International Regulatory Experiences in Digital Financial Services

1. International Regulatory Experiences in Digital
Financial Services
John Owens, Senior Policy Advisor, Digital Financial Services, AFI
Digital Banking: Technologies and Innovations Minsk, Belarus April 24, 2105

2. Global Data on Financial
Inclusion
Source: Demirguc-Kunt & Klapper (2012), World Bank Policy Research Paper 6025
2 billion of adults do not have access to formal
financial system
AFI | Alliance for Financial Inclusion

3. The Alliance for Financial
Inclusion
• 120 Institutions
• 95 Countries
• Unique Peer Learning
Network Working Groups
• 7 Policy Areas
• More than 53 tangible
policy changes
• Shaping global discussions
(G20, G24, SSBs)
• Platform for public
private dialogues
• Maya Declaration: 52
concrete commitments
Building the
Network
Activating the
Network
Enhancing
Network value
Policy-Driving
Network
Independent
Network
AFI | Alliance for Financial Inclusion

4. Opportunities
• Growing alignment of interests among governments,
private sector and policy makers.
• Greater understanding and global practices exist on
regulating digital financial services that support financial
inclusion.
• Recognition of country specific conditions as well as
learning from practices in developing and emerging
markets.
• More open communications with International Standard
Setting Bodies and peer learning from other regulators.
• With the right policy/regulatory environment, digital
financial services can drive financial inclusion more
rapidly.
AFI | Alliance for Financial Inclusion

5. Benefits & Opportunities of
Digital Financial Services
Source IFC Infographic: Bonny Jennings www.itldesign.co.za IAFI | Alliance for Financial Inclusion

6. AFI | Alliance for Financial Inclusion
 E-money Services
 Mobile Financial Services
 Use of Agents
 Big Data
 Crowd funding models
Key Models of Digital Financial
Services

7. AFI | Alliance for Financial Inclusion
Convergence & Interoperability:
A driving force for Financial Inclusion
Financial
Inclusion

8. Play M-PESA Video

9. AFI | Alliance for Financial Inclusion
Mobile E-Money Supporting
Financial Inclusion in Other Ways
2012
2006 13%
29%20 Million
bank accounts
4 Million
bank accounts
24 Million
registered mobile money users
Percentage of adults using a bank account in Ke

10. M-Shwari: Mobile E-
Money & Banking

11. Small Value and Credit Savings
M-Shwari, a savings and credit
product from Safaricom and
Commercial Bank of Africa (CBA)
has registered a phenomenal
uptake.
The product enables M-PESA
subscribers registered for at
least 6 months to get a loan,
anywhere from
$1.15 to $235
for a 30 day term
instantly into their e-wallets.
AFI | Alliance for Financial Inclusion
US$ 1.7
billion
1st largest
bank in
terms of
accounts
US$ 322
million in
loans
35,000 to
10M in 2
years

12. Digital Financial Inclusion
Policy Trends
 Technological innovation to
reduce cost of delivery and
increase access on a large scale
 Proportionate financial sector
policy and regulation is critical
enabling factor
AFI | Alliance for Financial Inclusion

13.  Increased importance of data to
make informed policy decisions
 Quality aspects (consumer
protection) of financial Inclusion
 Coordinated national strategies for
expansion of digital financial
ecosystems leading to more
inclusive environments
Digital Financial Inclusion
Policy Trends
AFI | Alliance for Financial Inclusion

14.  Proportionate AML/CFT
– Tiered KYC Regulations
 E-Money Operator
Regulations
 Remote Account Opening
Rules
 Outsourcing to Third Parties
 Digital Signatures & Receipts
 Agent Regulations
 Interoperability
Key DFS Regulatory Options to
Support Financial Inclusion
AFI | Alliance for Financial Inclusion

15. 1) Risk management frameworks and resulting data for
risks pertaining to operations, liquidity, money
laundering, and terrorist financing
2) Consumer protection
3) Public disclosure of information
4) Outreach and financial inclusion
Four Key Areas in Digital
Financial Services Reporting
AFI | Alliance for Financial Inclusion

16. DFS Experiences in Tanzania
Create an enabling legal and regulatory environment
 Support market development and encourage innovation
 Proportionate regulation
Partnerships and cooperation
 Partner with Telco Regulator
 Encourage market cooperation (non-banks and banks)
Government Uptake of Usage of DFS
 Revenue payments (Licenses and small taxes)
Adoption of DFS in National Financial Inclusion Strategies
 Public and private sector adoption for national financial
inclusion goals
Interoperability
 Consider private sector initiatives enhancing or developing
interoperability
AFI | Alliance for Financial Inclusion

17. 0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Female Male Female Male
7.00%
11.50% 10.10%
17.90%7%
5.90%
41.10%
45.10%
30.40% 27.10%
17.20%
14.30%
Use informal
mechanisms only
Have/ use non-bank
formal products
Have/ use bank
products
20132009
DFS Experiences in Tanzania
AFI | Alliance for Financial Inclusion

18. Bangladesh: Mobile-Enabled
Agent Banking Success
AFI | Alliance for Financial Inclusion
Central Bank Issued Clear
Guidelines:
 Agent Banking &
Allowable Services
 Eligibility Criteria for
Agents
 Allowance of Non-
Exclusive Agreements
 Risk & Operational Issues
 Consumer Protection
Principles
Results:
 541,000 active agents
 25.2 M registered clients
 12.2 M active clients

19. Philippines Example of
Mobile-enabled E-Money
Challenges for Rural Banks
• Reaching deeper into rural areas without
costly investments in infrastructure
• Reducing costs of servicing clients
• Avoiding risks from robbery, holdup

20. Philippines Example of
Mobile-enabled E-Money
• Central Bank allowed e-money
services to be linked and used by
rural banks to offer basic banking
services
• Accreditation process was via the
Rural Bankers Association of the
Philippines (RBAP) that developed
and received approval for standard
procedures used by the industry.
• Accredited more than 1,100 rural
banking units and benefited >
300,000 rural bank clients.
• Processed over P17 B (US$400 M)
in mobile phone banking
transactions.

21. Solomon Islands: Mobile Banking
for Financial Inclusion
AFI | Alliance for Financial Inclusion
Central Bank Was Key To
Financial Inclusion Thru
 Agent Banking
Regulations
 Expanded Eligibility
Criteria for Agents
 Tiered KYC Regulations
 Close dialogue with the
Private Sector in
Developing Policies
 Financial Literacy and
the role of the Private
Sector
Results:
 From 80% without a bank
account 5 years ago, 80%
now have access to basic
banking services

22. Russia: E-Money Regulations
AFI | Alliance for Financial Inclusion
Central Bank Was Key To
Enabling E-Money Services
 Revised “Light” E-Money
Regulations
 Regulations for Payment
Agents & Kiosks
 Tiered KYC Regulations
and Simplified CDD
 Government/Private
Sector Working Group

23. info@afi-global.org
www.afi-global.org
Thank you!
John.Owens@afi-global.org
@jvowens