Regulatory Considerations for Expanding the Mobile Money Ecosystem

As mobile money services have grown into a global industry with over 100 million active customers (including 21 services with over 1 million active accounts), providers are seizing the opportunity to use mobile money as the foundation for offering unbanked and underserved customers a wide variety of financial services. While domestic P2P and airtime topup services still dominate, services such as international remittances, bulk disbursements, bill payments, merchant payments, insurance, credit, and savings grew rapidly in 2014. In addition, financial regulators in Liberia and Tanzania have issued regulatory guidance requiring mobile money providers to ensure that interest earned on pooled accounts directly benefits mobile money customers, and Tigo Tanzania has begun to pay out all interest earned in the pooled Tigo Pesa Trust Fund to its customers.

Regulatory issues affecting the development and adoption of basic mobile money services (and similar digital financial services) have been analysed in depth by a number of international stakeholders. CGAP has published a number of relevant publications, including a branchless banking diagnostic template, a series of country regulatory assessments, and Focus Notes addressing issues such as regulation and supervision of retail agents and regulation of nonbank electronic money issuers. Similarly, the GSMA has produced a number of relevant resources, including a paper on enabling regulatory solutions, several country case studies, and a Mobile Money Regulatory Guide. Many other international stakeholders have made important contributions in this space as well.

In contrast, there is little research on regulatory issues that may need to be addressed to facilitate the expansion of the mobile money ecosystem. Two notable exceptions include CGAP’s analysis of regulatory issues related to the payment of interest to e-money accountholders and AFI’s analysis of regulatory issues affecting the use of mobile money accounts for cross-border remittances.

This blog and presentation offer a summary of some of the regulatory issues that providers, policy-makers, and other stakeholders will need to consider to facilitate the expansion of the mobile money ecosystem. While a number of important issues are discussed, not all potentially relevant regulatory issues are addressed. In addition, some of the issues highlighted below may not apply in a specific country context.

Cross-Cutting Issues

A number of regulatory issues arise in the context of multiple new ecosystem services, including the following:

• Transaction and balance limits:  Limits designed for low-value P2P may be insufficient for services such as credit, insurance, cross-border remittances, merchant payments, B2B payments, government payments, and salary payments.
• Customer Due Diligence:  Related to the issue of transaction and balance limits is the issue of Customer Due Diligence (CDD). One challenge that providers may face is a lack of harmonized CDD procedures, which may force providers to repeat CDD for new ecosystem services. In addition, simplified CDD requirements designed for low-value P2P services may be insufficient for new ecosystem services. Customers wishing to avail of higher-value services may need to undergo more rigorous CDD procedures in line with a risk-based approach to Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) compliance.
• Licensing or partnership requirements:  Unless the mobile money provider also has a license to offer other financial services, they will need to work through a partner with a license to offer services such as credit, savings, insurance, and/or cross-border remittances.
• Data privacy:  In some countries, mobile money providers may be prevented from sharing customer data with banks, credit providers, insurance companies, money transfer operators, or entities specializing in mobile data analytics. If providers are permitted to share this information, they should ensure that other parties who handle customer data comply with relevant data privacy requirements and that customers give informed consent to the sharing of their personal information.
• Disclosure and transparency:  Compliance with customer protection and disclosure requirements (e.g., fees, interest rates, other terms and conditions) may be difficult when using a mobile phone interface, particularly with simple feature phones. This is a challenge for all mobile money services, but the risks may be greater for new ecosystem services such as credit, savings, cross-border remittances, and insurance.

For an analysis of how these and other issues apply in the context of specific mobile money-enabled financial services such as credit, savings, insurance, cross-border remittances, merchant payments and others, please download the presentation.