Colloquium: Telecommunication regulation in M-banking

Posted on July 30, 2009  /  0 Comments

This colloquium was conducted by Erwin Alampay.

E-Banking refers provision of retail and small value banking products and services through electronic channels. This includes deposit taking, lending, account management, the provision of financial advise, electronic bill payment and the provision of other electronic payment products and services such as electronic money. =

M-banking: financial services delivered via mobile networks and performed on a mobile phone. may or may not be defined as banking services by the regulator, depending on the legislation of the country in question, as well as on which services are offered.”

(Bångens and Söderberg 2008: 7)

RS: Is the Basel paper an official document?

EA: Yes. Position paper

RS: Are there any kind of e-transactions which don’t fall with the scope of m-banking? It would be good to be clear about what types of transactions don’t fal within m-banking.

Electronic money and banking may have overlaps.

RS: One of the important points from the paper would be identifying the differences between m-money and m-banking.

The challenges are how to expand m-money/banking services and how to protect its consumers? In cases of redress, where would customers turn to? Banks/financial institutions or the telecos? Also, how do they balance regulation without hindering innovation

RS: Does globe telecom do mbanking or mpayments?

EA: They are doing mpayments.

regulation without hindering innovation

Electronic money: stored value or prepaid payment mechanisms for executing payments via point of sale terminals, direct transfers between two devices, or over the computer networks, such as the Internet.

Stored value products include hardware or card-based mechanisms (electronic purses or wallets), and software or network based cash (also called digital cash).” (Basel, 1998:3-4)

stored value or prepaid payment mechanisms for executing payments via point of sale terminals, direct transfers between two devices, or over the computer networks, such as the Internet.
Stored value products include hardware or card-based mechanisms (electronic purses or wallets), and software or network based cash (also called digital cash).” (Basel, 1998:3-4)
Role of telecos: Mobile operators are licensed to transfer information over mobile networks including financial information (Bangens and Soderberg 2008: 21). Limited risks and with no new or unusual telecommunications issues (Wishart 2006).

Types of mobile banking innovations:

1) carriers going solo

2) banks going solo

3) exclusive bank and telco partnership

4) bank-telecom open partnership

5) open federation model (considered most flexible)

There are two types of banking: additive and transformational banking. The presentation will focus on transformational issues.

Telecom regulation issues:

Market entry


Access to scarce resources

Tariff regulation


Universal services

Quality of services

Bank regulations:




Integrity of transactions

Cashing out

RS: What do you mean by cashing out?

EA: Withdrawing electronic money into hard currency.

RS: This is a critical element.

Market entry:

M-money is just a VAS, not a requirement to entry for telcos

Delivery of m-money services on the other hand, requires access to a network: Exclusive partnership, Open, Independent (ie use of Internet)

RS: If there is a bank which comes to the teleco and asks for frequency such that money can be transferred, without voice services, what will the procedures be?

EA: I will think about this.

HS: that won’t be a telecom issue. Anyone can get a licence to get frequencies to run a mobile application. It is just a stored value system. It requuires a frequency but doesn’t require a telecom service.


M-money as a strategy to bring churn rates  down; May strengthen telecom brand loyalty especially if number portability is not in place

But currently not an issue because of:

1) low usage rate

2) trend towards increased multiple-SIM use

Access to scarce resources: Problematic if services require particular bandwidths to work effectively (i.e. 3G):
  • If internet based interfaces
  • For others, design of services is deliberately made technology agnostic/neutral or basic
Tariff regulation:
Essentially a substitute service that competes with alternative money transfer channels (hence not necessary to regulate rates). Transparency of rates, however, is necessary (esp. for prepaid users). Tracking and records of transactions are needed in case of redress.
RS: Isn’t this something a banking regulator should do, or a teleco regulator?
EA: Depends on who tracks the data. Need to track money laundering. If you start tracking financial transactions, it would bring up privacy issues. Tariff regulation somewhat overlaps with QoS
RS: Not sure if it should be in tariff regulation. Most queries a teleco will get will be billing issues. This is a QoS issue, not a tariff issue. You can have indicators for QoS (number of billing queries per given period of time).
Costs are generally transaction-related in the Philippines.
  • Between banks and telcos: Compliance with banking regulations
  • Between telcos: Interoperability/exchange of different m-currencies
  • Across boundaries/nations: Global interoperability to enhance
ITU-T has a definition for interconnection. Check this. Does the paper definition refer to accessing a service? If not, then interconnection issues may not apply. but interoperability issues apply. Among banks, there is an interconnection issue: to make a payment from one bank to another.  It is  interconnection for a bank, But it is not interconnection in the telecom service.
SL: Is there any value in Gcash and Smart having different currencies?
RS: Why do we have different money in normal currencies? Because each state is trying to control its financial systems. If GCash and Smart have the same currency, they have to corporate on issues. Then they have to agree on marketing and terms and conditions.
Universal Access:
  • Re-viewing UA as access to services (financial services/ m-money)
  • Physical access: Limited coverage to infrastructure (expansion to rural areas), Limited telco partners providing the service, Consider alternative structures for depositing and withdrawing money,
  • Subscription requirements:  IDs can become a hindrance
Considerations for UA:
Technology agnostic services
Skills and capability of target market
Accessibility of social infrastructures converting m-money to cash and back
Telco-bank exclusive partnerships vs open-line m-money services
Identification vs Accessibility
Philippines: Registration issues and the case of Prepaid Cards
Quality of service:
Handling fraud management and individual user activity:
  • Telco-led: Telco
  • Bank-led: Banks; individual user activities possibly tracked by telco partners

QoS considerations:

  • Capabilities of target markets (ie poor) to understand the process (security, privacy, redress, etc)
  • Identification of users/numbers and privacy concerns
  • Securing the transmission and retention of data
Overlaps between Telecom and Bank Regulation:
Separate issues for telecom regulation :
Competitive provision of services
RS: We need to focus on m-money or m-payments. What is the effect of teleco and banking regulation on m-payments – this is the main issue, not mbanking. If a bank wanted to buy cellbroadcasting or SMS from telecos to communicate with customers, can telecos discriminate between telecos? That is one issue but m-payments is our main issue. We want to be in the transformative not additive models.
RS: Among the three types of functions that people use mpayments for (cash in, cash out, storage mechanism), what are the regulations involved? When people cash out, central banks can get involved if you cash out into physical money. Focus on that and see how the Philippines has handled this. Fundamental issue: difference between m-payments and m-banking.
HS: Need to look at what are the boundaries: is every transaction (such as Western Union etc) used to remit money from one country to another considered illegal? Currently, it says that every foreign exchange transaction has to go through banks.
RS: It would be illegal if it was defined as banking.
HS: If it is a single  currency transaction, no issues. If it is a multiple transaction, there would be financial, regulation, fraud, money supply issues. Talking about hundi/hawala issues.
RS: Another issue in hundi would be under invoicing.
HS: That would be considered fraud as bypassing regulation.
RS: If we can show govts that cheap mpayments would remove the foundations of hundi, then govts would support it
HG: How does money come into the Philippines? How often and in what format?
RS: If we position m-money as an alternative to hundi, as opposed to banking, then we could push this forward. Then
HS:  In LK, the largest forex source is remittances. And most of these people are poor. And governments want this to go through banks.
RS: need to position favourably with consumers and the government.
SL: Do we have estimates of how profitable m-remittances would be? What is the minimum remittance amount?
HG: There has to be a point where it is better to use a formal system vs. m-remittance services. Then look at at which point does it become profitable to  the vendors.
EA: Some of the concerns brought up may be more relevant to the first paper.
RS: one of the issues is what are the regulations that get in the way, and then see how we can modify this. If the banking regulators are only concerned about exchanges rates, etc, then they can prohibit this. But then if they realize that this is pushing hundi, etc, further, then we could push for m-payments.

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