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Mobile Banking Financial Regulatory Issues May 2011
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  • 1. Mobile Banking Services- Financial Regulatory Issues
    Retail Banking/Payments Innovation May 2011
    Louise Malady
  • 2. Overview
    Financial Regulatory Issues
    Regional and International Efforts
    Regulator’s Viewpoint
    Explaining the Business Model
    Regulatory Focus – Safety and Efficiency
    Emerging Themes in Regulation
  • 3. 1a. Regional Efforts
    Developed Economies – focus on payment system efficiency
    Emerging and Frontier Economies – additional focus on the unbanked and underbanked
  • 4. 1b. International Efforts
    Alliance for Financial Inclusion
    CGAP Technology Group
    GSMA Development Fund
    UK Dept for International Development
    Bill & Melinda Gates Foundation
  • 5. 2a. Financial Regulator’s View
    See opportunities for inclusion
    See benefits for greater safety and efficiency in payment systems
    Post GFC - regulators are more conservative
    Concern when non-banks are proposing to be the issuers of the stored value
  • 6. 2b. Regulatory Viewpoint
    Financial protection alongside financial inclusion
    Need to understand the business models
    Implications of different models
    End-users
    Market players
    Regulators
  • 7. 3a. Business Model
    By player
    By function
    Transaction process by function sourced from: Alexandre, C., Mas, I. and Radcliffe, D. (Bill & Melinda Gates Foundation) August 2010Regulating New Banking Models that can Bring Financial Services to All
  • 8. 3b. Regulations will Influence...
    How business models are structured
    How agents are used in the model
    How customers are able to register for accounts and do cash-in and cash-out transactions
  • 9. 4a. Regulatory Focus - Safety
    Issuance and Management of the Float
    Operational/Security Risks
    AML/CFT and KYC
    The Role of Agents
    Consumer Protection
  • 10. Issuance / Management of Float
    Fund Safeguarding
    Fund Isolation
  • 11. Fund Safeguarding
    Funds must be available when required by the customer
    Maintain “unencumbered liquid assets”
    Examples – Philippines, Indonesia, Malaysia, Cambodia
    M-Pesa (Kenya) –interim agreement to store funds with a regulated bank
  • 12. Fund Isolation
    Who owns the funds deposited with the bank?
    Is the stored value “pooled” and placed on deposit?
    Does the jurisdiction have trust account set-up (e.g. Singapore, Malaysia)
  • 13. Operational/Security Risks
    Payments processing, clearing and settlement arrangements
    Security - type and levels
    E-crime or fraud
  • 14. AML/CFT and KYC
    Financial Action Taskforce (FATF) requirement
    Tiered KYC (Philippines, Singapore, EU)
    Dialogue between financial and telco regulators (e.g. Fiji and South Africa – two different approaches)
    Build KYC requirements into system design – role of agents very important
  • 15. Agency Arrangements
    Are non-bank entities allowed to handle cash-in and cash-out transactions
    Are banks and non-banks both held liable for their agents’ activities
    Clearing and settlement arrangements can reduce the liquidity and credit risk
    Consumer protection risk - disclosure and redress mechanisms
  • 16. Consumer Protection
    Important where stored value is not a “deposit”
    Framework can include:
    Disclosure requirements
    Redress mechanisms
    Clear identification of users for KYC purposes
    Consumer education
  • 17. 4b. Regulatory Focus - Efficiency
    Interoperability
    Integration
    Competition
    http://mmublog.org/blog/mobile-money-interoperability-at-mwc-2011/
    mService in Vietnam
  • 18. Emerging Themes for Regulators
    Stored value as a savings mechanism
    Interoperability and integration
    Engage the telcos and other non-bank players
    Regulatory proportionality
  • 19. Emerging Themes for Industry
    Involve the financial regulator early
    Cooperation between regulators and industry players
    Industry players working together
    Beneficial partnership solutions
  • 20. Further Resources
    The Mobile Financial Services Development Report 2011 – World Economic Forum (in collaboration with The Boston Consulting Group)
    GSMA Mobile Money for the Unbanked survey on regulations
    http://www.mobilemoneyexchange.org/wiki/Regulation
  • 21. Thank You lmalady@skybroadband.com.ph