On Harnessing the Power of Financial Inclusion: The Case of Mobile Payments
Posted: July 26th, 2011 | viewed: (1,116) | Comments: ( 0 ) | Topic: Blog Post, Regulation | Region: Global
The development of information and communications technology has opened up the opportunity for providing essential financial services to most people. As we often write in this blog, many mobile money and branchless banking schemes are currently being launched or expanded across the world. However, these schemes can only be sustainable if they are built on a commercially viable business model.
This recently published paper written by Peter Dittus, Secretary General of the Bank of International Settlements (BIS) and Michael Klein , Professor at the Frankfurt School of Finance and Management and Visiting Professor at Harvard and Johns Hopkins University analyses in detail the transactions involved in the world’s most successful mobile money deployment: M-PESA and attempts to explain to which degree can and should regulation be applied to newly emerging financial services for the poor, and whether there a trade-off between financial innovation to help the poor and regulation.
The authors describe the challenges of poor people and their need for basic financial services and show how mobile technology has made it possible to provide basic services at a price point where the poor can afford it. They describe how well-meaning attempts to protect the poor through regulation can be counterproductive arguing that before regulation is discussed, we need to understand the object of regulation – because in the new world traditional banking service bundles may be much less important than basic, highly specialised financial services.
They analyse key building blocks of such services: exchange of different forms of money for one another; storage of money for safe-keeping; transfer of money from one owner to another; and investment of money. They argue that in order to harness the potential of financial inclusion it is vital to permit experimentation with different business models. Regulation is therefore required that enables such experimentation by being calibrated to the type of service offered, but which can be tightened if and when such schemes become bigger with the potential to impact financial stability
You can access the fill report via the MMU Document Library
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