Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
MOBILE PAYMENTS REGULATORY FRAMEWORK PERSPECTIVES IN
KENYA
Gerald NyaomaDirector, Banking Services, Central Bank of Kenya
1
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Agenda1. Context of mobile money in Kenya
2. How does M-pesa work?
3. How has mobile money evolved?
4. Regulatory questions
5. Conclusions: learning from Kenya
2
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Kenya: Relevant Statistics 2008
• Population: 39,002,772• GDP per capita: $1,600• Rural Population: 78%
3
• Mobile Phone Penetration:
55%• Bank Account Penetration:
21%
Mobile Network Coverage
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Source: CIA Fact book, FSD Kenya
MOBILE PAYMENTS REGULATORY FRAMEWORK
ATMs and branches per 100K people in selected countries
Source: BFA for CGAP/DFID 2009
The Kenyan banking system has a low conventional channel reach…
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
4
…and a changing institutional landscape
21.5
9.03.4
6.8
27.9
50.1
32.7
14.2 13.1
1.75.9
0.0
50.6
38.4
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Bank Sacco MFI Insurance M-PESA Informal Excluded
%
2009 2006
FSD (2009) “The state of financial service delivery in Kenya today”
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
5
6
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
1. Context of Mobile Money in Kenya;
2. How does M-Pesa Work?
3. How has Mobile Money evolved?
4. Regulatory Questions;
5. Conclusions – Learning from Kenya.
6
MOBILE PAYMENTS REGULATORY FRAMEWORKLaunch Proposition
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
7
Step 1: Ensure you have a “new generation” SIM card*Step 2: Register your accountStep 3: Send M-PESA an SMSStep 4: M-Pesa will send you a confirmation with a new ‘M-Pesa’ menu
Go to any local Agent to register:
* All SIMs since October are new generation
Registering for M-PESA
How to register…
Source: Lonie S (2007) A brief introduction to MPesa
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
8
You both receive SMS confirmation of the transfer
In your M-PESA menu pick “send money” & enter:
How to send money
Source: Lonie S (2007) A brief introduction to MPesa
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
9
{Mobile Network Cloud}{Mobile Network Cloud}
Withdrawing Cash
AGENT ‘B’CLIENT ‘A’Putting the pieces together…
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Yes, once I receive confirmation from
M-Pesa.
My son sent me $20 via M-Pesa. Can I
withdraw $10 here?
M-Pesa Account AdministratorM-Pesa Account Administrator
Client Account[Debited $10]
Agent Account[Credited $10]
SMS Instruction to M-Pesa Admin:Withdraw $10 from Agent ‘B’
SMS Instruction To Agent ‘B’:Give $10 to Client ‘A’
$10$10
10
Agenda1. Context of mobile money in Kenya ;
2. How does M-Pesa work?
3. How has mobile money evolved?
4. Regulatory questions;
5. Conclusions: learning from Kenya.
11Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Evolution of M-Pesa
12
MOBILE PAYMENTS REGULATORY FRAMEWORK
2008-20092007200620052004
PilotPilot National LaunchNational Launch Expansion of functionalityExpansion of functionality
Clearly branded as a payment service
Clearly branded as a payment service
International remittances
Bill pay
Bulk deposit
International remittances
Bill pay
Bulk deposit
Initially for MFI loan repaymentInitially for MFI loan repayment
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
12
M-PESA: Explosive growth in 33 months…Growth of M-Pesa
USERS(millions)
Growth of M-Pesa AGENTS
(thousands)
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
11/2009:More than 8.5
millionregistered
M-Pesa Users
11/2009:Over 14,500
M-Pesa Agents
Source: Mpesa, 2009
13
0.00
2.00
4.00
6.00
8.00
10.00
Mar
May Ju
l
Sep
Nov Ja
n
Mar
May Ju
l
Sep
Nov Ja
n
Mar
May Ju
l
Sep
Nov
2007 2008 2009
0 2,000 4,000 6,000 8,000
10,000 12,000 14,000 16,000
Mar
May Ju
l
Sep
Nov Jan
Mar
May Ju
l
Sep
Nov Jan
Mar
May Ju
l
Sep
Nov
2007 2008 2009
19.1
3.7 0.4 0.2 0.30
16.25
65.76 62.74
010203040506070
RTGS (KEPSS) NACH ATMs SCOM
Value moved (bn) Number of transactions/cheque (m)
Current Kenyan Payment system flows: monthly average (2008)
14
Retail payment systemsHigh value payment systems
...however, it is still miniscule in terms of value
Source: Mwaura (2009)
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25h January, 2010
Source: Mwaura, S (2009)
14
State of the Market- Competition 2007- Soon after launch, competitor MNO launches
_________ scheme, which fails to get traction;
Late 2008- second MNO Zain applies for approval for new m-product, Zap (substantially similar to M-Pesa; launches in 2009);
15
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Yu, Scheme operated by Essar Approved in July 2009;
Many applications received from other MNO’s and non-bank players to operate a mobile scheme.
15
• 70% of users are already banked• Blend of uses:
– 50% send/ receive money– 20% store value
• Average user:– Male– 25-45 year s old– Better education– 60% of senders urban; slightly more than
half of receivers rural• 90% believed money was safe with M-Pesa• High satisfaction levels
– More than 80% said they would worse off without M-Pesa
Source: FSDK presentation (2009) on 2008 survey of 3000 M-Pesa users
16
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
State of the Market-Survey of M-Pesa Users
16
State of the Market-How Do People Send Money?
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Source: FSDK presentation (2009) on 2008 survey of 3000 M-Pesa users
17
Agenda1. Context of mobile money in Kenya;
2. How does M-pesa work?
3. How has it evolved?
4. Regulatory questions; 5. Conclusions: learning from Kenya.
18
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
How does m-payments promote broader policy objectives?
• Kenya had very low levels of formal usage in 2006
19
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
• Broadens access to financial services and promotes wider formal financial inclusion.
• Promotes economic efficiency through reduced transaction costs.
• Provides a focal point to assess areas for development in the retail banking system e.g. partnerships and agency banking.
• Enhances safety, security & efficiency of transactions.
• Positive impact on social & economic growth – employment opportunities.
• Mobile infrastructure is cost effective and flexible to the needs of the population
• Electronic footprint provides better tracking and monitoring of financial activities without the challenges of managing physical cash
Question 1:How is Kenya’s Regulatory context?
20
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Can non-banks issue e-money and/or operate payment systems?
Not ProhibitedPayment system bill which would give this authority is pending
Can banks appoint agents to take deposits?
No Non-banks not precluded; changes enacted to allow banks
Is taking of cash/ opening of accounts subject to AML control?
Regulations cover banks only
AML/CFT Act Ascented to on 31/12/2009
Current reality(Banks Act/ Central Bank Act)
Proposed changes
Key Questions relating to enabling a mobile money product in Kenya
Question 2: What is the risk profile of mobile money?
• Operational risk: Providers responsible for managing operational risk through procedures and controls.
• Anti money laundering: KYC facilitated by national identity cards, electronic footprint provides audit trail and transaction monitoring is critical .
• Systemic risk – Defined threshold limits, volumes and reporting• Consumer Protection – Provider has procedures and capacities to handle
and resolve complaints timeously and reports to regulator.• Agency risks – Clear accountability for actions of agents through agent
agreements.• Insolvency - Trust account in a regulated institution that is ring fenced
from the operations of the service providers, mitigates the risk.
21
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
These risks were discussed in detail prior to issuing the letter of no objection to Safaricom
Question 3: Whether to regulate at outset?
– Presently no direct authority to regulate but intend to bring mobile payments into the regulatory framework under the proposed National Payment Systems Bill and AML/CFT)
– Meanwhile, various conditions set on reporting requirements
22
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Did the proposed activity fall under definition of Deposit taking? NO, because:-- No intermediation (& no interest paid)- Funding ring fenced: not available for operations
If not, how should CBK relate to it?
Was there demand for it in the market?– The Fin Access Survey (2006) demonstrated that traditional
banking channels were not reaching the unbanked– High demand for access, coupled with inadequacy of
traditional channels, was critical in the decision to authorize M-Pesa to launch.
Question 4: How to integrate mobile payments into an efficient
retail payment ecosystem? Future questions
23
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
How to promote appropriate levels of competition?
How to promote interconnection to other systems?
- How many players can the Kenyan market support at the level of payment instrument provider vs. retail payment system?
- Agents are exclusive. Is this efficient or optimal for access?
Question 5: How to integrate mobile payments into an efficient
retail payment ecosystem? Future questions
24
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
How to promote appropriate levels of competition?
How to promote interconnection to other systems?
- How many players can the Kenyan market support at the level of payment instrument provider vs. retail payment system?
- Agents are exclusive. Is this efficient or optimal for access?
Agenda1. Context of mobile money in Kenya 2. How does M-pesa work?3. How has it evolved? 4. Regulatory questions
5. Conclusions: learning from Kenya
25
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
There are many financially excluded people who increasingly have access to mobile technology
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
We have come a long way in a short time, but there is further to go
Source: FSD(2009)
Of those in each category of inclusion, % having:
26
M-Pesa has expanded well beyond its core P2P functionality
27
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
CoreP2P
NaturalPerson
Payee Corporate
Agent Non-Agent
Cash Out Bill PayNaturalPerson
Payer
CorporateAgent
Non-Agent
Cash in
Employers (bulk deposit)
Mobile Payment Ecosystem
27
Engaging with the Regulator
1. Pilot
• Notification of Intent
• Demonstration of product capabilities
• Request for authorization
2. National Launch
• Letter of no objection
• Monthly reporting of predetermined metrics
• Regular engagement with regulator and key stakeholders
3. Expansion of functionality
• Product extension approval on case by case basis
• Coordinated development of further enablingregulations
28
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
• An enabling approach requires purposeful and continued engagement to understand and facilitate innovations that can improve financial inclusion.
29
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop. Lagos, 25th January, 2010
• New legislation (such as the draft NPS Bill and accompanying guidelines/ regulations) endeavors to provide the necessary level of certainty and a create level playing field for all financial services
• Regulatory certainty is critical to ensure market confidence in long term investment in broadening financial access
Leadership through engagement
• In crafting the new regulatory framework the way forward is to rely on the conceptual differences between:
• Banking Business: Generally regarded as deposit taking and lending that raises prudential risks that should be regulated to manage the risks.
• Electronic money: Which involves issuance of stored electronic value presents a different level of risk as it does not involve intermediation.
• Payments: Which involves the transfer of value. Here the risk of loss is limited to a relatively short window and the need for prudential regulation is limited.
30
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010
Proposed Regulatory Framework
31
MOBILE PAYMENTS REGULATORY FRAMEWORK
Mobile Payments Services Regulatory Financial Dissemination Workshop, Lagos, 25th January, 2010