TechSalon on mBanking

Overview and Key Issues; Recommendations

fin svc over cell via sms, mobile internet, secure apps
mbank != mpayment, mbanking more, requires bank or mobile network operator (MNO) deposit account
- xactn svcs, protfolio mgmt, payment requests, loan requests, atm locator svc/ customer svc
- mfi over cellphones
why care? next killer app; great potential, global mcommerce 88B in 09, etc; bank center call volume coming from cell not fixedline
- key driver in dev, smb, livelihood improvement

bank focused; traditional bank providing mobile channel (additive approach)
bank-led model, bank trying to reach new customers who don't have formal accounts via mobile to remote locations / branchless banking (transformational model - reaching the unbanked)
telco model, bank used as clearinghouse, MNO uses eCurrency, differs from bank e.g. gCash in philippines for remits - challenge is that regulatory, in limbo state btwn mno and bank levels
- some telecom/MNOs not classified as a bank b/c purely transactional

Handset problems - encryption, security, handset variety, newer phones (more expensive)have builtin crypto
- most dev world country users have phone w/o security tools
some mBanking systems tie to a mno exclusively - lockin for end users/recipients
technical interop - html, wap, xml, sms... , bank and cell phone have diff agendas; banks want to keep narrow proprietary, mnos want open pltform to attract new

eContracting complications with clear definite authentication via pin/password/eSig
consumer protection from fraud
interop - mobility to switch operators/banks and diff providers can interact
getting mbanking out to the poor - transformational
- anti money-laundering aml anti terrorist financing - requiring bank/mno to provide due dilligence on new customers, lowering their profit potential
for mnos, cell phone cos have to maintin liquidity, akin to a bank
involving regulators, antitrust, judiciary, police, etc. SMS as evidence in court...
examples of regulatory/legal problems
- telecom has to be open to liberalization, new entrants, interop
- eSigs - political football - fight btwn ict and finance ministries
- fin regulators - secuity/encryption/authentication on simple sms handsets; but smartphone-level more susceptible to virii/attacks
  - oversight of agents
  - antitrust and user lockin to fin svcs
  - AML regulators and verification of ID with informal home addresses, etc.

To fin svcs providers:
- set up a risk mgmt framework at bod/sr level, beynd tech level, accountability, e.g. limiting size of xactn, firewall multiple personal accounts, share risk mgmt practices
regulators - don't make tech too rigid b/c of high rate of change, put burden on svc providers to do due dilligence; ongoing interaction/monitoring; making security explicit in banking/ecommerce laws (pakistan has mbank security as requirement)
- antitrust - spain - guaranteed interop of systems, subscribers could not be locked in
- consumer protection (india brazil); needs user education / id theft -
- need a toplevel law for regulatory certainty; uae and namibia - enables ecommerce, mbanking....
other alternatives can work too; other ways to reach the unbanked via POS devices, ATMs, etc.

Some Stats
- WAf region - 270M+ ppl 350B GDP; tremendous migration
- 10B crossing borders in ghana nigeria senegal and mali
- mostly cash xfer , high potential for reaching unbanked
  - mbanking to facilitate and bring csh out of informal networks
facilitating crossborder xatcn via mobile phone; target mkt are interregional remits and trade
- ECOLAS - 15 wAf; 8 diff currencies/banks/policies; mbanking to fsttrck/leapfrog
- need for higher threshold for traders; need 1000-dollar levels; banks can only xact lim'd amt due to AML; 10k standard international
  - francophone subset of ecolas sharing a common currency/bank, but lower AML threshold
regultory framework, mnos cannot do cross-border xfers, but banks can; phone provides money order, bank carries it out;
- foreign exhange - not internally transferable; must convert to base currency and re convert; phone banking as end-run, but must fight against people profiting off of float/interest from current system
- choice of law for crossborder xactn; diff law systems (french law vs case law system)

Business/profit potential overlapping development potential; no precedent for non-poor yet; leverage private sector movement for unbanked; move of mfi from nonprofit to for profit providers
regulatory resistance to money<=>minutes as a currency, but AML - better to xfer in formal econ; high, >AML thresholds probably already occurring informally (FFX codes!)
prob with network / dropped calls and delays
biometrics - voice (and stress) to provide legal structure (SMS not permissible evidence in some countries, fingerprint scanner not reasonable for many phones...) -- the problem is not the tech, it's the lawmakers

(mBanking as bubble potential for the next subprime loan??