When we write about ID requirements, we cover financial regulator’s often overly burdensome Know-Your-Customer (KYC – regulations that force financial institutions to verify a person’s identity with a passport or ID card). A new trend is emerging in telecom regulations that could pose a similar threat to mobile money businesses reaching the bottom of the economic pyramid. This trend is the requirement that mobile operators ID all users of their network.

Exciting changes are underway in the European Union. European governments are developing laws and regulations to promote the use of non-bank accounts (i.e. e-money). This is good news for mobile money. The UK, for example, is now consulting the public on its planned changes to regulations in that country. We believe they are positive and could set the standard elsewhere for mobile money including developing countries in Africa and Asia that have modelled some of their regulation after the European Directives

Over the past few weeks we have been looking into different countries’ regulatory practices for e-money issuers. E-money is what is stored in customer and agent wallets in mobile money services around the world. Given the lower risk that e-money entails, regulators are creating a license class for e-money that imposes a less costly regulatory burden compared to that of a full-blown banking license.

Today we are pleased to share a new paper written by Alexandre, Mas and Radcliffe titled ‘Regulating New Banking Models that Can Bring Financial Services to All’. The paper argues that “branchless banking” is misleading as it implies that we can do away with bank branches altogether. Rather, they advocate for branch specialisation where the branch role is higher-level, meeting more sophisticated needs such as complex credit services, liquidity, and customer redress. Basic services — those which reach the poor directly, are often better provided by non-bank retail outlets — not unlike those that mobile network operators already use to provide mobile money.