In October, MMU hosted the fourth Leadership Forum as part of the Mobile Money Summit in Milan. The MMU Leadership Forum provides the opportunity for policymakers and industry leaders to engage on technical regulatory and commercial topics that impact mobile money. Chris Locke, the Managing Director of GSMA Mobile for Development opened the discussion by reinforcing the significant potential of mobile technology as an enabler for socio-economic development. To achieve the potential, policymakers and industry players need to collaborate and build sustainable business markets to meet the needs of the underserved. This is the theme that underpins all of the discussions at the Leadership Forum.
Click on the session title to see the highlights.
- Session 1: The digital pathway to financial inclusion: How sustainable mobile money business models are operated
- Session 2: New catalysers for financial inclusion: How to regulate non-bank mobile money providers?
- Session 3: The new Financial Action Task Force (FATF/GAFI) recommendations on Anti-Money Laundering and Counter Financing Terrorism (AML/CFT)
- Session 4: Data for business development and better policymaking
- Session 5: Interoperability: When and where can it be used to achieve greater financial inclusion?
Session 1: The digital pathway to financial inclusion: How sustainable mobile money business models are operated
Panellists:
- Annie Smith, Head of Financial Services Pacific, Digicel Pacific
- Alex Kamara, Head of Regulatory Affairs, Africa, Millicom International Cellular
Moderator:
- Yasmina McCarty, Senior Manager, Mobile Money for the Unbanked, GSMA
In Africa, 34% of all MNOs have already launched mobile money services for the unbanked and another 22% are planning to. Mobile network operators (MNOs) are well-positioned to run mobile money and this first panel addressed how regulators can best support that development. To start the conversation, Digicel and Millicom shared their experiences launching and scaling mobile money services, and discussed the importance of an enabling regulatory environment. An enabling environment is first built upon the ability to have an open dialogue between financial regulator and MNOs. Building on their long experience of working with Telco regulators, MNOs understand and appreciate the guidance of a financial regulator when it comes to launching mobile money. MNOs need the legal certainty from the regulator without adding unnecessary costs to the service that would either be pushed to the customer or create an unsustainable business model. Agent regulation and customer due diligence (CDD) are the two most evident examples where non-proportional regulation risks the sustainability of the business. The operators pointed out that regulatory guidelines are helpful to design the deployments and compliance mechanisms, it is the interest of the mobile money provider to train and manage the agents effectively to give customers a positive experience when using the service.
Session 2: New catalysers for financial inclusion: How to regulate non-bank mobile money providers?
Panellists:
- Matu Mugo, Assistant Director, Banking Supervision, Central Bank of Kenya
- Otto Boris RodrÃguez, Head of Financial System Development, Banco Central de Reserva de El Salvador
- Charulatha Kar, General Manager, Dept. of Payment and Settlement Systems, Reserve Bank of India
- Claire Alexandre, Head of Commercial & Strategy, Mobile Payments, Vodafone
Moderator:
- Michael Tarazi, Senior Policy Specialist, CGAP
The regulators invited to this panel have adopted different regulatory approaches onn the allowed business models, agents regulation, and AML/KYC regimes. Kenya allows MNOs to provide mobile money services, the Indian regulator allows only banks in the market, and the Ecuadorian draft regulation aims to require the creation of a separated legal entity (wholly owned subsidiary) to that can be owned by and MNO or a bank in order to provide the service, which facilitates supervision and establishes clearer financial regulator authority. While it is clear the value proposition of MNOs and that there are effective solutions to protect customers funds when the provider is not a bank, there are still many open issues regarding customers gaining an interest from the amount stored in the system, and about the extension of the deposit insurance to that capital. On the other hand, there is still no evidence that closing the market letting in only banks to be licensed as mobile money providers would work to expand the reach of the formal financial sector. Usually banks don’t have the incentives to deliver the service to the unbanked, and when they are licensed but are not active in actually providing the service (which is actually provided by an MNO) this complicates delivery and raises costs – ultimately passed on to the customer.
From the audience, Ivette Vasquez of the Central Bank of Bolivia shared a great example of the rationale for the South American regulator to allow non-bank mobile money providers to be established.
Vodafone emphasized the risks of the cash-based economy and the cost that people bear having to manage their finances only through the informal sector, and compared the risks and costs of the cash-based economy with those – smaller and mitigable – that customers face in the mobile money ecosystem. Matu Mugo of CBK also pointed out that regulators should test new business models that can leverage the experience and assets of non-traditional financial providers, be open to dialogue with all relevant actors and constantly adjust their approach to avoid overregulation and dogmatic policy approaches that would stifle innovation.
Regarding AML/CFT and agents regulations, most speakers agreed on the importance of proportionate Know-Your-Customer (KYC) regulation to allowing the ease of quick mobile money registration process, and that regulators need to allow mobile money providers to easily establish a wide agent network with low licensing/registration requirements.
Session 3: The new Financial Action Task Force (FATF/GAFI) recommendations on Anti-Money Laundering and Counter Financing Terrorism (AML/CFT)
Panellists:
- Anne-Françoise Lefèvre, Policy Analyst, AML/CFT, FATF
Moderator:
- Simone di Castri, Regulatory Director, Mobile Money for the Unbanked, GSMA
The 2012 FATF Recommendations on money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction require all countries to have effective systems for preventing and addressing these issues. The standards could have great impact on the development of mobile money for the unbanked because of their relevance for the design of proportional KYC and CDD rules. The revised FATF standards are better targeted to allow financial institutions to apply their resources more efficiently by focusing on higher risk areas while there is more flexibility for simplified measures to be applied in low risk areas. The first Recommendation requires country to adopt a risk-based approach. During the session FATF pointed out that this could allows to accept alternative means of identification for low risk customers that are conducting low risk transactions such as a small value transfer through the mobile. The FATF is currently drafting guidelines to help countries implement the standards, recognizing that regulators are seeking more formal guidance on the implementation of the risk-based approach and the CDD solutions that are compliant with the FATF framework, particularly whether financial sector authorities can open windows in the regulation for “no-KYC” entry-level accounts. The FATF will begin a new round of country-level evaluations in 2013 and will focus much more intensively on assessing how effectively countries have implemented the Standards. Depending on the design of the mutual evaluation questionnaire, the level of financial inclusion in a country could form part of the assessment.
Session 4: Data for business development and better policymaking
Panellists:
- Carlos Lopez-Moctezuma, Comisión Nacional Bancaria y de Valores, Mexico, and Chair of the AFI Mobile Financial Services Working Group
- Jake Kendall, Research Program Officer, The Bill & Melinda Gates Foundation
Moderator:
- Tillman Bruett, Chief Technical Advisor, United Nations Capital Development Fund
Session in co-hosted with the Alliance for Financial Inclusion‘s (AFI) Mobile Financial Services Working Group (MFSWG)
The use of quantitative information can drive better policymaking and mobile money deployments design: quantitative analysis to enable the development of evidence based regulatory solutions and make the provision of mobile money products and services more cost-effective, thus amplifying the economic and social impact of mobile money. The GSMA is increasingly investing in the collection and dissemination of data related to the mobile and different development areas; specifically on mobile money, the MMU has released in Milan the preliminary results of its annual Global Mobile Money Adoption Survey. The study provides detailed figures on the usage of mobile money, uncovered key barriers to adoption and identified best practices for mobile money providers. We asked one policymaker and one economist to present their work in the area of digital financial inclusion measurement and to discuss with the audience the benefits and challenges of data collection, reporting, and analysis. The Bill & Melinda Gates Foundation (BMGF) presented the Spatial Data Analysis for Financial Inclusion and Operational Efficiency project, showing that the GIS software and spatial data can be used to assess the geographic distribution of bank branches, ATMs, CICO agents, and other financial access points relative to the spatial distribution of population (including the poor). More information about this project on this blog.
The CNBV has made great use of data to better assess their financial inclusion objectives, identify gaps, develop policies, and monitor progresses made to broaden access.
The panel conveyed a series of important messages to the audience:
- Look at what is already there. What do you have in house, in the government, in the private sector?
- Have clear in mind your specific goal, what you exactly want to know? What questions are you trying to answer?
- Talk to the industry. What do they need to know to improve their services? Where is there overlap with our data needs and availability? Want data do they or could they have and entrust with the regulator as a honest broker?
- Get expertise. Ever you are working with a national statistics office or other agency, its good to have some analysts in house that can use the data, help articulate your needs.
- Ensure quality and create a public good with the available quantitative information. Publishing is a good way to keep the pressure on to make the data high quality and on time.
Session 5: Interoperability: When and where can it be used to achieve greater financial inclusion?
Panellists:
- Narda Sotomayor, Head Microfinance Analysis Department, Superintendencia de Banca, Seguros y AFP, Peru
- Omar Moeen Malik, Head of Strategy and Projects at Easypaisa, Telenor Pakistan
- Shaibu Haruna, GM Sales & Distribution MTN Uganda
Moderator:
- Paul Makin, Head of Mobile Money, Consult Hyperion
The final session focussed on interconnection and interoperability. On the regulatory side, the session was a great continuum of the panel on the same topic that was hosted at the AFI Global Policy Forum a few weeks before, with the regulator on stage and her peers in the audience agreeing that timing, and market and deployment maturity, must be carefully appraised by the policymaker together with the providers where interoperability is considered by the policymaker as a requirement to achieve mobile money deployment, first because there isn’t evidence that mandating interoperability would help the market to develop rather than jeopardize it, and second because the providers themselves can find ways to interconnect in a way that improve the value of the service for the customer. An important note that was made during the panel is that the issue concerns not only the mobile money providers, but all the environment and different connections at different levels (mobile money providers, banks, ATMs, and prepaid debit cards) can be considered. From the audience Annie Smith of Digicel brings up an excellent point about the opportunities for banks and MNOs to work together to expand access to banking services.