Consulting Services for Fintech and Digital Financial Services (DFS) Data Supervision

1. Background:

The Alliance for Financial Inclusion

The Alliance for Financial Inclusion (AFI) is the world’s leading organization on financial inclusion policy and regulation. Currently, 84 member institutions make up the AFI network including central banks, ministries of finance and other financial policymaking or regulatory institutions from over 76 developing countries and emerging markets. AFI empowers policymakers to increase the access and usage of quality financial services for the underserved through sustainable and inclusive policies and an effective use of digital technologies.

Policies developed and implemented by AFI members contribute to a range of the Sustainable Development Goals. By Setting their own agenda, AFI members harness the power of peer learning to develop practical and tested policy reforms that enhance financial inclusion with strategic support from both public and private sector partners.

AFI has 7 Working Groups (WG): Consumer Empowerment and Market Conduct Working Group (CEMCWG), Digital Financial Services Working Group (DFSWG), Financial Inclusion Data Working Group (FIDWG), Financial Inclusion Strategy Peer Learning Group (FISPLG), Global Standards Proportionality Working Group (GSPWG), Inclusive Green Finance Working Group (IGFWG) and SME Finance Working Group (SMEFWG),

As the key source of policy developments and trends in financial inclusion and as the primary mechanism for generating and incubating technical content in the network, the Working Groups serve as “communities of practice”. Providing a platform for knowledge exchange and peer learning among policymakers to share, deliberate and deepen their understanding, the working groups offer leadership and expertise in their respective policy fields and support the network to monitor new developments in emerging fields.

The knowledge generated via the working groups is disseminated for implementation by a range of capacity building activities such as Joint Learning Programs, Member Trainings, Trainings by Private Sector Partners. The practical experience members garner from engaging in peer learning based capacity building is then applied by members as in country implementation projects which are supported by the provision of financial or technical support to AFI member institutions in conducting activities that aim to deliver financial inclusion policies, regulations, supervisory tools or enablers for the development of policies, such as national financial inclusion strategies.

The working groups receive strategic guidance and insight from the High-Level Global Standards & Policy Committee, while the Gender Inclusive Finance Committee, supports WGs in integrating gender considerations into all aspects of their work and support members in fulfilling their Denarau Action Plan (updated 2022) commitment to promote women’s financial inclusion.

AFI members have made further commitments in a range of other accords which can be read here.

The AFI’s five regional initiatives complete the AFI platform of services by supporting policy implementation in Africa (AfPI), Latin America and the Caribbean (FILAC), the Pacific Islands (PIRI), Eastern Europe and Central Asia (ECAPI) and the Arab Region (FIARI).

2. Project Background:

The financial technology and innovative digital financial services industry are rapidly growing and transforming the financial services landscape – with how financial services are designed, developed, distributed, and delivered, with new technologies and innovations emerging on a regular basis. The regulatory environment is therefore regularly making efforts to keep up with the pace of change and seeking more efficient and effective avenues or approaches for data, insights, and opportunities to extract intelligence on trends, market dynamics and potentially new challenges and/or risks posed directly or unintentionally by FinTech – entities, the business model(s), use cases and the products and services).

The importance and relevance of data, which has been the bedrock for the research and statistics function within central banks cannot be overstated; it bears direct linkages to institutional knowledge and decision making across several areas and functions including but not limited to monetary policy, financial stability, regulation and supervision, payment systems, consumer protection, market conduct etc., and more recently, given the volume, velocity and veracity of data birthed with the emergence of FinTechs and other innovative financial service providers, it informs on market trends, cybersecurity early warning systems, ecosystem intelligence on both supply and demand side, the general public perception and evolving customer behaviour and much more.

For regulators in emerging and developing market economies (EDMEs) represented by the AFI network, data on the financial market are a key source of information, and it is critical that the process, types, approach, and quality of data collected and analyzed remains high and sufficient for the performance of their duties. Citing changes in the financial sector, AFI member countries represented by the Digital Financial Services Working Group (DFSWG) observe that because of rapid digitalization, having an approach to data for the entire ecosystem anchored on principles such as intelligence, usefulness and representativeness are needed to ensure proportionate and timely policy as well as data-driven decision making.

Within this context, the DFSWG have established a subgroup on FinTech and DFS data for supervision to explore and deliver a knowledge product that will provide clear and actionable guidance to members of the AFI network and beyond, on broadly why (clear objectives) and for what purposes should data from the FinTech and DFS ecosystem be collected, defining the limits and parameters governing the velocity, volume and veracity of data needed, and how an ecosystem approach(es) can be explored to ensure policy, market intelligence, market conduct and customer protection, supervisory and oversight objectives and more are achieved.

Therefore, taking forward the interest from the AFI network to explore the opportunities inherent FinTech and DFS data for supervision and its linkages and/or implications in supporting, accelerating and sustaining financial inclusion for all and particularly, the underserved (specifically women), vulnerable (including the elderly, forcibly displaced, youth etc.) and MSMEs, the subgroup will be engaging the services of a consultant(s) to support with the research, validation and development of the knowledge product with the objectives, scope and aligned to the timelines described below.

3. Objectives:

The subgroup with the support of AFI wishes to develop a guideline note, which will:

• Create a comprehensive and practical policy guideline note that outlines an ecosystem-based approach to data collection, usage, and decision-making for regulators or central banks. This high-level document will facilitate examination, exploration, analysis, decision-making, planning, coordination, and implementation of a holistic, sustainable, and practical strategy for data collection, analysis, stakeholder cooperation, and decision-making within the FinTech, DFS, and financial services ecosystem with contributions to a net positive impact for financial inclusion throughout the process.
• Develop a taxonomy of fintech and DFS providers: Develop a comprehensive and standardized taxonomy of fintech and DFS providers, which can be used to classify and differentiate these entities based on their business models, activities, stakeholders, products, and services.
• Identify relevant data points and indicators: Identify relevant data points and indicators that can be used to establish policies and to monitor the operations and risks of fintech and DFS providers. This will include data on customer profiles, transaction volumes, operational and financial performance, risk exposures, compliance with regulatory requirements, creating and maintaining an active FinTech registry, identification of data gaps, market intelligence, market surveillance, facilitating co-operation with stakeholders, and decision-making support.
• Highlight and cite country examples, use cases and experiences within the AFI network and beyond of DFS and FinTech data for supervision principles, and approaches that demonstrate practical and proven policy options.

The deliverable should take account of the various levels of regulatory and supervisory regimes, data ethics, digital infrastructure, regulator and stakeholder capabilities, and different circumstances in terms of DFS appreciation across the countries representing the AFI member network, therefore, the guideline note must incorporate principles of resilience, proportionality and equity in the considerations and recommendations proposed.

4. Scope of Work:

The activities, tasks, and deliverable within these terms of reference (TOR) is expected to include:

1. Extensive literature and desk research on the scope, approaches, models, and regulatory practices on DFS and FinTech data for supervision across the AFI network including other emerging & developing economies through a lens of supporting or contributing to positive acceleration of financial inclusion. The research should cover (not exhaustive list):
2. 1. DFS and FinTech ecosystem taxonomy and emerging data options
   2. Identification of the data types, the required volume, velocity and veracity, and the principles governing the regulatory approach
   3. Supply and demand-side approaches, objectives, and outcomes to collection of data for knowledge, market intelligence and public policy use, such as:
      • FinTech (licensed and unlicensed), non-bank financial services providers (including BigTech and other entities that provide financial services through digital channels), businesses, products, services, and other activities registry or database for census and intelligence purposes.
      • Regulated and unregulated entities, as well as those operating in both domestic and cross-border markets.
      • Data on national DFS distribution infrastructure, access touchpoints e.g. ATMs, Digital Kiosks, agent networks with implications on underserved and unserved segments.
      • Demand and supply side data on payments, digital payment services, payment service providers.
      • Data on financially excluded population, sex disaggregated data and gender related data on FinTech and DFS industry.
   4. Collection of data for FinTech and DFS industry surveillance and broad supervisory purposes
   5. Monitoring of fintech developments and its implications from financial inclusion, stability, integrity, cybersecurity, and consumer protection standpoint, such as:
      • New risks to the ecosystem
      • Market failures – contagion effect of bankruptcy or business collapse (e.g. FTX contagion)
      • Market conduct (institutional fraud, poor corporate governance, unauthorized and improper activities)
      • Competition issues – Abuse of dominant position (undue influence in product pricing, monopolistic pricing, exploitative business practices etc.), unfair competition (collusion, acquisitions, and mergers etc.), absence of data portability, exclusivities, fairness of contracts etc.
      • Integrity issues – AML/CFT concerns and monitoring (supporting unauthorized businesses and related payments, etc.
      • Credit risk, liquidity risk, operational risks, risk of interconnectedness, and the data indicators to establish controls or mitigation to these risks
      • Cyber-security and technology-related hygiene indicators such as vulnerabilities, incidents, security arrangements/preparedness etc.
3. Validate via key informant interviews, surveys or focal group engagement, information, and data from (a) above with relevant AFI members countries, stakeholders and relevant AFI partners.
4. Avoid duplication, reference, and build synergy/linkages with relevant AFI policy models and knowledge product including Policy models on E-money, consumer protection for DFS, risk guide and framework: cybersecurity for financial inclusion, guideline note for data privacy for DFS and other relevant non-AFI publications and resource.
5. Ensure the overall deliverable provides gender-sensitive policy considerations to guide regulators in the development of relevant policies/frameworks for DFS and FinTech data for supervision.
6. Facilitate review and iteration of 2-3 draft versions including the technical reviews and incorporation of feedback and comments from the subgroup, members of the DFSWG and the AFI management unit.

5. Out of Scope:

The following are out of scope for this deliverable (to be excluded from the project):

• Personal data and other forms of alternate data in form of digital identity used for purposes including customer identity, customer due diligence and know-your-customer (e-KYC or remote KYC) requirements.
• Data or policy elements related to data privacy, data protection, customer consent etc.
• Applications of data in regulatory technology (RegTech) and supervisory technology (SupTech) tools

6. Key Deliverables:

The final guideline note must meet and satisfy the objectives and scope of work specified for this project. This final draft of the guideline note must include policy recommendations, and other technical guidance that effectively provide valuable insights and recommendations to central banks and financial regulators on collecting, utilizing, and adapting fintech and digital financial services data for market insights, trends, and supervision.

Complementing the objectives (in section 3) and scope of work (in section 4), the guideline note should further support these by:

• Presenting a comprehensive set of FinTech and DFS ecosystem data sets, practical collection approaches, framework for analysis and guideline on requirements for Fintech and DFS providers.
• Providing guidance on data governance and collaboration between ecosystem stakeholders and actors.
• Presenting (where applicable) a set of supervisory reporting templates for Fintech and DFS providers.
• Providing decision-tree, priority matrix and guidance on necessity, appropriateness and use of Fintech and DFS data in supervisory processes; and
• Providing guidance for the monitoring and evaluation of Fintech and DFS data for intelligence and supervision lifecycle.

Hence, the key deliverables for this project are:

1. Extensive and comprehensive desk research for the guideline note
2. Key Informant Interviews (KIIs) and/or short survey with select AFI members, partners, and stakeholders (minimum 12 relevant KIIs)
3. Submission and acceptance of Outline for Guideline Note and the summary report for the KIIs
4. Submission of three (3) iterations of the draft Guideline Note incorporating feedbacks and comments from the AFI management unit, DFSWG subgroup, stakeholders and other parties as defined by AFI
5. Submission of the comments and feedback matrix report
6. Submission of all data, images, charts, and associated visuals used or referenced in the Guideline Note
7. Submission of the PowerPoint presentation for the final draft of the Guideline Note
8. Submission of the plagiarism check and similarity score report for the final draft of the Guideline Note (score shall not exceed 5 percent)
9. Submission of the final draft of the Guideline Note.

Additionally, throughout the course of the project, the consultant is expected to lead the project management including convening and leading update calls, capturing, and providing meeting (virtual) minutes, presenting the Guideline Note development progress and taking verbal and written inputs from AFI, the DFSWG subgroup and other stakeholders, tracking timelines and ensuring the deliverable is completed based on agreed workplan and timelines.

7. Other Considerations:

Please note the following considerations:

1. During the development and delivery of the stated outputs from this project, representative from the AFI Management Unit will support the project by reviewing the report outline and drafts produced and facilitating contact with AFI’s members and partners for arranging interviews and focus groups discussions.
2. Consultant(s) engaged to support this project will be expected to tap into their own contacts and networks which supplement AFI’s membership and partners, to facilitate relevant key informant interviews, and should provide relevant details in this regard as part of their proposal.
3. The review of the drafts for the guideline note shall be undertaken by AFI staff, representatives of AFI DFSWG subgroup and any external reviewers (as identified and communicated by AFI).
4. The following are required for the submission and acceptance of the final draft:

• A feedback and comment tracker/matrix detailing how comments, feedback and contributions received have been responded to and addressed in the final draft of the guideline note
• Prior to the submission and acceptance of the final draft, a plagiarism and referencing check is required to be done by the supporting consultant(s), the check must have preferably not more than 4.99 percentage (5%) similarity score or less to be acceptable for submission.

8. Timeline, Resources and Payment:

The assignment is expected to commence and be completed between July and September 2023, with the duration of man-days not exceeding 45 days.

Refer link in ‘How to Apply’ section for more detailed information.

9. Travel:

No Travel is expected for this assignment. The consultant(s) will work remotely and undertake virtual meetings to complete the tasks.

10. Consultant Experience:

• Financial Regulation and Policy: A strong understanding of financial regulatory frameworks, policies, and best practices, including knowledge of international standards such as Basel III, PSD2, GDPR, and AML/CFT regulations.
• Fintech and Digital Finance: In-depth knowledge of fintech innovations, digital financial services, and emerging technologies such as blockchain, artificial intelligence, and cloud computing. Familiarity with digital payment systems, DFS, FinTech, open finance/data, digital banking, and digital credit platforms is essential.
• Data Analytics and Insight Generation: Proficiency in data analytics tools and techniques, including statistical analysis, data visualization, and predictive modeling. The consultant should have experience in extracting actionable insights from large and complex datasets.
• Risk Management: Expertise in assessing and managing risks associated with fintech and digital financial services, including cybersecurity, consumer protection, data privacy, operational risk, and fraud prevention.
• Regulatory Compliance: Understanding of compliance requirements and the ability to develop frameworks and strategies for ensuring compliance with relevant regulations, including data protection, customer due diligence, and anti-money laundering measures.
• Market Research and Trend Analysis: Strong research skills to gather and analyze market trends, competitive landscapes, customer behavior, and emerging business models in the fintech and digital finance sectors.
• Data Governance and Privacy: Knowledge of data governance frameworks, data protection regulations, and privacy laws. Experience in developing policies and procedures for responsible data collection, storage, sharing, and protection.
• Collaborative Stakeholder Engagement: Ability to engage and collaborate with a diverse range of stakeholders including central banks, financial regulators, financial institutions, fintech startups, technology providers, and customers. Experience in facilitating discussions, workshops, and consultations with key stakeholders.
• Project Management: Proficiency in project management methodologies to plan, execute, and deliver complex projects within agreed timelines and budgets. This includes skills in scoping, resource allocation, risk assessment, and reporting.
• Communication and Report Writing: Excellent communication skills, both written and verbal, to effectively convey complex concepts, findings, and recommendations to diverse audiences. The ability to synthesize information and present it in a clear, concise, and impactful manner is crucial.
• Industry Knowledge: Up-to-date knowledge of the latest developments, trends, and challenges in the fintech and digital finance landscape, including regulatory advancements, technological innovations, and market dynamics.
• Practical Experience: Previous experience working with central banks, financial regulators, or financial institutions in implementing digital financial services, fintech solutions, or data-driven initiatives would be highly valuable.
• Language and report writing skills: Fluency in English (oral and written)

11. Reporting:

For the duration of this contract period, the consultant will be expected to coordinate and provide regular reports and updates to AFI DFS team working with the Policy Specialist FinTech (Project Lead) and the Senior Policy Manager DFS during the assignment.

12. Payment Terms:

Refer link in ‘How to Apply’ section for more detailed information.

13. Proposal Submission Information:

Refer link in ‘How to Apply’ section for more detailed information.

14. Criteria for Evaluation:

Refer link in ‘How to Apply’ section for more detailed information.

Evaluation of technical and financial proposals

The evaluation and decision on the best proposal will be made based on the combined criterion, where companies are qualified by means of a score that takes into account the combined valuation of the technical and financial proposals, with the following weights:

1. a) Technical Proposal: 70% (Seventy percent)
2. b) Financial Proposal: 30% (Thirty percent)