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Southern Africa Roundtable on Making Finance work for Africa May 7-9, Zambezi Sun Hotel, Livingstone, Zambia Finance and Technology – What are the opportunities?. By Stephen Mwaura Nduati Central Bank of Kenya . Introduction. Access Challenges:

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Southern Africa Roundtable on Making Finance work for AfricaMay 7-9, Zambezi Sun Hotel, Livingstone, ZambiaFinance and Technology – What are the opportunities?

By

Stephen Mwaura Nduati

Central Bank of Kenya

introduction
Introduction
  • Access Challenges:
    • Financial Services – Kenya, Tanzania, Zambia, South Africa
    • Mobile Telephones - Kenya
    • Growth in Bank Branches and in ATM Services - Kenya
    • Local Money Transfer Services – Kenya
  • Enabling Environment for Mobile Banking
  • Regional Payment System Initiatives
  • Way forward

Enabling Environment for Mobile Banking in Africa

access to financial services kenya
Access to Financial Services - Kenya

Source - National Survey on Access to Financial Services in Kenya 2007

Enabling Environment for Mobile Banking in Africa

access to financial services tanzania
Access to Financial Services – Tanzania

Source – Finscope: Key findings of the finscope survey in Tanzania 2006

Enabling Environment for Mobile Banking in Africa

access to financial services zambia
Access to Financial Services - Zambia

Source – Finscope: measuring financial access in Zambia November 2006

Enabling Environment for Mobile Banking in Africa

access to financial services south africa
Access to Financial Services – South Africa

Source – FinMark Trust: Making financial markets work for the poor (2006)

Enabling Environment for Mobile Banking in Africa

growth in bank branches kenya
Growth in Bank Branches - Kenya

ATM Growth - Kenya

Source: Central Bank of Kenya

Enabling Environment for Mobile Banking in Africa

local money transfer services kenya
Local Money Transfer Services - Kenya

Source - National Survey on Access to Financial Services in Kenya 2007

Enabling Environment for Mobile Banking in Africa

access to mobile telephones kenya
Access to Mobile Telephones - Kenya

Source - National Survey on Access to Financial Services in Kenya 2007

Enabling Environment for Mobile Banking in Africa

enabling environment for mobile banking
Enabling Environment for Mobile Banking
  • What is m-payment and m-banking?
  • Why is m-payments and m-banking relevant?
  • Emerging experiences & models
  • Policy Framework
  • Possible roles for policy makers
  • Enabling environment policy balance
  • Key concerns (certainty, security issues, competition)

Enabling Environment for Mobile Banking in Africa

what is m payments and m banking

Form of money:

Cash

e-money

Bank money

e-money institution (could be bank or Telco)

Issued by/liability of:

Central Bank

Commercial bank

POS/ATM

Digital cash

Smart card

Channel:

Physical exchange

Mag stripe card

Mobile phone

Internet

Branch & cheque

What is m-payments and m-banking?

Account based or digital wallet

Enabling Environment for Mobile Banking in Africa

Source – Bankable Frontier Association

which model
Which model?

Traditionally, bank driven

(linked to deposit account or credit card)

Telco driven

(linked to pre-paid account)

Enabling Environment for Mobile Banking in Africa

Source: Mobey Forum WP v1.1

why is m payments and m banking especially relevant
Why is m-payments and m-banking especially relevant?
  • Broadens access to financial services:
    • Unbanked with cell phone: SA 20%+
    • Rural coverage and penetration increasing
  • Leapfrogging access to e-banking
  • Focal point to assess and consider general development issues in the retail banking system
  • Enhancement of safety, security & efficiency
  • Positive impact on social & economic growth

Enabling Environment for Mobile Banking in Africa

emerging experiences models
Emerging Experiences & models
  • Europe:
    • Collapse of Simpay & other models
    • Nordic region most advanced
  • Asia:
    • Japan:
      • DoCoMo: FeliCa 10m by end 2005
    • Korea:
      • 10m enrolled from 2003 onwards
    • Philippines
      • SMARTmoney: 2.5m/ 20m customers (2000)
      • Globe G-Cash: 1.2m (2004)

Enabling Environment for Mobile Banking in Africa

Source – Bankable Frontier Associates

africa today
Zambia & DRC

Celpay: 2002 onwards

South Africa:

MTN Mobile Banking: 2005-

Wizzit: 2005-

Paym8: 2003-

Kenya:

M-Pesa: 2007 launched

Africa today:

Enabling Environment for Mobile Banking in Africa

Source – Bankable Frontier Associates

policy framework

E-commerce

AML-CFT

Bank Agency

Payment systems

Comp-etition

Telco

regulation

Bank outsourcing

Policy Framework

EE: MOBILE PAYMENTS & MOBILE BANKING

Enabling Environment for Mobile Banking in Africa

key concerns certainty
Key Concerns - Certainty

There should be sufficient certainty around electronic contracting to protect both parties

Issues:

  • Repudiation risk
  • UNCITRAL model laws
  • Advanced digital signatures

Enabling Environment for Mobile Banking in Africa

competition
Competition

“The consumer should have the freedom to choose bank, mobile operator and handset and change them independently” Mobey Forum White Paper 2003, Customer Proposition

Issues:

  • Number portability
  • Platform access
    • Movilpago case (Spain, 2000)

Enabling Environment for Mobile Banking in Africa

possible roles for policy makers
Possible roles for policy makers
  • Regulator
  • Supervisor
  • Standard setter
  • Information gatherer
  • Facilitator
  • Coordinator

Enabling Environment for Mobile Banking in Africa

enabling environment policy balance

Stability of the financial system

Efficiency

Financial

integrity

Broader access

Consumer protection

& choice

Enabling environment:Policy balance

Enabling Environment for Mobile Banking in Africa

market development
Market development

Questions for policy makers/ regulators

1. Should policy makers promote inter-operability (to get to efficiency and critical mass)? The gains from doing so could be offset by diminished product differentiation and stifled innovation.

2. Should public authorities be involved in the security of the means of payment? There are commercial incentives to achieve this, but also market wide externalities from not achieving it.

Source: Helen Allen, Bank of England 2003

No of consumers

1. Pioneer

2. Breakout

3. Consolidation

4. Maturity

Enabling Environment for Mobile Banking in Africa

regional payment and settlement systems initiatives
Regional Payment and Settlement Systems Initiatives
  • Enhance regional financial stability and promotion of regional economic development through – East African Payment System Harmonization Committee and MAC directives on:
    • Cross Border Settlement model for the region
    • Harmonization of oversight benchmarks
    • Internet payments, e-commerce and e-banking
      • BIS guidelines on Risk Management principles for e-banking
      • Management and supervision of Cross Border e-banking activities

Enabling Environment for Mobile Banking in Africa

way forward
Way Forward
  • Way forward:
    • Appreciation that the payment system will remain dynamic –
      • New opportunities,
      • Market requirements and
      • Technological developments
    • Enactment of e-legislation [e-transactions, communications & information]
    • Enactment of AML and CFT Legislation
    • Enactment of Modern Payment System Legislation (Large Value payment systems (RTGS), Retail payment system)
    • Enhancement of Regulatory Capacity to ensure that safety and efficiency are maintained and that the following Questions are continuously addressed:-
      • Why Regulate?
      • How?
      • When?

Enabling Environment for Mobile Banking in Africa

are we ready for the transformation
Are we ready for the transformation?

Enabling Environment for Mobile Banking in Africa