Financial Services Glossary

Agent: A person or business that is contracted to facilitate financial transactions for users. These transactions include depositing, withdrawing and transferring money. Agents often also register new customers, and usually earn commissions for their services. They also often provide front-line customer service—such as teaching new users how to initiate transactions on their phone. Regulations my limit the kinds of individuals or businesses that can serve as agents, but small-scale traders, microfinance institutions, chain stores, and bank branches serve as agents in some markets. 

Aggregator: Regarding Mobile Network Operators (MNOs), an aggregator is someone who aggregates customer requests for connections or service - so that the MNO sees one connection (from the aggregator). Regarding customers, an aggregator is a party who connects the customer to multiple MNOs or payment networks and aggregates those payment networks into one connection. So the customer makes one connection.

Digital Financial Services (DFS): DFS use information and communication technology and agent networks to connect customers with financial services.  DFS lower the cost and increase the security of sending, paying, saving and receiving money, providing important benefits to poor populations who are otherwise excluded from formal financial systems. DFS can use a variety of digital tools - mobile phones, point-of-sale devices, ATM or debit cards, etc. - along with networks of agents. Banks, microfinance institutions, mobile network operators, and other providers offer DFS.  

E-money: Short for “electronic money,” is stored value held in the accounts of users, agents, and the provider of the mobile money service. Typically, the total value of e-money is mirrored in (a) bank account(s), such that even if the provider of the mobile money service were to fail, users could recover 100% of the value stored in their accounts. That said, bank deposits can earn interest, while e-money cannot.

Financial inclusion: Financial inclusion means that households and businesses, regardless of income level, have access to and can effectively use the appropriate financial services they need to improve their lives. According to World Bank Research, an estimated two billion working-age adults globally—nearly one-third of the world’s total adult population—do not have an account at a formal financial institution.
Financial literacy: Financial literacy is defined as the ability to understand and execute matters of personal finance, including basic numeracy and literacy, budgeting, investing, and risk diversification. Financial literacy includes a combination of awareness, knowledge, skills, attitudes and behaviors necessary to make sound decisions and achieve financial wellbeing. Globally, financial literacy levels range from 13 percent to 71 percent, and women’s financial literacy often lags that of men.

Formal Financial Services: Financial services offered by regulated institutions.  Banks, remittance service providers, microfinance institutions and Mobile Network Operators can be licensed to offer formal financial services. 

Informal Financial Services: Services offered by unregulated entities, such as individual money lenders, and informal savings groups. 

Interoperability: The ability of users of different mobile money services to transact directly with each other. Limited interoperability is a major barrier to the use of digital financial services in remote rural areas. Given the technical and regulatory complexities involved, no mobile money platforms are to date fully interoperable with each other. However, many mobile money services allow users to send money to nonusers (who receive the transfer in the form of cash at an agent). 

Liquidity: The ability of an agent to meet customers’ demands to purchase (cash in) or sell (cash out) e-money. The key metric used to measure the liquidity of an agent is the sum of their e-money and cash balances (also known as their float balance).

MIS (Management Information System): A general term for any system that is used to manage and make decisions within a company, in this case specifically microfinance institutions.

Mobile banking: A service provided by a bank that allows its customers access to their bank account to conduct a range of financial transactions using a mobile device such as a mobile phone or tablet, and using software (an app), provided by the financial institution for the purpose.  

Mobile Money: An electronic wallet service, available in many countries, that lets users store, send and receive money using their mobile phone. Safe, easy electronic payments make Mobile Money a popular alternative to bank accounts. It can be used on both smartphones and basic feature phones.

Mobile Network Operators: A mobile network operator (MNO) is a telecommunications service provider organization that provides wireless voice and data communication for its subscribed mobile users. Mobile network operators are independent communication service providers that own the complete telecom infrastructure for hosting and managing mobile communications between the subscribed mobile users with users in the same and external wireless and wired telecom networks. MNOs can be authorized to offer mobile money services.

Mobile Wallet: An account that is primarily accessed using a mobile phone.

POS (Point of Sale): The terminal/technology/interface that the teller uses to capture a sales transaction (e.g., the clerk at the checkout counter at any shop, cafe, mall, etc.)

Unbanked: People, usually the very poor, who do not have a bank account or a transaction account at a formal financial institution.