Key issues to consider in considering mobile money for financial inclusion

1. MOBILE MONEY FOR
FINANCIAL INCLUSION: KEY
ISSUES
PREPARED AS A FINAL PROJECT FOR GSMA MOBILE MONEY FOR
FINANCIAL INCLUSION
KAREN WOO

2. MONEY MOBILE IN PERSPECTIVE
• In many countries where conventional banking facilities are limited or
costly, thereby limiting accessibility to financial services, mobile
money offers possibilities
• Mobile penetration in many countries, even in developing countries,
is high
• As such, assessing financial services through a handset encourages
adoption
• Basic services such as P2P transfer services and remittances can be
considered
• Other conventional banking services, such as savings and loans are

3. WHAT IS THE APPROACH TO BE TAKEN?
• It depends on the status of financial inclusion in each country, and in
particular, the reasons why there is a barrier to adoption
• Mobile money has the potential to be a disruptor: a mobile operator
competes with banks to provides financial services; conversely, a bank (as a
MVNO) can also compete with mobile operators in offering financial services
• Questions to ask in developing policies:
• What is the objective of allowing mobile money to be provided?
• Is it intended that mobile money platform would eventually be competing with
financial institutions?
• What are the roles and responsibilities of the different sectoral regulators and the
competition regulator? Who will consider consumer issues?

4. CONVERGENCE: WHICH EX-ANTE RULES
APPLY?
• Mobile payment has characteristics
like telecommunications network
• Sunk costs and economies of scale is
required
• Two-side network effects: an increase
in consumers or agents/merchants
make it more attractive to the other
side
• Settlement or interconnection rates:
to be payable as consumer from one
network transfers money to consumer
belonging to a different network
• Mobile money and other financial
products such as savings and loans
are fundamentally financial
products
• Capital maintenance requirements are
needed to ensure that operational,
financial and legal risks are
sufficiently covered
• Banking products would require
access to the national bank clearing
system

5. WHAT IS THE ROLE OF THE REGULATOR?
• Arguably mobile money is a new service, involving high sunk cost and uncertain
demand
• Under such circumstances, best practice is to have a light-handed approach and
to allow market to lead in the following areas:
• Developing codes of conduct in relation to consumer protection, due diligence and
transparency of information
• Technical interoperability of different mobile money platforms
• Charges to be imposed on other operators and to consumers
• The sectoral regulator and competition regulator (within their respective roles)
can monitor and intervene, where required
• If there is any anti-competitive conduct that threatens consumer welfare, the
regulator (generally the Competition Commission) should step in

6. EXAMPLES OF COMPETITION CONCERNS
AGENT EXCLUSIVITY
• The MNO has exclusivity
arrangement with its agents
• Such exclusivity has been a
concern in countries such as
Kenya, Tanzania and Uganda
DISCRIMINATORY
ACCESS TO
CHANNEL
• The MNO is offering the same
USSD channel to itself and to
its competitors : it has an
incentive to discriminate the
terms and conditions and rates
offered to others
• This discriminatory practice
raises the price for its
competitors
REFUSAL TO HAVE
INTEROPERABILITY
• New mobile payment player is
susceptible to network effects :
consumers generally prefer a
bigger network, regardless of the
quality or price of the services
provided by the new player
• Hence, interoperability between
platforms is essential to ensure
that the new or smaller player
can compete on a level-playing
field

7. CONCLUDING REMARKS
• It is important to emphasise a good working relationship between the
regulators as mobile money is not only a new service, it overlaps over
different jurisdictions
• In encouraging development, regulators can consider a facilitative
approach and allow the market to take the lead
• However, if rules should be applied, then, they should be
proportionate to the services to be supplied and similar rules should
be applied to similar type of services

8. REFERENCES
• Bourreau, M. and Valletti, T. (2015). Competition and Interoperability in Mobile Money Platform Markets: What
Works and What Doesn’t? Digiworld Economic Journal, 99 (3), pp. 11-32. Retrieved August 30, 2016, from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2763624
• MMAKA ALN (no date). Competition Issues in Mobile Money. Retrieved August 30, 2016, from
http://www.africalegalnetwork.com/wp-content/uploads/2015/12/legal-alert-competition-issues-in-
mobile-money.pdf
• Mazer, R and Rowan, P (2016, January). Competition in Mobile Financial Services: Lessons from Kenya and
Tanzania. Retrieved August 30, 2016 from http://www.cgap.org/sites/default/files/Working-Paper-
Competition-in-MFS-Kenya-Tanzania-Jan-2016.pdf
• Paelo, A (2016, February). The Role of Aggregators in the Mobile Money Industry and Related Competition
Issues. Retrieved August 30, 2016 from http://www.competition.org.za/review/2016/2/19/the-role-of-
aggregators-in-the-mobile-money-industry-and-related-competition-issues
• Sitbon, E (2015, November). Removing barriers to competition in mobile payments platforms. Retrieved
August 30, 2016 from https://www.brookings.edu/blog/techtank/2015/11/02/removing-barriers-to-
competition-in-mobile-payments-platforms/