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

Enabling Environment for Mobile Banking in Africa 2 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 3 Access to Financial Services - Kenya Source - National Survey on Access to Financial Services in Kenya 2007

Enabling Environment for Mobile Banking in Africa 4 Access to Financial Services – Tanzania Source – Finscope: Key findings of the finscope survey in Tanzania 2006

Enabling Environment for Mobile Banking in Africa 5 Access to Financial Services - Zambia Source – Finscope: measuring financial access in Zambia November 2006

Enabling Environment for Mobile Banking in Africa 6 Access to Financial Services – South Africa Source – FinMark Trust: Making financial markets work for the poor (2006)

Enabling Environment for Mobile Banking in Africa 7 Growth in Bank Branches - Kenya ATM Growth - Kenya Source: Central Bank of Kenya

Enabling Environment for Mobile Banking in Africa 8 Local Money Transfer Services - Kenya Source - National Survey on Access to Financial Services in Kenya 2007

Enabling Environment for Mobile Banking in Africa 9 Access to Mobile Telephones - Kenya Source - National Survey on Access to Financial Services in Kenya 2007

Enabling Environment for Mobile Banking in Africa 10 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 11 What is m-payments and m-banking? Form of money: Issued by/liability of: Channel: Cashe-moneyBank money Central Bank e-money institution (could be bank or Telco) Commercial bank Physical exchange Digital cashSmart card Mag stripe cardMobile phoneInternet POS/ATM Branch & cheque Account based or digital wallet Source – Bankable Frontier Association

Enabling Environment for Mobile Banking in Africa 12

Enabling Environment for Mobile Banking in Africa 13 Which model? Macro payment $/Eu10 Micro payment RemoteLocal Source: Mobey Forum WP v1.1 Traditionally, bank driven (linked to deposit account or credit card) Telco driven (linked to pre-paid account)

Enabling Environment for Mobile Banking in Africa 14 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 15 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  ) Source – Bankable Frontier Associates

Enabling Environment for Mobile Banking in Africa 16 Africa today: Zambia & DRC –Celpay: 2002 onwards South Africa: –MTN Mobile Banking: –Wizzit: –Paym8: Kenya: –M-Pesa: 2007 launched Source – Bankable Frontier Associates

Enabling Environment for Mobile Banking in Africa 17 Policy Framework E- commerce AML-CFTBank Agency Payment systems Bank outsourcing Comp- etition Telco regulation EE: MOBILE PAYMENTS & MOBILE BANKING

Enabling Environment for Mobile Banking in Africa 18 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 19 Security issues Elements: Confidentiality: –encrypted secrets not available to non-authorized users Integrity: –Message authentication Authentication –Genuine source Non-repudiation –No one can deny sending or receiving

Enabling Environment for Mobile Banking in Africa 20 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 21 Possible roles for policy makers Regulator Supervisor Standard setter Information gatherer Facilitator Coordinator

Enabling Environment for Mobile Banking in Africa 22 Enabling environment: Policy balance Stability of the financial system Consumer protection & choice Efficiency Broader access Financial integrity

Enabling Environment for Mobile Banking in Africa 23 No of consumers 1. Pioneer2. Breakout3. Consolidation4. Maturity 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

Enabling Environment for Mobile Banking in Africa 24 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 25 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 26 Are we ready for the transformation?