Mobile Payments and Immobile Regulators

Posted on February 2, 2012  /  0 Comments

I am borrowing the title from a presentation by Chanuka Wattegama, from the Distance Learning Center and who is also a Research Fellow with LIRNEasia. The presentation in question was made at an industry workshop on mPayments and mBanking in South Asia in Colombo,  which I attended as well giving a presentation on the potential for mPayments in agriculture. I was actually quite impressed with the crowd that was assembled and found it quite informative.

LIRNEasia hasn’t worked extensively on the topic since our 2008-20010 research cycle, when our Research Fellow, Eriwin Alampay explored mMoney applications in the Philippines as well as the overall issues with respect to regulation (Financial and Telco) of such services. We even did some rapid response work, when Sri Lanka’s Central Bank expressed  their intentions to come up with new rules regarding financial transactions using mobiles. Chanuka subsequently critiqued the less-than-ideal regulations that eventually came out.

Two years on, what I saw at the event was that the breadth and depth of applications for financial transactions through mobiles had increased, yet the regulations that have come up still leave much to be desired by way of financial inclusion for the unbanked. The same arguments that took place then about whether it should be a bank led or mobile led model still seem to be in play. Disappointing indeed. But there is hope. Pakistan seems to have come up with collaborative model, using a third party switch(es) that would connect multiple telecos and multiple banks. Since this happend only last month, I still don’t have all the details, but what I appreciated was the apparent lean regulatory approach with clearly bifurcated responsibilities for the State Bank (Pakistan’s Central Bank) and PTA (the regulator) in terms of oversight and dispute resolution. One hopes our Central Bank is keeping an eye on the developments there.

The other issue that goes to the heart of the financial inclusion debate vis-a-vie mobiles, i.e. KYC [Know You Customer] requirements, still seems to be an issue, with different countries taking different approaches. I hope they can converge on a multi-pronged approach to KYC, with different levels of KYC for different transaction limits, so that the poor who will transact with lesser amounts don’t have the same burden of paperwork that prevents them from having bank accounts in the first place.

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