international regulatory practices for digital financial services
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1. International Regulatory Experiences in Digital Financial Services John Owens, Senior Policy Advisor, Digital Financial Services, AFI Digital Banking: Technologies and Innovations Minsk, Belarus April 24, 2105 2. Global Data on Financial Inclusion Source: Demirguc-Kunt & Klapper (2012), World Bank Policy Research Paper 6025 2 billion of adults do not have access to formal financial system AFI | Alliance for Financial Inclusion 3. The Alliance for Financial Inclusion 120 Institutions 95 Countries Unique Peer Learning Network Working Groups 7 Policy Areas More than 53 tangible policy changes Shaping global discussions (G20, G24, SSBs) Platform for public private dialogues Maya Declaration: 52 concrete commitments Building the Network Activating the Network Enhancing Network value Policy-Driving Network Independent Network AFI | Alliance for Financial Inclusion 4. Opportunities Growing alignment of interests among governments, private sector and policy makers. Greater understanding and global practices exist on regulating digital financial services that support financial inclusion. Recognition of country specific conditions as well as learning from practices in developing and emerging markets. More open communications with International Standard Setting Bodies and peer learning from other regulators. With the right policy/regulatory environment, digital financial services can drive financial inclusion more rapidly. AFI | Alliance for Financial Inclusion 5. Benefits & Opportunities of Digital Financial Services Source IFC Infographic: Bonny Jennings www.itldesign.co.za IAFI | Alliance for Financial Inclusion 6. AFI | Alliance for Financial Inclusion E-money Services Mobile Financial Services Use of Agents Big Data Crowd funding models Key Models of Digital Financial Services 7. AFI | Alliance for Financial Inclusion Convergence & Interoperability: A driving force for Financial Inclusion Financial Inclusion 8. Play M-PESA Video 9. AFI | Alliance for Financial Inclusion Mobile E-Money Supporting Financial Inclusion in Other Ways 2012 2006 13% 29%20 Million bank accounts 4 Million bank accounts 24 Million registered mobile money users Percentage of adults using a bank account in Ke 10. M-Shwari: Mobile E- Money & Banking 11. Small Value and Credit Savings M-Shwari, a savings and credit product from Safaricom and Commercial Bank of Africa (CBA) has registered a phenomenal uptake. The product enables M-PESA subscribers registered for at least 6 months to get a loan, anywhere from $1.15 to $235 for a 30 day term instantly into their e-wallets. AFI | Alliance for Financial Inclusion US$ 1.7 billion 1st largest bank in terms of accounts US$ 322 million in loans 35,000 to 10M in 2 years 12. Digital Financial Inclusion Policy Trends Technological innovation to reduce cost of delivery and increase access on a large scale Proportionate financial sector policy and regulation is critical enabling factor AFI | Alliance for Financial Inclusion 13. Increased importance of data to make informed policy decisions Quality aspects (consumer protection) of financial Inclusion Coordinated national strategies for expansion of digital financial ecosystems leading to more inclusive environments Digital Financial Inclusion Policy Trends AFI | Alliance for Financial Inclusion 14. Proportionate AML/CFT Tiered KYC Regulations E-Money Operator Regulations Remote Account Opening Rules Outsourcing to Third Parties Digital Signatures & Receipts Agent Regulations Interoperability Key DFS Regulatory Options to Support Financial Inclusion AFI | Alliance for Financial Inclusion 15. 1) Risk management frameworks and resulting data for risks pertaining to operations, liquidity, money laundering, and terrorist financing 2) Consumer protection 3) Public disclosure of information 4) Outreach and financial inclusion Four Key Areas in Digital Financial Services Reporting AFI | Alliance for Financial Inclusion 16. DFS Experiences in Tanzania Create an enabling legal and regulatory environment Support market development and encourage innovation Proportionate regulation Partnerships and cooperation Partner with Telco Regulator Encourage market cooperation (non-banks and banks) Government Uptake of Usage of DFS Revenue payments (Licenses and small taxes) Adoption of DFS in National Financial Inclusion Strategies Public and private sector adoption for national financial inclusion goals Interoperability Consider private sector initiatives enhancing or developing interoperability AFI | Alliance for Financial Inclusion 17. 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% Female Male Female Male 7.00% 11.50% 10.10% 17.90%7% 5.90% 41.10% 45.10% 30.40% 27.10% 17.20% 14.30% Use informal mechanisms only Have/ use non-bank formal products Have/ use bank products 20132009 DFS Experiences in Tanzania AFI | Alliance for Financial Inclusion 18. Bangladesh: Mobile-Enabled Agent Banking Success AFI | Alliance for Financial Inclusion Central Bank Issued Clear Guidelines: Agent Banking & Allowable Services Eligibility Criteria for Agents Allowance of Non- Exclusive Agreements Risk & Operational Issues Consumer Protection Principles Results: 541,000 active agents 25.2 M registered clients 12.2 M active clients 19. Philippines Example of Mobile-enabled E-Money Challenges for Rural Banks Reaching deeper into rural areas without costly investments in infrastructure Reducing costs of servicing clients Avoiding risks from robbery, holdup 20. Philippines Example of Mobile-enabled E-Money Central Bank allowed e-money services to be linked and used by rural banks to offer basic banking services Accreditation process was via the Rural Bankers Association of the Philippines (RBAP) that developed and received approval for standard procedures used by the industry. Accredited more than 1,100 rural banking units and benefited > 300,000 rural bank clients. Processed over P17 B (US$400 M) in mobile phone banking transactions. 21. Solomon Islands: Mobile Banking for Financial Inclusion AFI | Alliance for Financial Inclusion Central Bank Was Key To Financial Inclusion Thru Agent Banking Regulations Expanded Eligibility Criteria for Agents Tiered KYC Regulations Close dialogue with the Private Sector in Developing Policies Financial Literacy and the role of the Private Sector Results: From 80% without a bank account 5 years ago, 80% now have access to basic banking services 22. Russia: E-Money Regulations AFI | Alliance for Financial Inclusion Central Bank Was Key To Enabling E-Money Services Revised Light E-Money Regulations Regulations for Payment Agents & Kiosks Tiered KYC Regulations and Simplified CDD Government/Private Sector Working Group 23. [email protected] www.afi-global.org Thank you! [email protected] @jvowens