Bringing Smart Policies to Life
The basics: Mobile phone financial services
Last update: 2010
Overview
Mobile phone penetration is soaring, with
subscriptions more than quadrupling since 2002,
to more than 4 billion globally.
• Well over half of these live in developing countries
• Huge potential for expanding financial access at a
lower cost than through brick-and-mortar branches
Potential Market
Closing the gap between unbanked people with access to mobile phones
is one opportunity to scale up access to finance
% mobile phone penetration
97%
100%
Finland
50%
Mexico
South Africa
10%
Kenya
The
Philippines
Colombia
% of banked people
% Banked people
% Mobile Penetration
Sources: Banked Honohan 2007; Penetración Celular: ITU; WireIess Intelligence 4:2002, 4:2006
Datos México: Notes on Branchless Banking Policy and Regulation in Mexico; CGAP
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Benefits
• Expand financial access to the unbanked by:
- Offering convenient and real-time transactions
- Dramatically reducing transaction costs
Microfinance Loans and Domestic Remittances
- Expanding points of access – reaching remote areas
- Lessening the need to carry cash - security
Service offering
• Mobile phones can be used to deliver a range of
banking services, including:
–
–
–
–
–
–
–
money transfers
retail purchases
bill payments
welfare payments and other social services
savings
withdrawals
remittances
• Transaction data can be used to develop customers’
credit histories:
• Can lead to a wider range and depth of inclusion
Policy Question :AML/CFT
• Traditional AML/CFT rules may need to be updated
for virtual or outsourced relationships & transactions
– Pose unique risks but also opportunities, as mobile phone
transfers leave trails
• FATF advocates a risk-based approach that allows
regulation to be tailored to perceived risk
– In practice, many countries face challenges in achieving
compliance this way
• Standard KYC procedures may hurt outreach to lowincome customers
– Some policymakers have simplified procedures to allow the
development of products with a low-risk profile
Policy Question: interoperability?
• Interoperability enables customers to gain access to a
different operator’s m-banking platform
• Question of market structure and competition policy
– Mandating interoperability may promote competition and
benefit consumers
– Early movers may resist, as they can lose competitive edge
• Customers still need to convert e-money to cash, using
bank branches, ATMs or agents
– Adds another level to interoperability - sharing cash in/cash
out infrastructure can support outreach at lower cost
Policy Question:
Protecting Consumers
• Mobile phone financial services present new consumer
protection challenges
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–
–
–
Large distance between providers and customers
Agents may lack clear incentives or liability for transparency
Cash in/out function by agents may open the door to fraud
Requires technology-tailored solutions to data security and
privacy, redress mechanisms and pricing transparency
• Including technology issues in financial education can
help reduce information asymmetry
• Bringing operators under central bank supervision may
also help unfamiliar customers feel more at ease
Example: Kenya
• M-PESA launched in 2007
when only 23% of Kenyans
had a bank account but 80%
access to a mobile phone.
• The service has grown into
one of the most successful
in the world, with more
than 8.5 million customers
and over 12,000 agents by
the end of 2009.
Kenya “MNO-Based” Model:
M-PESA
Client
MNO Agent
Cash In/Out
Safaricom
With a loaded
M-Pesa Account
Clients can…
• Transfer &
receive funds
•Pay Bills
•Withdraw
•Donate
Bank
M-Pesa account
funds are pooled
and deposited
by Safaricom
into an account
held in trust at a
commercial
bank.
In the M-Pesa “MNO-Based model,” clients cash-in/out at thousands of M-Pesa
agents. M-Pesa wallets are held by Safaricom & are not classified as deposits. EMoney is backed 1:1 by pooled funds deposited in trust at a commercial bank.
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Example: The Philippines
• Two mobile banking operations
(Smart Communications and
Globe Telecom/G-Cash) have an
estimated 71.2 million
customers (90.5 Population)
• Mobile phone transactions are
estimated to cost just 1/5 of
those executed through bank
branches (US$0.50 versus US$
2.50)
Philippines “Bank-Based” Model:
SMART Money
Client
SMART Agent
Cash in/out of Smart money
wallet
SMART
Money
Banco D’Oro
With a loaded Emoney wallet
clients can …
•Purchase
•Deposit
• Withdraw
• Pay Bills
• Transfer Money
•ATM Withdraw a
Using just their
mobile phone
The E-money issuer in this model is Banco
D’Oro. Individual Smart E-wallet accounts
are held on the books of the bank
In the SMART Money “Bank-Based Model,” Banco D’oro issues E-Money using the
SMART E-wallet platform that allows clients to transact.
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Mexico Mobile Banking Model
Under the Mexican model, TelCo is a banking agent because the Mexican
Banking law only allows a banking institutions to accept deposits from
general population.
TelCo
Retailer
Client
Face to Face with Client
TelCo
Bank
(Banking Agent)
Basic Banking
Services:
• Deposits
• Withdraws
• Bill payments
• Remittances
Deposits are
withheld and
managed by the
bank
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Mexico Mobile Banking Model
Banking institution is responsible for the implementation of the
AML/CFT regulation but some specific activities are required of the
TelCo.
Bank
• Monitoring client transactions
• Report suspicious and significant transactions
(over US$10,000)
• Open mobile banking accounts and apply
simplified KYC and CDD
TelCo
• Back office for handling database of banking
transactions and push a copy to the bank.
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Thank you!
© Alliance for Financial Inclusion 2010
info@afi-global.org
www.afi-global.org