Bill Gates and a Cashless Society

Policymakers Embrace Mobile Banking to Reach Unbanked Poor

March 9, 2009

Payment News - Despite regulatory challenges and the financial crisis, policymakers are embracing mobile banking as a means of providing financial access to the unbanked poor. More than a billion people worldwide lack bank accounts, but do have mobile phones, providing a dramatic opportunity to achieve greater financial inclusion, according to officials meeting near London today.

"Mobile banking services offer millions of poor people a route out of poverty by helping them to improve their incomes and pay for healthcare and education. It is vital that policymakers ensure that the needs of the poor are central as they develop regulation for this innovative and emerging sector," said Mike Foster, UK Minister for International Development.

To promote effective regulation of mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the second Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking.

"Mobile banking holds great potential, and CGAP is encouraged to see that governments everywhere are being deliberate and thoughtful as they merge the domains of finance, payments, and telecom to create a framework that balances customer needs with concerns around security and prudential regulation," said Elizabeth Littlefield, CEO of CGAP, a microfinance center based at the World Bank.

Seminar participants represent countries where branchless banking is growing quickly, or is poised to do so soon: Argentina, Bangladesh, Brazil, Colombia, Egypt, India, Kenya, Maldives, Mexico, Pakistan, Peru, the Philippines, Russia, Rwanda, Sri Lanka, South Africa, Tanzania, and Zambia.

Core issues around regulating mobile banking

Mobile banking is a triangle, with customers and providers joined by local merchants that act as the crucial interface between poor people's electronic value on their phone and the cash economy in which they live. Special challenges these services present for policymakers include the following:

• Allowing nonbank third parties, such as local merchants, to conduct "cash-in/cash-out" transactions and interact directly with customers.
• Adapting the anti-money laundering and combating the financing of terrorism rules (AML-CFT) so they are based on real risks and are adapted to the realities of transactions conducted through remote agents.
• Figuring out the right regulatory space for the issuance of e-money and other stored-value instruments (particularly when issued by parties other than fully licensed and supervised banks).
• Determining how to ensure effective consumer protection (on a variety of fronts).
• Making sure payment systems are open to all players and adequately supervised.
• Getting the balance right in competition policies -- the right incentives for pioneers to get into the branchless banking business without allowing customer-unfriendly monopolies.

CGAP's Technology Program is supported by the Bill and Melinda Gates Foundation.

Coverage of the seminar will be available at http://technology.cgap.org.

The Alliance for Finance Inclusion is a global network of policymakers in developing countries that provides its members with the tools and resources to share, develop and implement their knowledge of evidence-based financial inclusion policies that deliver tangible results. Established in September 2008, the Alliance is managed by GTZ (German Technical Cooperation) with funding from the Bill and Melinda Gates Foundation. For further information, visit http://www.afi-global.org.

CGAP is an independent policy and research center dedicated to advancing financial access for the world's poor. It is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions and offers advisory services to governments, microfinance providers, donors, and investors. More at http://www.cgap.org.

DFID, the Department for International Development: leading the British government's fight against world poverty. DFID supports long-term programmes to help eliminate the underlying causes of poverty. DFID also responds to emergencies, both natural and man-made. DFID's work aims to reduce poverty and disease and increase the number of children in school, as part of the internationally agreed UN 'Millennium Development Goals'. For more information visit http://www.dfid.gov.uk.