international tourists arriving in these islands.According to a World Bank report,the future potential of tourism growth in the Pacific is immense.By 2040,tourism is expected to generate US$1.8 billion in annual income and create over 120,000 new

167、 jobs.Given the growth potential of the tourism sector,E-commerce payments are also likely to gain more traction.29However,with the COVID-19 pandemic,the tourism sector has faced a huge shock,resulting in heavy economic losses.For instance,Fiji employs 150,000 people in its tourism sector,contributi

168、ng 38 percent of GDP.But due to COVID-19,in 2020,the number of visitor arrivals in Fiji declined by 84 percent and the countrys GDP dropped by 17 percent.30 Before the pandemic,one of the major hurdles faced by tourism operators was the lack of access to digital platforms and E-commerce to promote t

169、heir businesses.In order to help in the post-pandemic recovery of the tourism sector and help meet international standards,Vanuatu has launched the Vanuatu National Bookings Platform in 2021.The platform is expected to operate as one main E-commerce hub to help businesses list their services(includi

170、ng tours and activities,accommodation,transport,and handicrafts).Although there is a clear opportunity for digital payment adoption in the Pacific Islands,there are a few key challenges that need to be overcome which can be bucketed into three major headings:demographic,infrastructure,and regulatory

171、.Demographic challenges:The challenges of demography in the Pacific Islands are intertwined with the geographical characteristics of the countries.Small population:Most of the Pacific Island countries are archipelagos of dozens or hundreds of islands,and in many cases,are populated by a couple of th

172、ousand people only(on the larger islands).This,coupled with the distances between islands,is a major cost for service providers,especially if they need physical interaction to reach users through branches or agents.Small revenue opportunity:The Pacific Island population is relatively poor,and theref

173、ore many online and offline transactions are relatively low-value and volume.This lowers the revenue opportunity for payment service providers to charge fees to compensate for the high investment and maintenance costs,making it difficult to create a sustainable business model for providers.Low finan

174、cial inclusion and literacy:Both low financial and digital literacy have been identified as a significant challenge in increasing smartphone uptake and penetration of DFS.However,the gap has been recognized and 3.3.Key Challenges For The Adoption Of Digital Payments highlighted in the National Finan

175、cial Inclusion Strategies(NFIS)the Pacific Island countries have developed,where financial literacy targets have been defined.Infrastructural challenges:While it is easy to assume that bridging the infrastructural gaps could be done by investing in building/developing new infrastructure(such as more

176、 undersea cables etc.,),it is not the most viable option for a few reasons.Most of these countries are ecologically fragile,making it difficult,or rather unsustainable,to recklessly increase infrastructural capabilities.Markets across the region are highly fragmented,which makes it difficult for ind

177、ividual service providers to create a sustainable business case.According to a recent report by GSMA,there are,on average,only 1.7 MNOs per country in the region,with many Pacific Island countries having only one operator.Due to the lack of national scale,many operators have focused on regional expa

178、nsion.For instance,Digicel is present in six countries across the Pacific Island region.However,strong market control by a few existing service providers restricts new players from entering the market.Regional integration is also hindered by the huge disparities in digital and financial development,

179、both cross-border and sometimes in-country(e.g.,rural versus urban).30Xinhuanet Asia-Pacific News,http:/ 30Regulatory bottlenecks:In addition to the demographic and infrastructural challenges,there are a few roadblocks in terms of regulations and policies in these countries.Lack of regulation/oversi

180、ght for cross-jurisdiction and service licensing of payments and mobile money:Given the fragmented nature of markets in the Pacific Islands,regional operability of PSPs becomes important to reap the benefits of economies of scale.However,currently,cross-jurisdiction payments are widely unregulated a

181、nd face a multiplicity of insular regulatory regimes.There is a need for more regional collaboration to incentivize PSPs to operate regionally and to facilitate cross-country payments.Further,most of the Pacific countries do not issue a specific mobile money license for PSPs,making the whole process

182、 unclear.This issue has also been identified by the IMF as one of the main challenges to overcome for a more efficient FinTech and payment regulation.32 Non-interoperable payment platforms within and between countries:Most Pacific countries lack interoperable platforms that allow customers to transf

183、er money from an account of one bank to another.That does not mean that transactions between banks are impossible,but that it requires manual interventions during processing.The cost is mostly borne by the customers and usually represents several percentage points of any transaction.This is a huge c

184、hallenge that hinders the uptake of digital payments.Existing payment gateways are often provided by international banks,which are difficult to integrate with local E-commerce marketplaces and may require local E-commerce transactions to be conducted in foreign currency which adds cost.This highligh

185、ts a gap in the offerings of local payment processors.Finally,promoting digital payments comes with the challenge of cybersecurity.The countries under study are not well-equipped to handle cyberattacks.According to the GSMA Connectivity Index 2019,all the countries covered in this report rank poorly

186、 in the Cybersecurity Index(see figure below).31Ibid.32FinTech and Payments Regulation:Analytical Framework,IMF,2020;https:/www.imf.org/en/Publications/WP/Issues/2020/05/29/FinTech-and-Payments-Regulation-Analytical-Framework-49086FIGURE 16:Cybersecurity index,201931Fiji19.4Papua New Guinea13.1UK93.

187、10USA92.636.7Samoa6.1Solomon Islands20.8Tonga9.8VanuatuNote:This index measures the commitment of countries to cybersecurity at a global level and ranges from 0 100,with 100 being the best and 0 the worst.Source:GSMA Mobile Connectivity Index,201931 KYC requirements:Due to strict AML/CFT regulations

188、 in place across the region,KYC requirements in the Pacific Islands are very rigid and lengthy thus further constraining the use of digital payments.While eKYC utilities seem to have made this better than it used to be,this still remains a challenge.The lack of national IDs is also a key challenge t

189、o cost-effective KYC.Supporting regulations:Apart from the lack of governance frameworks to ensure smooth functioning of digital payments,the protection systems such as cybersecurity and data privacy are also not present across all countries and arestill at the nascent stage.FIGURE 17:Summary of key

190、 challenges DemographyInfrastructureRegulatoryLack of supporting regulations(Cybersecurity,Data privacy etc.,)Lack of regulations for interoperabilityLack of PSPs and MNOsLack of regulation for cross-judisdiction paymentsRisk of CyberattacksLack of local payments processorLow financial and digital l

191、iteracyLow-incomeRemote locationsSmall populationEcological fragilityFragmented marketsRigid KYC requirementsKEY CHALLENGESSource:Kapronasia analysis32While there seem to be multiple roadblocks in achieving E-commerce payment aggregation in the region,with focus and by leveraging examples from other

192、 regions,it should be possible to achieve the goal.The recommendations on how to achieve this have been categorized under four main focus areas:1.Overcoming infrastructure challenges such aslack of network infrastructure,lack of payment network interoperability,absence of local payments processors,e

193、cological fragility and small,and fragmented markets.2.Overcoming regulatory challenges such as rigidKYC requirements,lack of uniform licensing of PSPs and MNOs,lack of a common regulation Currently,there is little integration and interoperability between bank and non-bank financial service operator

194、s.Mobile money service providers commonly indicate that formal banks consider them as competition rather than as potential partners.Integrating payment providers into a unified,open API-driven,interoperable national,or even regional payments ecosystem,will have multiple benefits,such as reduced tran

195、saction costs between countries,improved business sustainability for PSPs in these countries and so on.To achieve this,there are a few areas that should be focused on which will be addressed below.4.1.1.Government-led pan-regional central payment infrastructure The initial investment in central paym

196、ent infrastructure is typically a loss leader and payment fee revenues are relatively small.Therefore,the Pacific Island governments should either expand on central infrastructure such as PNGs National Payments Switch or develop a new pan-regional payment switch to facilitate 4.Recommendationsto gov

197、ern interoperable payments and other cross-border transactions,and an absence of ancillary regulations,including cybersecurity and data privacy regulations.3.Addressing digital payment economicsincluding who pays for the implementation and on-going fees of using digital payment platforms.4.Improving

198、 financial literacy and technical skillset of consumers to overcome the challenges of poor uptake of financial services in these countries and simultaneously equip citizens with the necessary skills to access these digital financial solutions.4.1.Overcoming Infrastructure Challengesdomestic and cros

199、s-border payments.Ideally,this infrastructure would incorporate real-time payment functionality,which has proven to be very effective in other Asia Pacific regions in promoting both physical POS and E-commerce transactions.Payment technology has matured significantly over the past decade,and numerou

200、s cloud-based payment solutions could be relatively easily provisioned and would provide an omnichannel approach to payments.Governments could subsidize the initial launch and the implementation and gradually introduce fees for paymentssimilar to other Southeast Asian countries.Infrastructure should

201、 also be open to both bank and non-bank/FinTech players to encourage adoption and innovation.Different payment aggregation models could be adopted,such as:a single regional acquirer model,an in-country acquirer model,or combinations of the above.The regional aggregator could be a bank,a mobile money

202、 operator,or an independent digital payment processor,and oversight can be handled by the regulator of the host country.33Some key considerations for the governments in choosing the model include:Regulatory standing of each of these countries Transaction currencies and fees Settlement schemes,A regi

203、onal agreement on the approach including regulatory,technical,and operational frameworks such that they can be implemented across all countriesA final key consideration is that the payments system needs to be able to handle offline settlement.Due to the geographic considerations mentioned above,stak

204、eholders need to assume that network connectivity will not have 100%uptime.These outages need to planned into the development strategy such that if one country or network link goes down,there is a backup link and/or capacity to process transactions offline.The challenge in this approach is achieving

205、 regional consensus.The Single European Payment Area(SEPA)is arguably the most successful regional payments initiative globally and makes sending money down the street or across the region a trivial exercise.The European Union was able to accomplish this as there was one singular regulator and centr

206、al bank,the European Central Bank,driving the initiative and,at least initially,one single currency:the Euro.In Asia,there is little regional integration at the moment outside of a handful of trade agreements and the Association of Southeast Asian Nations(ASEAN).Although the regional bloc has made p

207、rogress on a number of economic agreements,they have so far failed to come to a consensus around any sort of SEPA-style regional payment hub.Without a common currency or regulator,it becomes challenging to come to any sort of consensus.For this reason,we are seeing the development of bilateral payme

208、nt initiatives such as the tie-up between Singapores PayNow and Thailands PromptPay infrastructure.Any development of cross-border payments infrastructure within the Pacific Islands would need to have these considerations in mind in order to ensure the smooth development and implementation of any in

209、frastructure.4.1.2.Open banking/API approach The critical challenge in the adoption of a new payment hub is ensuring that traditional financial institutions can connect to the new infrastructure.An API-first approach would help in this regard as well as providing the ability to monitor payment traff

210、ic and collect transaction statistics,thus addressing data gaps,including those relating to AML/CFT.It would also allow systems to connect into future RegTech/SupTech solutions.In addition,APIs will be essential to promote better integration and interoperability between different channels such as mo

211、bile money,digital wallets,and bank accounts.Any payment infrastructure should also be based on the ISO20022 messaging format which will help futureproof the platform and enable better integration with other international payment networks such as SWIFT,which will be transitioning to ISO20022 in the

212、next few years.The open API banking approach will also be dependent on other considerations such as the regulators role in each countrywhether open banking will be mandated by regulation or market-driven;while regulatory recognition of ancillary functions such as e-KYC and e-signatures will also be

213、important.4.1.3.Interoperable QR codesQR codes can be a useful enabler of both physical POS transactions as well as online E-commerce transactions and thus are a critical part of any future digital payments strategy.They require little or no investment in merchant infrastructure and thus allow merch

214、ants(of all sizes)to be enrolled into the developing ecosystem of E-commerce entrepreneurs.Similarly,users are alleviated from the tedious task of typing authentication and transaction information,thus removing language and literacy barriers while widening the inclusion of E-commerce participants.QR

215、 codes,when coupled with real-time payment infrastructure,provide for a seamless online and offline payment experience and require minimal hardware.The regions governments should also come together around a QR-code standard,ideally based on the global EMV-QR standard.Having 34a proprietary QR standa

216、rd might lead to quicker implementation in the short run,but nearly all countries globally are moving toward global standards.Ideally,in the future,QR codes could also be made fully interoperable,insofar that a consumer using digital wallet brand#1 would be able to transact at a merchant using digit

217、al wallet brand#2 despite not using the same wallet.There are already a few QR code payment pilots on some islands.However,the trials are proprietary and not interoperable.Some key considerations for the successful adoption of QR standards are as below:The QR standard should be globally acceptable t

218、o allow for interoperability Improving ancillary digital infrastructures such as smartphone and internet penetration rates will be imperative Should be cost-effective and relatively easy and quick to adapt for both consumers and merchants alikeAn important further consideration around QR-codes is ha

219、ving a long-term view of the economic model.China was the first country to see significant adoption of QR-code payments and the economics around the model have fluctuated,not always to the benefit of the industry itself.Exploring the implications thoroughly and accounting for those in any plan will

220、be critical.4.1.4.National Digital ID system Lack of proper documentation is a major challenge for people from low-income households preventing them from accessing formal financial services.Therefore,it will be critical for governments to adopt a National Digital ID system that can not only help ser

221、vice providers carry out customer due-diligence and digital authentication but increase adoption of digital payments.Initially,the ID can be as simple as a card and database to provide a national/regional identity to individuals but can later be incorporated into eKYC systems similar to Singapores S

222、ingpass/MyInfo and payment systems as an overlay service,as in the case with Indias UPI.If governments do decide to adopt a National Digital ID system,there are several important considerations:The National Digital ID should allow for e-signatures along with proper regulatory recognition of the same

223、 The system should facilitate interoperability A robust operating model must be in place to ensure strict regulatory compliance and also to prevent any sort of fraudulent activities4.2.1.Uniform payment regulationsHaving uniform regulations will be imperative to provide the basis for more effective

224、and efficient growth of the digital payments sector across the region.Currently,interbank payments are expensive,and this cost hurts overall consumer adoption,of both digital payment services and digital financial services in general.Uniform 4.2.Overcoming Regulatory Challengesregulations/licensing

225、requirements across the region would not only facilitate cross-country operations for PSPs but would also open up opportunities for the license to be“passportable,”thereby reducing licensing and setup costs for all stakeholders.As well as uniform regulations around licensing,merchants should also ha

226、ve at least one digital channel to apply for a business license(as is the case in Malawi,for instance).354.2.2.Easing existing consumer-related regulatory requirementsSome of the existing consumer-related payment regulations are quite complex and rigid,hindering the uptake of digital payments in the

227、 Pacific Islands.For instance,current KYC requirements are onerous due to concerns about money laundering and financial terrorism.This deters customers from the uptake of newer digital solutions and is reflected in the low scores in the ease of doing business rankings/scores of these countries.Thus,

228、governments must carefully evaluate easing these requirements,as it will not only encourage more users but will also attract more competitorsputting downward pressure on price(making digital payments more affordable).4.2.3.Developing ancillary regulationsAs Pacific Island countries move towards the

229、adoption of digital services,it will be imperative to have regulations in place to govern the online presence of users.These fall broadly into four categories:Cybersecurity Ensuring that technology standards are in place to help public and private sector actors implement technology systems and platf

230、orms that comply with the latest best practices around cyber-attack preventions.Data/Information Privacy Rules and regulations to ensure the proper handling of sensitive data,including,notably,personal data but also other confidential data,such as certain financial data and intellectual property dat

231、a,including both the confidentiality and immutability of the data.AML/CFT Implement regulations and practices that ensure that individuals and companies are not able to generate income through illegal and illicit transactions,as well as ensure that funds are not being used to support terrorist fundi

232、ng.Consumer protection Safeguard buyers of goods and services,and the public,against unfair practices in the marketplace in order to prevent businesses from engaging in fraud or unfair practices in order to gain an advantage over competitors or to mislead consumers.Pacific Island governments should

233、work towards having uniform regulations across the region for these ancillary regulations as well.A good example of a region that has deployed uniform regulations would be the European Union(EU).For instance,the entire EU follows the General Data Protection Regulation(GDPR)when it comes to data priv

234、acy.This has proven to be successful,and is considered to be a gold standard in data privacy regimes worldwide.This should be something that the Pacific Islands should have as an end-goal.Some key considerations for governments in the region when making any regulatory changes/decisions are as follow

235、s:It is important to understand and communicate different pain points and the regulatory changes to all the stakeholders involved in the process.Coordination of regulatory entities within and among countries,especially for regional regulations,will be of utmost importance.The regulations should be f

236、ormulated keeping in mind the current standing of various countries.All of the ancillary regulations should be designed with both online and offline use cases in mind.36The regions governments should also focus on the economics of merchant payments and consider offsetting merchant fees either throug

237、h government or third-party development agencies or networks.This could either be through subsidizing the implementation of the platform such that the payment network could provide a fee-free service on launch,or the reverse,where payment fees are subsidized,but there is an implementation cost.In ei

238、ther case,the critical focus is to encourage merchant adoption of digital payments.In most jurisdictions where digital payments have been successful,this has been accomplished by incentives for both merchants and consumers for a certain period of time until digital payments become ubiquitous.Other p

239、otential options include:Removing bank charges for customers and small merchants.The next set of recommendations addresses the challenge of poor financial and digital literacy among consumers,which may be limiting the uptake of digital payments and financial services in general.Focusing on addressin

240、g only the infrastructural and regulatory challenges will be futile if this particular set of challenges are not addressedas the uptake of DFS will ultimately depend on how finance and tech-savvy the population is.Therefore,governments must actively work towards engaging end-users through a multi-mo

241、dal engagement strategy.Some key considerations for governments are as follows:Creating awareness and trust among citizens through public media campaigns,workshops,Subsidizing costs of low-value transactions.Removing/lowering import duties on POS devices and smartphones.Offering tax incentives to me

242、rchants that enable e-transactions in proportion to their digital transaction volumes.The second element of cost that needs to be considered is chargeback risk.Banks often require that online businesses put aside a somewhat significant amount of collateral,typically money,to offset any potential cha

243、rgebacks.This can be challenging for SMEs and may restrict uptake.The ecosystem should look at working with a development partner or bank to provide an MSME credit facility to mitigate these risks and therefore encourage adoption.and short courses as part of the school curriculum.Making sure financi

244、al literacy is undertaken at all levelsfrom young adults to the older population.Besides financial literacy,upskilling of consumers about the usage of digital technologies,including the use of smartphones,the internet,and even how to access DFS,will be critical.Training of merchants and service prov

245、iders about the evolving financial and digital technologies,as well as the regulatory landscape,will be important to prevent fraud and ensure compliance.4.3 Addressing Digital Payment Economics4.4.Improving Financial Literacy And Technical Skillset Of The Population37Facilitation of regional forums

246、and dialogues:While Pacific Island governments have to undertake different initiatives to enable smooth and interoperable payment aggregation in the region,developmental partners and the industry in general,can aid governments by providing them with technical expertise and helping with coordination.

247、A few important functions that different stakeholders could adopt are as below:Take the lead in facilitating a regional consultation forum to develop a regional institutional framework to achieve harmonized regional digital payment regulations and standards.These regional forums will help address an

248、y potential issues and discrepancies among different actorsgovernments,PSPs,MNOs,development partners,and consumers before implementation of actual policiesthereby reducing future roadblocks in the process.Creating FinTech sandboxes:while Pacific Island governments are trying to standardize and clar

249、ify regulations around licensing and KYC processes,developmental partners can aid(in terms of finance and technical expertise)in the development of sandboxes for different PSPs and merchants to test their products and understand the regulatory requirements.These should be made regionally recognizabl

250、e,whereby once a provider graduates from one countrys sandbox,they are recognized by everyone across the region,effectively becoming passportable.Support existing PSPs to meet the regulatory requirements by providing technical expertise and guidance.Undertake supporting MSMEs to accept digital payme

251、nts by providing training and other necessary support.Develop business requirements for a regional payment platform and support relevant authorities in regulatory issues,tendering,and contracting.In essence,for all the recommendations to be successfully implemented,it will be of utmost importance fo

252、r the different stakeholders involved(governments,developmental partners,private companies,and merchants)to engage and collaborate towards the goal of regional payment aggregation.The responsibility assignment(RACI)matrix below translates the recommendations into activities and describes the require

253、d participation of the different stakeholder groups as follows:4.5.Other Ancillary Recommendations38FIGURE 18:RACI matrixSTAKEHOLDER/ACTIVITYCENTRAL BANKSBANKSMNOsPSPsPFIP/DEV PARTNERSPRACTITIONERSCUSTOMERSMERCHANTSOvercoming infrastructural challengesGovernment-led pan-regional central payment infr

254、astructureACCCRCIIOpen Banking/API hubsARCIICIIInteroperable QR codesARCCIIICNational Digital ID systemACCCCCCCBettering regulatory environmentUniform regulations across the regionACCCRCICEasing of existing regulationsACCCCCCCDeveloping ancillary regulationsACCCRCIIAddressing digital payment economi

255、csReducing merchant fees and other chargeback risksARCCIIICImproving financial literacy and technical skillsetSkills developmentCRCCACCIFinancial and technological awareness and literacyRRRRAICCOther ancillary recommendationsFacilitating regional consultation forumsRCCCAICCCreating FinTech sandboxes

256、RCCCACICSupport PSPs to meet regulatory requirementsICIIRCICHelp MSMEs to accept digital paymentsICIIRCICResponsible:People or stakeholders who do the work.They must complete the task or objective or make the decision.Several people can be jointly Responsible.Accountable:A Person or stakeholder who

257、is the“owner”of the work.Success requires that there is only one person Accountable,which means that“the buck stops there.”Consulted:People or stakeholders who need to give input before the work can be done and signed-off on.These people are“in the loop”and active participants.Informed:People or sta

258、keholders who need to be kept“in the picture.”They need updates on progress or decisions,but they do not need to be formally consulted,nor do they contribute directly to the task or decision.39The economic and financial inclusion benefits derived from the adoption of digital payments has been discus

259、sed extensively in existing literature.Digital payments can help increase economic activity,decrease the cost of doing business,and provide the groundwork for additional digital financial services such as lending and wealth management products.Despite the challenges that the Pacific Island region fa

260、ces in terms of geography and infrastructure,the opportunity for developing and launching a pan-regional digital payments aggregation platform is there.This report has put forward a number of recommendations to accelerate the adoption of digital payments.However,there are a few critical points to ke

261、ep in mind that are essential to these recommendations success:Project management and coordination:Project management and coordination are critical in deciding how to move towards implementing the suggested recommendations.Coordination is vital among different regulators and actors(such as PSPs)and

262、the end-users of E-commerce payments to ensure they are well-equipped to take up these services.Continuous monitoring,evaluation,and learning(ME&L):To ensure the recommendations are well implemented and lead to the desired outcomes,continuous ME&L of different initiatives by different actors involve

263、d in the process will be crucial.It is not only essential 5.Conclusion and way forward to monitor and evaluate these initiatives,but also to continuously learn and improve on the methods.For this,it will be essential to have an agile and well-rounded ME&L mechanism in place.Constant and effective co

264、mmunication:Given that regional aggregation has been put forward as the optimal solution for greater digital payment adoption,continuous and effective communication between different stakeholdersgovernments,regulators,PSPs,developmental partners,sectoral associations,non-governmental organizations,a

265、nd consumers will be imperative.This will also help to avoid any duplication in efforts by countries across the region.Policy makers may also want to consider their role in the adoption of digital payments.For instance,jurisdictions where governments have adopted digital payments for items such as t

266、ax and utilities have been very successful in promoting their usage.For example,during the pandemic,the Malaysian government paid government stimulus payments out through three of the nations largest digital wallets.If the recommendations above are implemented with a clear focus on both addressing r

267、isks and maintaining a robust multi-stakeholder approach,implementing a regional digital payment aggregation strategy could ultimately catalyze greater financial inclusion and economic growth across the region.406.Annex6.1.Forecast model:Methodology Weight10.80.80.20.40.210.60.6Potential E-commerce

268、growth by volume in the next five years(2021 2026)Country NameGDP growth,CAGR,2000-20191Population growth,CAGR,2000-20191Smartphone adoption rate,%change,2018 20252Tourism growth,%change 2010 20191Infrastructure growth,%change,2014-20192Other enabling infrastructure,%change 2014-20192Network coverag

269、e growth,%change,2014-20192eCommerce revenue growth rate,2017 20253Personal remittance growth,as%of GDP,2010-20191Growth estimateFiji6%0.5%29%40.0%10.0%5.9%6.1%28.3%-0.8%7.2%Papua New Guinea11%2%41%44.5%22.1%14.4%13.8%22.0%-9.4%9.2%Methodology:Indicators presumed to impact E-commerce the most were i

270、dentified and weights were assigned based on their assumed level of importance.The growth rate is calculated as average of X1*W1+X2*W2+Xn*Wn where X refers to the indicator and W to the weights assigned.Growth projections calculated only for Fiji and PNG due to data availability for only these two c

271、ountries.Note:CAGR is calculated for indicators where all year values are available for calculation.For e.g.,GDP and population have all values between 2000 and 2019(and hence CAGR)is calculated.But for Tourism,only 2 data points were available(hence percentage change is calculated as(Y1-Y0)/Y0).For

272、 index values(Infrastructure,other enabling infrastructure and network coverage,the growth is calculated as(Y1-Y0)/100(where 100 is the highest possible index value).Tourism assigned lower weightage due to disruptions caused by the recent COVID-19 pandemic,increasing the uncertainties around travel

273、and tourism.Personal remittances assigned higher weightage despite negative growth rates in the past years,due to increased usage of the same during the pandemic.Data source:1 World Bank;2 GSMA;3 STATISTANotes and definitions of Indicators:GDP and GDP growth:GDP at purchasers prices is the sum of gr

274、oss value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products.It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.Data are in current

275、 U.S.dollars.Dollar figures for GDP are converted from domestic currencies using single year official exchange rates.For the GDP growth,compounded annual growth rate(CAGR)is calculated for years 2010-2019.Population:Total population is based on the de-facto definition of population,which counts all

276、residents regardless of legal status or citizenship.The values shown are mid-year estimates.Population growth is calculated using CAGR for 2010-2019.Smartphone adoption rate is taken projections given by the GSMA in their Mobile Economy Pacific Islands 2019 report.Tourism growth is based on the numb

277、er of annual arrivals for a given year.The percentage change is calculated between 2010 and 2019.E-commerce revenue growth numbers are taken from STATISTA Infrastructure growth is calculated using the GSMA Mobile connectivity indexs infrastructure index.This covers network performance,coverage,and s

278、pectrum including digital spectrum,1-3GHZ etc.Network coverage growth is taken from the GSMA Mobile connectivity index.This includes 2G,3G,4G and 5G coverage of the population.Other enabling infrastructure growth is calculated using the GSMA Mobile connectivity index.It includes international bandwi

279、dth 416.2.Country Profiles6.2.1.Fiji Fiji is one of the most developed countries among the Pacific Islands and one of seven upper middle-income countries in the Pacific.Its economy is primarily based on tourism and agriculture;the main cash crop for export is sugarcane.Remittances account for up to

280、five percent of GDP.33 Fijians living and working abroad are mostly in Australia,New Zealand,and the United States.E-Government:In 2018 the Government of Fiji launched its flagship digital transformation“digitalFIJI”program.The four-year program is managed by the Digital Government Transformation Of

281、fice and aims to implement a number of government applications to enhance the overall ICT infrastructure as well as to build and develop capacity for digital transformation of the government.Fiji has well-developed infrastructure,and a more developed e-government as compared to many other countries

282、in the Pacific Islands.This is seen through its ranking in different indices:The UN classifies Fiji as high on their E-Government Development Index(EGDI)which is ranked 90 out of 193 countries.34 This index measures access to the digital services provided by the Government,provision of online servic

283、es by the Government,telecommunication development(i.e.,infrastructure)among others.It is important to note that this index is not designed to capture e-governance development in the absolute sense,but in relation to other countries.Thus,we can say that Fiji fares much better in these indices compar

284、ed to most other countries in the Pacific Islands owing to a higher rank and score.Similarly,in the ITU ICT Development Index 2017 that aims to capture the level of development of ICT in these countries,Fiji is ranked 107 out of 190 countries.Poor performance in the UPU Postal Development Index 2019

285、(where Fiji ranked 136 out of 170 countries)shows that Fiji not only needs to improve on its digital infrastructure but also on its physical infrastructure.35,36 Infrastructure and connectivity Since deregulation and reform of the telecommunication industry began in 2003,the telecommunication infras

286、tructure in Fiji has improved significantly.Fiji offers the most affordable mobile data in the region with prices for 1 GB ranging from USD 0.59 to USD 4.41.With an index score of 57.49,Fiji receives the highest GSMA Mobile Connectivity Index score in the Pacific,with particularly high scores in Mob

287、ile Consumer Readiness(79.88)and Infrastructure(66.84).33World Bank Data,Personal remittances,received percent of GDP(link)34UN E-Government Knowledge Base,https:/publicadministration.un.org/egovkb/en-us/data-center 35ITU ICT Development Index,https:/www.itu.int/net4/ITU-D/idi/2017/index.html 36Univ

288、ersal Postal Union,Postal Development Report 2019,https:/www.upu.int/UPU/media/upu/publications/postalDevelopmentReport2019En.pdfper user,number of secure servers,access to electricity and number of internet exchange points(IXPs).Personal remittance as%of GDP:Personal remittances comprise personal t

289、ransfers and compensation of employees.Personal transfers consist of all current transfers in cash or in kind made or received by resident households to or from non-resident households.Personal transfers thus include all current transfers between resident and non-resident individuals.Compensation of

290、 employees refers to the income of border,seasonal,and other short-term workers who are employed in an economy where they are not resident and of residents employed by non-resident entities.Data is calculated as%of GDP.42Fijian financial services ecosystem:Regulator:Reserve Bank of Fiji(RBF)Commerci

291、al banks in operation:ANZ Banking Group Limited,Westpac Banking Corporation(both Australian owned),Bank of Baroda(Indian owned),Bank of South Pacific Limited(Papua New Guinea),Bred Bank Limited and Home Finance Company Limited(both domestically owned).Regulations:The Fiji Interchange Network(Payment

292、s)Bill 2016 provides for the regulation of payment systems and services through the Fiji interchange network and related matters.The National Financial Inclusion Strategic Plan 20162020 provides a roadmap for financial inclusion;the RBF participated in the regional regulatory sandbox to foster finan

293、cial innovation.37 The ongoing payments system reform“National Payment Systems Program(NPSP)”aims to modernise the countrys payment system infrastructure and provide an umbrella legislation to meet the growing needs and aspirations of the Fijian economy.The reform comprises the introduction of an Au

294、tomated Transfer System(ATS)and a Central Securities Depository(CSD).The ATS will provide a comprehensive software-based electronic interbank payment mechanism.Using the ATS,Financial Institutions,Mobile Money Network Operators and other Payment Service Providers will be able to send a wide variety

295、of payment instructions to each other.Mobile money in Fiji Fiji was the first Pacific country to implement DFS with Digicel Mobile Money in June 2010.Vodafones mobile money service M-PAiSA was also launched in 2010,and is more visible in the market compared to Digicelespecially due to its use with t

296、he public transportation system in Fiji.However,overall usage and activity rates for mobile money remain very low.Several money transfer operators are offering their services in the country and remittances have been growing over the last twenty years.In 2020 Vodafone launched the E-commerce Platform

297、 VitiKart which also offers a payment gateway(through Westpac).In line with the usage of mobile money,the usage of internet banking also remains relatively low according to the IMF Financial Access Survey.37National Financial Inclusion Taskforce,Reserve Bank of Fiji,National Financial Inclusion Stra

298、tegic Plan 2016 2020,http:/www.pfip.org/wp-content/uploads/2016/09/2016-2020-Fiji-FI-Strategy-Aug26.pdf43TABLE 2:ATM and EFTPOS statistics38TABLE 3:Use of mobile money in Fiji39 TABLE 4:Use of mobile and internet banking in Fiji40 IndicatorFijiVolume of ATM transactions,201923.2 millionNumber of EFT

299、POS transactions,20195.4 millionIndicatorFijiNumber of registered mobile money agent outlets367Number of registered mobile money agent outlets per 1,000(km)20Number of registered mobile money agent outlets per 100,000 adults59Number of mobile money transactions per 1,000 adults3,912Number of mobile

300、money transactions(total)2,436,008Value of mobile money transactions,USD equivalent139,000,260Value of mobile money transactions(percent of GDP)3Volume of mobile money payments(in#of transactions),20192.3 millionIndicatorFijiNumber of mobile and internet banking transactions per 1,000 adults1,195 Nu

301、mber of mobile and internet banking transactions79,633 Value of mobile and internet banking transactions,USD equivalent18,549,134 Value of mobile and internet banking transactions(percent of GDP)4Value of electronic money in circulation,2019,Fijian dollars4.5 million38http:/ Financial Access Survey

302、2019,https:/data.imf.org/40Ibid4441WB Papua New Guinea Economic Updates July 2020202042Asia Development Bank Papua New Guinea Country Partnership Strategy www.ict.gov.pg45Ibid46Bank of Papua New Guinea,https:/www.bankpng.gov.pg/Over the past decade,the Fijian Government has made a strateg

303、ic shift from cash and other paper-based mediums of exchanges to electronic payment forms.As of 2020,70 percent of all government payments are made through electronic platforms.Pension payments from Fijis Superannuation Fund are made through bank and electronic channels but there are further opportu

304、nities to digitize welfare payments.Disaster relief funds(such as the relief program after Cyclone Winston)were distributed through pre-loaded e-cards with further opportunities for linkages with mobile money.Consumer demand:Rates of mobile(9.4 percent)and internet(8.1 percent)banking are low in Fij

305、i.The most important reason for opening accounts is to receive remittances and save money;only two percent of the population is eligible to receive a loan.Fijians show a strong dump&pull behavior with money,leaving the system immediately after receipt of remittances.Key use cases for mobile money ar

306、e airtime recharge,customer-to-business payments,and remittances.Customer awareness of mobile money is high but adoption is limited,with most consumers relying on cash for payments.6.2.2.Papua New GuineaPapua New Guinea(PNG)is the largest country by land area in the South Pacific.With rich cultural

307、diversity,it has more than 800 languages and over 1,000 ethnic groups.It has a population of over eight million,of which the majority lives in rural areas.The economy is dominated by labor-intensive agriculture and capital-intensive extraction of oil and gas,gold,copper,and other minerals.Mining and

308、 petrochemicals now account for over 25%of PNGs GDP and over 80%of exports.While 80%of Papua New Guineans live within mobile coverage range,fixed and mobile internet subscriptions only cover around 11.5%of the population.41 The COVID-19 pandemic has severely disrupted PNGs economy due to weakened de

309、mand and less favorable terms of trade.The economy is projected by the Asian Development Bank to shrink by as much as 3%in 2020.42E-Government:The current NG has embarked on a National Digital Economic Development initiative,guided by activities are guided by the ICT Roadmap of 2019 which builds on

310、the policy objectives of the National ICT Policy Phase 1(2008)and Phase 2(2009),the National ICT Act 2009,and the National Broadband Policy(2013),among other ICT policy and legal instruments.The major PNG ICT,Digital Payments and E-commerce policy and regulatory framework tools are listed in the tab

311、le below.44,45 45TABLE 5:E-Government regulations in PNGIndicatorPolicy/RegulationYearICT DevelopmentICT Policy2008National Information and Communications Technology Act 20092009National Digital DevelopmentDigital Transformation Policy2020E-Government DevelopmentPublic Service Digital Transformation

312、 Act,Draft2020CybercrimeCybercrime Code Act 20162016Electronic Transactions,Contracts,Digital signaturesElectronic Transactions Act Draft2020Financial ecosystem:The banking sector is regulated by the Bank of PNG(BPNG),the countrys Central Bank.The main payment policy and regulatory tools and directi

313、ves are listed in the table below.46,47 The Bank of Papua New Guinea launched its FinTech Regulatory Sandbox in December 2019.48 The Regulatory Sandbox framework permits the accelerated development and market testing of new digital payment innovations and solutions for advancing financial inclusion

314、in PNG.46www.ict.gov.pg 47Ibid48https:/www.bankpng.gov.pg/regulatory-sandbox/46There are currently 59 licensed Internet Service Providers and two active mobile providers in PNG,Digicel and Bmobile.49 A third provider,Digitech Communications has rolled out infrastructure but is not yet licensed.Digic

315、el currently holds above 90%of the mobile market.In line with the National Payment System Act 2013,the Bank of Papua New Guinea serves as the primary government regulator for financial institutions and has responsibility for the National Payment System(NPS).50 As custodian of the National Payment Sy

316、stem,the BPNG operates two key electronic payment systems:TABLE 6:Regulations enabling digital payments in PNGIndicatorPolicy/RegulationYearNational Payment System Oversight and RegulationNational Payments System Act 20132013Anti-Money Laundering and Counter Terrorist Financing Anti-Money Laundering

317、 and Counter Terrorist Financing Act 20152015CybercrimeCybercrime Code Act 20162016Central Bank oversight powersBPNG Directive on Oversight 01/20192019Electronic fund transfersBPNG Directive on Electronic Funds Transfer 02/20192019Agent financial servicesBPNG Directive on Agents 03/20192019Non-paper

318、-based retail payment instrumentsBPNG Directive on Payment Instruments 04/20192019Financial Technology Innovations TrialsBPNG Regulatory Sandbox2020Electronic Transactions,Contracts,Digital signaturesElectronic Transactions Act,Draft202049World Bank Papua New Guinea Economic Update July 202050Ibid47

319、The Kina Automated Transfer System(KATS):Introduced in 2013 with the objective of fostering an efficient payment system for processing and settling all payments(both small and large volume payments)between all the banks and their customers.The main KATS transactions are Real Time Gross Settlement(RT

320、GS).Direct Credits and cheque processing.The Retail Electronic Payment System(REPS):Processes card-based transactions from ATMs and EFTPOS terminals.The REPS is driven by the PNG national switch for card payments and mobile money payments and was launched in 2019 with six founding member banks.REPS

321、is being implemented in phases and it is hoped to enable instant person-to-person and mobile money payments as well as providing an online payments gateway by the end of 2021.Since its launch in July 2019,REPS has seen a steep increase in usage traffic and has processed over 19 million chargeable tr

322、ansactions valued at K3.43 billion(USD 0.98 billion)as of March 2021.516.2.3.TongaThe Kingdom of Tonga comprises 169 islands of which 36 are inhabited.Seventy percent of the population lives on the main island of Tongatapu.The geographical location of Tonga makes it difficult for the country to acce

323、ss major markets.Tonga has only a small domestic market and a limited regional market.The economy heavily depends on remittances;approximately half of Tongas citizens live abroad,primarily in Australia,New Zealand,and the United States.Tonga depends on imports to obtain the majority of processed or

324、packaged goods.Agriculture is the main occupancy for the majority of the population and is the main sector for generating foreign exchange earnings.E-Government:Tonga currently does not have an e-government strategy/plan,which is reflected in their poor performance vis-vis other countries in many of

325、 the digital readiness indices.Similar to Fiji,overall Tonga also has a low ranking in the EGDI of 108 out of 193 countries and a score of 0.56.It has an especially poor e-participation score,i.e.,the level of participation by citizens in the online space with a score of 0.36(where 0 is the lowest a

326、nd 1 the highest).Tonga also performs poorly in both the ITU ICT Development Index and the UPU Postal Development Index with a rank of 110 out of 190 countries in 2017 and 115 out of 170 countries in 2019,respectively.Though the post offices in Tonga had taken an initiative to go digital through the

327、ir MoneyGram bill payment project,it was put on hold as there were no public APIs with the banks.51https:/www.bankpng.gov.pg/payment-system/national-switch-statistics/48Financial ecosystem:There is no law for a national payment system,nor a national switch,though there is a National Financial Inclus

328、ion Strategy.54 Payment gateways for E-commerce are only offered by international banks.The acceptance of debit and credit card payments requires merchants to install POS machines.However,the time,cost and deposit requirements(for merchants)are prohibitive.Therefore,the use of credit or debit cards

329、in Tonga is limited;as a result,most transactions are cash-based.Tonga was the second Pacific country to launch Digicel Mobile Money(in 2011).In May 2012,Digicel partnered with VeriFone to launch Beep and Go,the worlds first fully inclusive mobile payment system that does not require the use of a ba

330、nk account,credit card or smartphone.Digicel customers in Tonga are able to receive mobile remittances through Digicels partnership with KlickEx Pacific.TABLE 7:E-commerce regulations in Tonga52Legal areaTitle of Legislation/Draft LegislationYearConsumer ProtectionConsumer Protection Act 20002000Cyb

331、ercrimeComputer Crimes Act 20032003E-TransactionsElectronic Transaction LegislationDraft legislation to support electronic transactions,privacy and data protection,and cybersecurity with support from the World Bank.The bill has yet to be enacted.Data protection and privacyThere is no official data p

332、rotection and privacy law,however,there are a number of provisions prescribed under domestic telecommunication acts that are similar to a data protection regime such as the obligation of a telecommunication service provider to protect information about its customers or any persons,the right of the p

333、roviders customers to inspect,correct,or remove their consumer information,as well as the prohibition of unsolicited communications.5353Unsolicited communications,or spam,refers to emails or mobile messages that advertise products and services to a large group of recipients without their prior request or consent.See Infocomm Media Development Authority Unsolicited Communications.Available from:htt