Connecting the World

Regulation in Your Country

Once the mobile operator understands the regulatory concepts affecting MMT services, the specific regulatory landscape in the country of interest becomes relevant.

This toolkit leads the reader through the relevant questions to address when assessing the regulatory environment for MMT services in their country.

The questions addressed are based on the questionnaire developed by our partners CGAP and DFID. Every regulatory question is addressed by explaining the background of the question and why it is relevant. The toolkit also provides possible answers to the questions, which are mobile-friendly.

Q1: What are the KYC procedures required for opening a new bank account and for receiving/sending remittances? Are there any exemptions from the KYC procedure?

Background of the Question
This question is aimed at finding out:

Are mobile operators allowed to accept and disburse cash? And what the mobile operator has to do when accepting and disbursing cash for the MMT service. Of special interest is the question of what requirements must be satisfied, i.e. the mobile customer has to appear in person with proof of address and identity when initiating a cash remittance. The requirements attached to accepting and disbursing cash give an idea about how the requirements relate to the MMT service as a 'mobile experience'. Any regulatory requirement for the mobile user to show up in person with ID documents at a retail outlet or bank has an impact on the design of the MMT service. The service becomes difficult to use, because the 'mobile experience' is impaired.

It is important to understand whether the customer has to undergo the KYC procedure only when registering for the service in the beginning or each time when initiating and/or receiving a payment.

The other interest behind this question is whether there are any exemptions that take into account low risks. Low value and low volume exemptions are desirable, because they can allow mobile operators to make the MMT service easier to use for the consumer.

A 'Mobile Friendly' Answer Can Entail the Following Elements:

  1. KYC requirements are suspended for accounts with transactions of low values in combination with low volumes.KYC requirements kick in after the customer reaches a certain threshold of transactions which points at the risk of money laundering.
  2. KYC requirements are agreed individually between the financial regulator and the mobile operator (preferably monitoring suspicious transactions on the system level) and with the least possible impact on the consumer experience.
  3. KYC requirements are only required once in the beginning when the customer registers for the MMT service. The following transactions are done in such a way that the registered customer can be authenticated via the mobile device (i.e. pin, biometric, etc).
  4. Paper ID and proof of address in paper form are used as little as possible for the KYC procedure.
Q2: How are deposits, payments and e-money defined and regulated?

Background of the Question

This question establishes if the regulatory regime in a given country allows mobile operators to compete with banks on a risk-based approach. In some countries only banks are allowed to provide e-money services and payments. This means that, non-banks such as mobile operators are de facto excluded from providing those services.

However, in countries with a risk-based approach, the regulator acknowledges that some services such as payments and e-money do not justify as heavy prudential rules as traditional banking, which includes deposit taking, savings and loans. Hence mobile operators are regulated under e-money or payment services rules and can effectively offer those services without being a bank.

A 'Mobile Friendly' Answer Can Entail the Following Elements:

  1. Non-banks can offer payments and/or e-money without a banking license.
  2. E-money does not fall under the definition of 'deposit taking'.
  3. The regulator assesses the actual risks involved in offering deposits, payments and e-money and regulates each group of services according to the risks involved.
  4. The financial regulator has a clear policy to encourage non-banks to offer e-money and payment services.
Q3: Which entities are allowed to become agents for financial institutions and money remittance providers in order to disburse and accept cash?

Background of the Question

In order to reach mobile customers beyond the realm of existing bank branches, it is necessary that mobile customers can use MMT services with increased independence from bank branches. Ease of use for mobile customers is increased if there is more choice of cash-in/out for MMT services. In addition to bank branches customers can go to other retail agents (e.g. mobile operator retail stores) and are not forced to cash in/out their remittances at bank branches. This allows the mobile operator to be at the consumer interface for the MMT service and it increases the reach of MMT services to the un-banked population with no easy access to bank branches.

A 'Mobile Friendly' Answer Can Entail the Following Elements:

  1. Non-banks can act as agents of banks and of other global remittance providers.
Q4: Is it difficult to obtain access or interoperability to the national retail payment system?

Background of the Question

This question aims at finding out if a non-bank has access to the national retail payment system.

The laws with regard to the payment system can indirectly force a mobile operator to co-operate with a bank, i.e. when the mobile operator can only get access to the national retail payment system via a bank. The rules on the payment system determine if a mobile operator can interconnect with existing banking clearing systems and if the MMT service of a given mobile operator is network independent or not.

A 'Mobile Friendly' Answer Can Entail the Following Elements:

  1. Need input from mobile operators
Q5: What are the data protection rules with regard to sharing, storage and use of consumer data for mobile operators and for financial institutions? Are there any differences between the provisions?

Background of the Question

There are often many rules with regard to data protection both in telecommunications regulation and in financial regulation. And sometimes these rules can be contradictory. For example, financial regulation can require that some data be kept for a number of years (i.e. 5 years) and telecommunications regulation can require the mobile operator to delete some data after a certain period (i.e. 1 year).

A 'Mobile Friendly' Answer Can Entail the Following Elements:

  1. A MMT service offered by a mobile operator does not trigger any contradicting requirements with regard to data protection rules.
Q6: Are there any foreign exchange controls? And if yes, what are the restrictions imposed on the amount that can be sent or received by consumers?

Background of the Question

This question is aimed at finding out whether foreign exchange controls can inhibit MMT services and if there are any compliance rules associated with foreign exchange controls, such as lengthy information requirements using MMT services. Information requirements associated with foreign exchange controls can sometimes be so difficult to provide (i.e. showing proof of address, paper ID, work contract, etc) that they can impair the 'mobile experience' when using the service.

In case there are foreign exchange controls, this question also establishes the maximum amount of money allowed to be sent over the period of a year. Depending on the amount, this can also impair the MMT service, if the amount is too low.

A 'Mobile Friendly' Answer Can Entail the Following Elements:

  1. There are no foreign exchange controls.
  2. There are foreign exchange controls, but the yearly limits are so high that they do not impact negatively on the MMT service offered by the mobile operator.
  3. The compliance rules of foreign exchange controls are such that they are compatible with designing a MMT service with a 'mobile experience' for the customer.
Q7: What are the consumer protection rules which affect the opening and operation of bank accounts and sending / receiving money?

Background of the Question

There is a possibility that consumer protection rules coming from the body of banking regulation are difficult to implement with MMT services in a banking environment.

A 'Mobile Friendly' Answer Can Entail the Following Elements:

  1. Need input from mobile operators.
Q8: Are financial transactions taxed differently when provided by mobile operators than by financial institutions?

Background of the Question

Differences in taxation can destroy the MMT business model for the mobile operator. This is the case when a financial institution offers MMT services without having to pay VAT, whereas it is assumed that the mobile operator offering a MMT service, is offering a telecommunications service, which is taxed with VAT. This destroys the level playing field between financial institutions and mobile operators and thus the viability of the business model for the mobile operator.

A 'Mobile Friendly' Answer Can Entail the Following Elements:

  1. The mobile operator has no disadvantages with regard to taxation compared to a financial institution offering the MMT service.