Why mobile money needs enabling e-commerce regulation to digitise payments
Authored by Jose Sanin and Francesco Pasti.
In our previous two blogs on e-commerce, we highlighted how mobile money, as a source of funds integrated in a mobile phone, is a compelling opportunity to digitise the growing number of e-commerce payments in emerging markets, which are currently conducted via inefficient cash-on-delivery. Mobile money and e-commerce are well placed for collaboration in emerging markets to increase adoption of digital services. In this third blog on e-commerce, we explore the role that regulation and public policy play in the success of e-commerce.
The role of trust in e-commerce
A lack of trust is the biggest barrier facing e-commerce adoption. This is particularly true for low-income mobile money customers, who are generally more vulnerable to any economic loss. Moreover, our demand-driven research confirmed that trust is one of the drivers of continued high levels of cash-on-delivery payments. The legal and regulatory framework can have a major influence on levels of trust in online transactions among both businesses and consumers.
An enabling framework for e-commerce is similar to the enabling framework required for all digital commerce, and goes beyond shopping for goods: it can affect all digital financial transactions, including the provision of more sophisticated financial products such as credit, savings, insurance and investments.
The United Nations Conference on Trade and Development (UNCTAD) has identified four key areas of regulation which have the capacity to increase trust in e-commerce: e-transaction; online consumer protection; data protection/privacy; and cybercrime.
- E-transaction rules are those recognising the legal equivalence between paper-based and electronic-based forms of exchange. It is crucial for e-commerce adoption that all parties involved in a transaction have the ability to enforce their digital agreements. Digital identification and electronic signatures should be accepted mechanisms to create legally binding contracts, and the legal and judicial system should also prepare to accept digital evidence.
- Online consumer protection is an extensive topic that has been the subject of vast legal and policy development, including among several international standard-setting bodies. Some of OECD’s general principles, reflected in their 2016 e-commerce recommendations, include Transparent and Effective Protection; Fair Business, Advertising and Marketing Practices; Online Disclosures; Confirmation Process; Payment; and Dispute Resolution and Redress.
- Data security and privacy legislation are fundamental to building consumer trust in digital services. The necessary safeguards should combine national legislation, industry action and internationally agreed approaches. In any case, regulation should be proportional to the risks and should not stifle innovation and product development that can be useful for consumers.
- Finally, cybercrime laws should ensure that the online world does not provide loopholes for criminal activities. Criminal law should typify and penalize cybercrimes, and criminal justice authorities should have sufficient tools to prosecute cybercriminals.
Comparing the GSMA’s mobile money data with UNCTAD’s Global Cyberlaw Tracker, we can see that only 24% of countries where mobile money is available have regulation in place for all four of the following areas. Specifically:
- 71% of countries where mobile money is available have e-transactions legislation, and 19% have draft legislation.
- 46% of countries where mobile money is available have online consumer protection legislation, and 8% have draft legislation.
- 43% of countries where mobile money is available have data protection/privacy legislation, and 17% have draft legislation.
- 62% of countries where mobile money is available have cybercrime laws and 13% have draft legislation.
If we compare this data with the data on mobile money enabling regulation, we find that only 17% of markets where mobile money is live have both mobile money and e-commerce enabling regulation (that is to say, regulation encompassing all four areas outlined above). By establishing an e-commerce enabling legal framework, countries in which mobile money is well established could experience strong benefits by leveraging it as a key enabler of e-commerce payments. As an example, Tanzania which is one of the most successful countries in terms of mobile money adoption, has legislation in place only for electronic transactions, with the other three areas at a draft legislation stage.
Nevertheless, having a set of rules in place is just the first step in achieving trust in e-commerce; in order to increase adoption of e-commerce and the digitisation of the economy, governments should pursue holistic policies that incentivise investment and promote the development of digital economies. It is particularly important for e-commerce and the digitisation of the economy that governments demonstrate digital leadership by accepting and encouraging the use of digital IDs, supporting the development of a digital financial infrastructure, and introducing and promoting digital government services, from school fees to tax collection and digital notarial services. For this reason, we take this opportunity to encourage policymakers once more to embrace the digital and mobile revolution by adopting policies designed to build a digital economy.
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