Branchless and mobile financial services hold the promise of banking millions of low income households in least developed countries by 2020. However the rise of these new banking services comes together with many complex issues and hurdles that involve an entire ecosystem of actors from mobile operators, to banks, microfinance institutions and regulators.
Regulation of mobile financial services in particular banking has not kept up with the growth of the market. Out of a desire to broaden access to finance as a means of poverty alleviation, many regulators have tended to take a hands-off approach. Those that have designed some form of regulation have tended to cut and paste regulation from other jurisdictions creating gaps and confusion.
Forward looking governments seeking to regulate digital financial services (DFS), particularly non-bank services, are hamstrung by a lack of rigorous academic research on this topic. Most literature remains industry based or focuses on isolated mobile banking regulatory topics.
UNCDF, through the Mobile Money for the Poor (MM4P) and Pacific Financial Inclusion Programme (PFIP), together with the Centre for International Finance and Regulation (CIFR) is working with the University of New South Wales (UNSW) on issues of regulation. This international research project which started end 2013, is intended to analyse and assist regulators to develop and apply better regulatory techniques and solutions. The output of this work includes a first series of papers now available online outlining:
- The basis under which non-bank mobile financial services is offered today (i.e. financial, banking and telecommunications regulation)
- How anti-money laundering regimes can be effectively applied (or amended in the case of Australia)
- How trust law can efficiently address regulatory lacuna
- Customer protection and prudential regulation
- The status of mobile money in Malawi and recommendations
These six papers provide a first insight into the research carried out by UNSW that will provide the input for a Regulatory Handbook, providing options, techniques and tools for regulators to be published end 2015. As the researchers continue their analysis and recommendation work, new papers will be published throughout 2015 addressing other issues such as KYC, agent regulation, as well as interoperability and regulators role.