2. 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
3. 3
Closing the gap between unbanked people with access to mobile phones
is one opportunity to scale up access to finance
Potential Market
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
97%
50%
100%
10%
% Banked people % Mobile Penetration
Finland
Kenya
The
Philippines
South Africa
Colombia
Mexico
%
mobile
phone
penetration
% of banked people
4. 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
5. • 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
Service offering
6. 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 low-
income customers
– Some policymakers have simplified procedures to allow the
development of products with a low-risk profile
7. 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
8. Policy Question:
Protecting Consumers
• Mobile phone financial services present new consumer
protection challenges
– 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
9. 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.
10. Kenya “MNO-Based” Model:
M-PESA
10
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. E-
Money is backed 1:1 by pooled funds deposited in trust at a commercial bank.
Safaricom
Bank
Client MNO Agent
Cash In/Out
With a loaded
M-Pesa Account
Clients can…
• Transfer &
receive funds
•Pay Bills
•Withdraw
•Donate
M-Pesa account
funds are pooled
and deposited
by Safaricom
into an account
held in trust at a
commercial
bank.
11. 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)
12. Philippines “Bank-Based” Model:
SMART Money
12
In the SMART Money “Bank-Based Model,” Banco D’oro issues E-Money using the
SMART E-wallet platform that allows clients to transact.
SMART
Money Banco D’Oro
Client SMART Agent
Cash in/out of Smart money
wallet
With a loaded E-
money 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
13. 13
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.
Mexico Mobile Banking Model
TelCo
(Banking Agent)
Bank
Client
TelCo
Retailer
Face to Face with Client
Basic Banking
Services:
• Deposits
• Withdraws
• Bill payments
• Remittances
Deposits are
withheld and
managed by the
bank
14. 14
Banking institution is responsible for the implementation of the
AML/CFT regulation but some specific activities are required of the
TelCo.
Bank
TelCo
• Open mobile banking accounts and apply
simplified KYC and CDD
• Back office for handling database of banking
transactions and push a copy to the bank.
• Monitoring client transactions
• Report suspicious and significant transactions
(over US$10,000)
Mexico Mobile Banking Model
