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GSMA explores regulatory challenges in mobile money industry

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Mobile money services are regarded as powerful tool for deepening financial access in developing markets, as it expand financial inclusion through lower transaction costs, improved rural access and greater customer convenience, Groupe Spécial Mobile Association (GSMA) has therefore recommended regulatory guide for the industry.

The global System for mobile communications said in its 2018 mobile money policy and regulatory hand book that as governments and regulators take a broader approach to digital financial services, “providers and national authorities must continue to work in concert to strike a balance that ensures sustainable and responsible market growth.”

The Handbook assembles a range of key considerations for regulators and other stakeholders in the mobile money industry, providing a practical guide to regulatory best practices and industry perspectives.

It said it explored regulatory challenges that have faced industry since its inception, and recommend approaches key stakeholders can take towards creating an enabling environment.

The Handbook also accounts for recent regulatory considerations surrounding mobile money taxation and data privacy. The content is based on up-to date statistics and new resources, and will continue to be refined as the industry evolves.

“As mobile money continues to bridge the gap in financial inclusion around the world, the need for a sound understanding of policy and regulatory issues and opportunities has never been greater,” it revealed in the handbook seen by BusinessDay.

The London-based organisation said that  mobile money services has a strong impact on whether a provider can enter the market and sustainably provide the services, determine the best solution to become interoperable and provide a broad range of services that create value around wallets.

It therefore recommends from a regulatory perspective that the basic proposition for mobile money to succeed is to create an open and level playing field that allows non-bank mobile money providers, including mobile money operators to enter the market and issue e-money (or equivalent).

The central Bank of Nigeria (CBN) has proposed Payment Service Banks (PSB), aimed at deepening financial

inclusion in a country where only about half its total adult population is

included into the financial cycle.

With PSB initiative Banking agents, Mobile Money Operators (MMOs), Retail chains (Supermarkets), Telecommunications companies (Telcos) who are able to present an initial capital of N5 billion will be given license to operate under the structures and guideline specified by the apex bank, with the motive but not limited to ensuring access

to financial services for the unbanked rural segments of the society.

“Mobile money is helping to make the financial services industry more efficient and inclusive. This has opened access to a broad range of essential financial services for millions of unserved and underserved people, GSMA said.

According to data compiled from the GSMA, financial inclusion industry is now processing a billion dollars a day and generating direct revenues of over $2.4 billion. “With 690 million registered accounts worldwide, mobile money has evolved into the leading payment platform for the digital economy in many emerging markets,” it said.

Another regulatory initiative it cited was effectively mitigating the risk of mobile money customers losing the money they have stored in the system.

“These are the basic elements of an enabling regulatory approach and are consistent with the recommendations of global standard setters, such as the Bank for International Settlements (BIS) and the Financial Action Task Force (FATF), which have recommended that the regulator take a functional and proportional regulatory approach. The policy context also plays a critical role,” GSMA explained in its handbook.

It mentioned also that the challenges of Anti-Money Laundering and Countering Financing (AML/CFT) compliance can be addressed by promoting risk-based Know Your Customer (KYC) procedures.

It said there are also cost-effective regulatory solutions in place to develop and set up distribution networks and accelerate customer adoption.

“Therefore, MNOs should be; directly licensed as e-money issuers; or licensed through a subsidiary set up for this business.” It said.

The establishment of bold financial inclusion policy objectives can help to mobilise political will and coordination of government agencies/regulators to enable market reforms that promote the growth of mobile money and the development of a larger ecosystem, the hand book read.

According to Enhancing Financial Innovation and Access (EFInA), a financial sector development organization Nigeria currently has 63.6 per cent of its adult population with access to financial services, while 36.8 per cent, equalling 36.6 million of the adult population are financially excluded.

As at the time Nigeria was considering the optimal approach needed to leverage new, innovative technology to deliver financial services to its people, the Central Bank analysed in some detail how to structure the guidelines and the regulatory environment to deliver the benefits on offer, without compromising the integrity of the financial system.

Africa’s largest economy needed to see how the regulation of mobile money could evolve owning to significant volumes of currency that could be circulating in mobile wallets, and may not be visible to the regulatory authorities.

As such it was clear that a better balance between the market and the regulatory structures was required.

Meanwhile since then there has been an explosion in mobile money wallet usage in Kenya and other Africa peers, the Nigeria’s CBN was rather focused on an independent bank led model that would supplement and support the existing banking system.

“Together, reforms that enable multiple use cases are necessary to build a successful, sustainable mobile money business and for the digital financial ecosystem to flourish. Ultimately, this will create greater financial inclusion and economic growth,” GSMA explained.

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