Leverage on mobile money to drive innovation in the financial service sector

 Mobile money has becoming a powerful tool for building more inclusive, stable, and secure financial sectors. The potential of mobile technology to improve people’s lives is growing exponentially as mobile network operators (MNOs) expand digital connectivity and bring more people in emerging markets into the mobile network.

The full potential of mobile money has not yet been realized, with 2.5 billion people in developing countries still lacking a viable alternative to the cash economy and informal financial services. 1.7 billion mobile phones users, but the mobile money industry has found it challenging to launch and scale services for the unbanked because yet many policy and regulatory environments are not genuinely enabling.

  As awareness grows that financial exclusion is a source of risk for the financial system, the global Standard Setting Bodies (SSBs) are embracing the goal of full financial inclusion, recognizing that it reinforces the objectives of financial stability, integrity, and consumer protection. Mobile money can contribute to all of these objectives, driving economic and social growth through a cash-lite economy and digital pathways to financial inclusion. Therefore a proposed regulatory reforms should not simply be items on the regulator’s financial inclusion agenda. They should also become central to national strategies for improving financial stability and integrity, protecting financial consumers, and guarding the financial system against the risks of the widespread use of cash.

 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 network operators (MNOs), into the market. Anecdotal evidence, commercial lessons, and international regulatory principles all defend opening the market to providers with different value propositions. The prudential regulations of non-bank mobile money providers effectively mitigate the risk of mobile money customers losing the money they have stored in the system. The challenges of anti-money laundering and combating the financing of terrorism compliance can be addressed by promoting risk-based know-your-customer (KYC) procedures. There are also cost-effective regulatory solutions in place to develop and set up distribution networks and accelerate customer adoption.

When both banks and non-bank providers, especially MNOs, are allowed to launch mobile money deployments, and when there are effective and proportionate mechanisms in place to manage the unique risks of this industry, mobile money has the capacity to significantly expand financial inclusion – through lower transaction costs, improved access to underserved areas, and higher levels of customer convenience.

What would a digital financial inclusion environment and a cash-lite economy look like? Customers of small businesses would be able to keep electronic records of their transactions, banks would use the ubiquitous distribution networks of third parties to deliver credit products, third parties would play a role in educating consumers, and microfinance institutions (MFIs) would have access to a new group of customers that are already using digital transactions thanks to tailored KYC procedures and other efforts.

Some countries are doing a lot at aligning mobile money to insurance and banking products. It needs to be encouraged as it avails another distribution channel customize to suit economic and geographic needs of the population outside the financial system,

Banking and insurance forms the two sides of the finance coin so their development ought to be equally matched. We require deliberate efforts from all players including government to chart a clear path for the development of these and other financial models.    

The central bank should explore the prospects of instituting financial and banking reforms which should aim at reducing income inequalities and improving financial inclusiveness.The countries that embrace the reforms will ultimately be the ones driving innovation in mobile financial services and building inclusive, secure, and efficient financial sectors aim at equipping revenue administrators to build stronger capacity to reduce loopholes and close revenue loses

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