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7/28/2019 MobileBankingBasics[1]
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Last update: 2010
Bringing Smart Policies to Life
The basics: Mobile phone financial services
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OverviewMobile phone penetration is soaring, withsubscriptions more than quadrupling since 2002,to more than 4 billion globally.
Well over half of these live in developing countries
Huge potential for expanding financial access at alower cost than through brick-and-mortar branches
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3
Closing the gap between unbanked people with access to mobile phones
is one opportunity to scale up access to finance
Potential Market
Sources: Banked Honohan 2007; Penetracin Celular: ITU; WireIess Intelligence 4:2002, 4:2006Datos Mxico: Notes on Branchless Banking Policy and Regulation in Mexico; CGAP
97%
50%
100%
10%
% Banked people % Mobile Penetration
Finland
Kenya
The
Philippines
South Africa
Colombia
Mexico
%
mobilephonepenetration
% of banked people
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Benefits
Expand financial access to the unbanked by:- Offering convenient and real-time transactions
- Dramatically reducing transaction costs
Microfinance Loans and Domestic Remittances
- Expanding points of access reaching remote areas
- Lessening the need to carry cash - security
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Mobile phones can be used to deliver a range ofbanking services, including: money transfers retail purchases
bill payments welfare payments and other social services savings withdrawals remittances
Transaction data can be used to develop customers
credit histories: Can lead to a wider range and depth of inclusion
Service offering
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Policy Question :AML/CFT
Traditional AML/CFT rules may need to be updatedfor virtual or outsourced relationships & transactions Pose unique risks but also opportunities, as mobile phone
transfers leave trails
FATF advocates a risk-based approach that allowsregulation to be tailored to perceived risk
In practice, many countries face challenges in achievingcompliance this way
Standard KYC procedures may hurt outreach to low-income customers Some policymakers have simplified procedures to allow the
development of products with a low-risk profile
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Policy Question: interoperability? Interoperability enables customers to gain access to a
different operatorsm-bankingplatform
Question of market structure and competition policy Mandating interoperability may promote competition and
benefit consumers Early movers may resist, as they can lose competitive edge
Customers still need to convert e-money to cash, usingbank branches, ATMs or agents
Adds another level to interoperability - sharing cash in/cashout infrastructure can support outreach at lower cost
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Policy Question:
Protecting Consumers Mobile phone financial services present new consumer
protection challenges Large distance between providers and customers
Agents may lack clear incentives or liability for transparency
Cash in/out function by agents may open the door to fraud Requires technology-tailored solutions to data security and
privacy, redress mechanisms and pricing transparency
Including technology issues in financial education can
help reduce information asymmetry Bringing operators under central bank supervision may
also help unfamiliar customers feel more at ease
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Example: Kenya M-PESA launched in 2007
when only 23% of Kenyanshad a bank account but 80%access to a mobile phone.
The service has grown intoone of the most successfulin the world, with more
than 8.5 million customersand over 12,000 agents bythe end of 2009.
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Kenya MNO-Based Model:M-PESA
10
In the M-Pesa MNO-Based model, clients cash-in/out at thousands of M-Pesa
agents. M-Pesa wallets are held by Safaricom & are not classified as deposits. E-
Money is backed 1:1 by pooled funds deposited in trust at a commercial bank.
SafaricomBank
ClientMNO Agent
Cash In/Out
With a loaded
M-Pesa Account
Clients can
Transfer &
receive funds
Pay Bills
Withdraw
Donate
M-Pesa account
funds are pooled
and depositedby Safaricom
into an account
held in trust at a
commercial
bank.
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Example: The Philippines Two mobile banking operations
(Smart Communications andGlobe Telecom/G-Cash) have anestimated 71.2 millioncustomers (90.5 Population)
Mobile phone transactions areestimated to cost just 1/5 of
those executed through bankbranches (US$0.50 versus US$2.50)
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Philippines Bank-Based Model:SMART Money
12
In the SMART Money Bank-Based Model, Banco Doro issues E-Money using the
SMART E-wallet platform that allows clients to transact.
SMARTMoney Banco DOroClient SMART AgentCash in/out of Smart moneywallet
With a loaded E-
money wallet
clients can
Purchase
Deposit
Withdraw
Pay Bills
Transfer Money
ATM Withdraw a
Using just their
mobile phone
The E-money issuer in this model is Banco
DOro. Individual Smart E-wallet accounts
are held on the books of the bank
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Under the Mexican model, TelCo is a banking agent because the Mexican
Banking law only allows a banking institutions to accept deposits fromgeneral population.
Mexico Mobile Banking Model
TelCo(Banking Agent)
BankClient TelCoRetailer
Face to Face with Client
Basic Banking
Services:
Deposits
Withdraws
Bill payments Remittances
Deposits are
withheld and
managed by the
bank
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Banking institution is responsible for the implementation of the
AML/CFT regulation but some specific activities are required of theTelCo.
Bank
TelCo
Open mobile banking accounts and applysimplified KYC and CDD
Back office for handling database of bankingtransactions and push a copy to the bank.
Monitoring client transactions
Report suspicious and significant transactions(over US$10,000)
Mexico Mobile Banking Model
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Thank you!
Alliance for Financial Inclusion 2010
info@afi-global.org
www.afi-global.org
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