The broader context

As COVID-19 continues to fundamentally change the global landscape, the GSMA is working with several of its members, governments, international organisations and NGO partners to ensure that mobile can play its part in responding to the pandemic. The GSMA recently agreed a Joint Action Plan with the World Bank, the International Telecommunications Union (ITU) and the World Economic Forum (WEF), outlining a set of concrete actions to help governments and the private sector cope with the pandemic.

A number of mobile operator initiatives already underway demonstrate how MNO-derived insights (such as aggregated population mobility data) could inform governments’ response efforts. We are also seeing a number of industry-led initiatives aimed at supporting citizens and consumers go about their daily lives under the new ‘norm’ of social-distancing and ‘lockdown’ restrictions.

The humanitarian context

The impact of the pandemic on vulnerable groups, particularly those affected by humanitarian crises,  is likely to be catastrophic. As part of the GSMA Mobile for Humanitarian Innovation Programme (M4H), and with generous support from the UK’s Department for International Development (DFID), we’ve been working to accelerate the delivery and impact of digital humanitarian assistance by catalysing partnerships and innovation for new digital humanitarian services, advocating for enabling policy environments, and building a learning and research agenda.

The M4H programme has been gathering and sharing insights on initiatives being led by our MNO members aiming to address COVID-19 related challenges part of the broader updates and guidance coordinated by our broader Mobile for Development (M4D) group.

Mobile money has proven to be an invaluable tool for fostering resilience by facilitating safe and efficient money transfer and payments services. Workers are able to receive wages while the humanitarian sector is able to disburse humanitarian assistance faster and more efficiently to the intended beneficiaries

Objectives of this guidance

• Outline the most significant challenges that MNOs face (or likely to face) in the context of supporting the delivery of humanitarian assistance in a COVID-19 world
• Offer relevant ‘calls to action’/recommendations to governments on how to help address or mitigate these challenges
• Use as a basis to invite humanitarian and MNO partners to (jointly or separately) advocate these messages when engaging with governments and regulators

Challenges and recommendations

Challenge 1:
Many displaced persons, including refugees, are unable to meet proof of identity requirements for accessing SIM cards and mobile money wallets

The role of mobile in providing a lifeline for digital, social and financial inclusion during this pandemic is now more important than ever – particularly in the context of reaching the most vulnerable populations affected by humanitarian crises. The global lockdown restrictions led several governments and humanitarian organisations adapting the delivery modalities of ‘social safety net’ or aid programmes towards digital/mobile money and other electronic payments. Most are specifically advising against cash-in-hand disbursements.

However, the ability to send financial aid to the intended beneficiaries remotely relies on the ability of each beneficiary to access a mobile money account in his/her own name. Research conducted by the UNHCR in partnership with the GSMA has found that refugees and asylum seekers lack the required identification credentials to legally register a SIM card and access mobile financial services including mobile money. Such exclusionary (or at best, unclear) policies need to be re-considered in light of the new COVID-19 related restrictions, if the objective of delivering (humanitarian) assistance digitally is to be realised.

Recommendation/Call to action:
Need to provide a clear and conducive legal pathway for a country’s non-nationals (e.g. refugees) to access mobile connectivity and mobile money services in their own name.

We call on governments to ensure that refugees and forcibly displaced persons are not left behind by policies that only cater for a country’s citizens. Having a legal framework that supports access to digital financial and connectivity services can empower countries to responsibly drive positive public health outcomes for refugees and their hosting communities.

A first step towards achieving this is ensuring effective collaboration and coordination between central banks and telecommunications regulators so that the proof of identity requirements (and any temporary relaxations) for accessing SIM cards are consistent with those for opening mobile money accounts.

Additionally, and in line with the latest Financial Action Task Force (FATF) recommendations, the introduction of ‘tiered-KYC’ mobile wallets (with lower transaction limits etc.) could offer a pathway to financial inclusion while addressing risks related to the financing of terrorism or money laundering (CFT/AML).

Challenge 2:
Excessive or prolonged fee reductions will impact the sustainability of the mobile money business model and its ability to meet the increasing demand in transactions

In response to the pandemic, a number of mobile money providers, their regulators and governments have been taking several measures to limit the spread of the COVID-19 virus by encouraging digital payments and reduce costs associated with the use payments. Measures being taken include:

• Person-to-Person (P2P) transaction fee waivers
• Waivers on bank to wallet and wallet to bank transaction fees
• Waiver of interchange (cross-network transaction) fees
• Increasing transaction and wallet balance limits to facilitate trade and purchase of essential items, including medicine

According to the GSMA State of the Industry Report 2019, P2P transactions account for 91 per cent of the ‘circulating value’ in a mobile money ecosystem. Unlike banks who may intermediate customer funds, mobile money business relies wholly on transactional revenue. Loss of P2P revenue in the long run will severely impair the sustainability of mobile money business as mobile money providers struggle to maintain strong agent networks. A GSMA study showed that agent management and commissions account for the highest proportion of mobile money operating costs.

Loss of mobile money excise taxes from zero-rating transactions may see an increased focus on the regressive taxation of the underlying principle amount.

As the volumes or spikes in transactions increase due to government or humanitarian transfer programmes, the pressures on the mobile money platform would be significant and the cost structure could impact the sustainability and viability of mobile money providers in offering lower transaction fees for extended periods of time.

Recommendation/Call to action:
Ensure that, where mandated, such measures are proportional, taken in consultation with the industry and reflective of market reality – especially in humanitarian contexts where ‘transaction spikes’ are prevalent

• Facilitate public/private dialogue to ensure proper implementation of any fee waiver regime during the pandemic
• Set term limits on the fee waiver regime, preferably month-on-month
• Define ‘return to normal’ formula for the period post the pandemic
• Introduce appropriate limits on free transactions to ensure that the fee waiver benefits vulnerable customers most affected by the pandemic rather than encourage free riding for higher value P2P transfers
• Provide tax relief on mobile money services (including taxes borne by mobile money agents) where such taxes exist to increase the resilience of mobile money services as recommended by the international organisations
• Where regulation permits earning and utilisation of interest earned on e-money liabilities, regulators could permit mobile money providers to utilise the interest to subsidise operating costs during the period of the pandemic under the supervision of the regulator^[1]
• Increasing transaction and balance limits to facilitate trade and purchase of essential items, including medicine. Furthermore, consider formalising the enhanced transaction and balance limits beyond the pandemic to ensure sustained use of mobile money by the SME sector

Challenge 3:
Agent liquidity issues affecting ability to meet beneficiaries’ cash out needs

The combination of governments mandated ‘lockdown’ rules (limited working hours and social distancing rules) as well as widespread panic caused by the present circumstances, leads to liquidity pressures on agents who rely on banks to rebalance. Additionally, existing liquidity support initiatives will come under pressure due to limited P2P revenue.

Recommendation/Call to action:
Take steps that improve cash liquidity or minimise reliance on it

Possible measures taken by governments/regulators could include:

• Incentivising/encouraging the provision of interest-free emergency loans for small businesses, many of whom are agents
• Temporarily reducing or removing taxes where appropriate
• Ensuring that banks make necessary arrangements to make liquidity available to mobile money agents
• In order to level the playing ground for all providers of essential financial services, regulators may consider declaring mobile money an “essential service” at par with other financial service providers such as banks. This will ensure there is service availability at mobile money cash in and cash out points even as governments tighten COVID-19 emergency responses.
• Staggering G2P (and humanitarian payments) to ease pressure on agent liquidity throughout a given period (rather than, say, a specific day of each month)
• encouraging the acceptance of digital payments by SMEs and informal traders could help drive this behaviour and remove the dependency on cash liquidity in the informal markets. This could be further supported if FMCG players encourage digital supplier payments from merchants so as to reduce the cash transactions and limit the risk of the virus spreading through cash handling.

[1] For example, in the DRC, a new instruction issued by the central bank allows the use of up to 75 per cent of the interest generated during the period from April 2020 to December 2020 to cover the shortfalls outstanding as a result of the abolition of the fees as well as to expand their presence of mobile money agents nationwide.