2. Actionable Intelligence into the Legal and Regulatory Payments Landscape 35 7 Understand key regulatory changes Stay informed and receive guidance on future implications Manage your compliance costs more effectively Alleviate the growing regulatory burden Regulations tracked Editors, Lawyers and Researchers

3. Introduction Remittances Environment Mobile Money and Adoption Schemes for Operation of Mobile Remittances Mobile Network Operators (MNOs) in the International Payments Space Mobile Money Ecosystem: Key Enablers Industry Challenges Perspectives in Latin America Agenda

4. Remittances $601bn in 2015 $441bn Developing Countries Largest Sending Countries USA: $56bn Saudi Arabia: $37bn Russia: $33bn Largest Recipient Countries India: $72bn China: $64bn Philippines: $30bn 0.4% 2014-15 4.8% 2014-15 4.2% 2014-15 World Bank, UNPD 2015, World Development Indicators

5. Migration 244m international migrants worldwide $500bn savings Possible changes in 2016 Top Migrant Destination Countries USA Saudi Arabia Germany Russian Federation Top Migrant Home Countries India: 16m Mexican: 12m Source: World Bank, UNPD 2015, World Development Indicators

6. Accounts Penetration 700m adults became account holders 2011-14 62% of adults have an account The “unbanked” fell from 2.5bn to 2bn Bank Account Numbers: High-income OECD: 94% Developing economies: 54% Mobile Money Accounts: East Africa: 20% Source: World Bank, The Global Findex Database 2014, Measuring Financial Inclusion around The World

7. Mobile Money 411m accounts globally 93 countries 271 services Available in 85% of countries in which the number of people with an financial account is less than 20% 37 markets had ten times more registered agents than bank branches New Markets: Albania, Myanmar, Perú and Seychelles. Source: GSMA, State of the Industry Report, Mobile Money, 2015.

8. Mobile Money, Smartphone Usage 70% of people using smartphones by 2020 6.1bn smartphone subscriptions by 2020 80% of all mobile data traffic will come from smartphones 80% of new smartphone subscriptions from Asia Pacific, Middle East and Africa 3.5bn total additions Source: Ericsson, Ericsson Mobility Report, June 2015

9. Mobile Money Mobile money services offering (IMT) increase by 52% (2014-15) Overall growth 27.3% (2014-15) 11.2 average customer transactions per month Over 12bn transactions 31.5% Mobile money growth by value Source: GSMA, State of the Industry Report, Mobile Money, 2015.

10. Cross-Border Corridors 29 cross-border mobile money remittance corridors connecting 19 countries 69% of services launched in 2015 are operationally run by mobile network operators (MNOs) 58% of all live services are MNO- led Source: GSMA, State of the Industry Report, Mobile Money, 2015.

11. MNO’s in the International Payments Space MNOs-led and/or bank led? Providing international remittance services MNOs Increased value proposition in the mobile money account Reduced operational costs Lower transactional fees Injection of money into the mobile money account Greater penetration in rural areas / finance inclusion Speed, security. Bank Financial service discipline Trust or credibility from consumers Security Wider range of financial services Liquidity Source: GSMA, White Paper: Mobile Money Transfer, International Remittance Considerations for Mobile Network Operators

12. Mobile Money Ecosystem Key Enablers Legislation Legislation tailored to cross-border transfer of funds For example, licensing / registering requirements for MNOs Distribution Networks High penetration of agents which carry out transactions on behalf of the operator Financial Institutions – MNOS Partnerships Complex industry agreements to widen the range of mobile financial services (MFS) Interoperability Platforms to effect cross-border transfers of funds between users of different MNO networks Behavioural Issues Incentivising the adoption of alternative means to transfer funds

13. Industry Challenges Mobile Money & Money Laundering Risks Potential Impacts & Regulatory Responses Source: World Bank, Working Paper No 146, Integrity in Mobile Phone Financial Services Anonymity KYC Requirements Elusiveness Transactions Limited Enhanced Customer Profiling Monitoring Profiling Rapidity Flagging of Transactions Management of Risks of Third-Party Providers Lack of Supervision Transparent Guidelines Licensing / Registering Regulation of Providers Effective Risk Supervision KYC It is a challenge to verify the identity of customers who lack ID documentation. Regulators have responded by relaxing KYC requirements. Countries have evaluated the convenience of mandatory KYC at SIM card registration Increased Cost of Compliance Excessive regulatory burdens could lead to increased costs of compliance and, potentially, higher fees to consumers The risk-based approach (RBA) is perceived as a means for allocation of resources, as increased attention is paid to areas of greater risk. € These reduce the risk of misusing mobile financial services (MFS) for money laundering purposes. These could impact the commercial attractiveness of MFS Transaction & Balance Thresholds

14. Industry Challenges Some considerations Interoperability increases the range of channels to send/receive remittances. Pricing structures Could intra-group models lead to lowered transactional fees between two users of the same MNO? How could this impact the competition landscape? Mali: Orange Senegal: Orange Ivory Coast: Orange; MTN Burkina Faso: Bharti Airtel Kenya: Safaricom Tanzania: Vodacom; Tigo Rwanda: Tigo

15. Europe & Central Asia: 1.7 million registered accounts 0.24 million active accounts Latin America & Caribbean: 17.3 million registered accounts 8.2 million active accounts Middle East and North Africa: 41.7 million registered accounts 10.7 million active accounts South Asia: 101.9 million registered accounts 27.2 million active accounts East Asia & Pacific: 26 million registered accounts 3.5 million active accounts Sub-Saharan Africa: 222.8 million registered accounts 84.1 million active accounts Global Adoption of Mobile Money in 2015: A Look at the Data 33 million Mobile money transactions per day 19 markets have more mobile money accounts than bank accounts 31% increase in registered mobile money accounts (2015) East Africa recorded the highest level of mobile money penetration (55%), which is more than twice the level of smartphone penetration (19.4%). Numbers of registered and active (90 day) customer accounts, by region (December 2015) Europe & Central Asia: 1.7m registered accounts 0.24m active accounts Latin America & Caribbean: 17.3m registered accounts 8.2m active accounts Middle East and North Africa: 41.7m registered accounts 10.7m active accounts South Asia: 101.9m registered accounts 27.2m active accounts East Asia & Pacific: 26m registered accounts 3.5m active accounts Sub-Saharan Africa: 222.8m registered accounts 84.1m active accounts

16. Latin America Key Facts and Figures Remittances play a significant role in social development. Households spend a considerable share of remittances in satisfying basic needs: FoodEducationTransport World’s Top 30 Remittance- Receiving Countries MexicoGuatemala Dominican Republic Colombia Honduras Guatemala Nicaragua El Salvador G.D.P World’s Top 30 Remittance- Corridor Countries Dominican Republic Honduras El Salvador Guatemala Mexico 111.3 Per 100 people 2014 Mobile Phone Subscription in LatAm and the Caribbean 19 LatAm & Caribbean countries 37 Mobile Money schemes Source: World Bank, Migration and Remittances Factbook 2016

17. Regulatory Landscape in Latin America Financial inclusion is the key driver of mobile financial developments in Latin America. Guatemala and Mexico consider MFS as an alternative channel to carry out financial transactions. Ecuador follows an unique approach: e- money under a central bank-led model. Chile is considering a draft law to allow non-banking, financial institutions to issue multi-purpose prepaid instruments. Bolivia, Perú, Colombia, El Salvador, Nicaragua, Paraguay, Uruguay and, most recently, Honduras, have provided for the incorporation of non-banking financial institutions subject to less stringent incorporation requirements than banks. These institutions are prohibited from carrying out financial intermediation activities.

18. International Remittances & Mobile Wallets The use of mobile wallets for international remittances, remains low; however, some deployments have emerged following an MNO to third party model. TIGO (Millicom), an MNO with operation in several LatAm markets, has partnered with key international money transfer operators to receive cross-border remittances directly into customer’s mobile wallets. Cross-border mobile remittances are a promising market. Development of this market will require legal enabling environments, payment infrastructures, shifting the preference of consumers for non-cash transactions, among other factors. Source: GSMA, Mobile financial services in Latin America & the Caribbean: State of play, commercial models, and regulatory approaches

19. Interoperability The case of Peru Modelo Peru is a shared platform that brings together financial institutions, MNOs and technology providers, among other relevant stakeholders, to increase the reach of mobile financial services. Alonso Segura, from the Ministry of Finance of Economy and Finance, described Peru’s e-money programme as “the e-money sector’s first example of a joint venture between the government and the private sector”. (PaymentsCompliance: Peru E-Money Push Open For Business(PaymentsCompliance: Peru E-Money Push Open For Business) This project will include international remittances as part of the value proposal to customers. Source: ASBANC, Dinero Electrónico, Modelo Perú.

20. Some Conclusions Mobile remittances are a promising market. In addition to legal environments, the development of ecosystems for MFS will require greater development of payment infrastructures and partnerships between relevant stakeholders. An attractive proposition of value to the customer, made of real-time transactions and receipt of funds directly to mobile wallets, among other factors, are key to shift the preference for international mobile remittance schemes. Policymakers are still striking the balance between financial inclusion goals, money laundering regulations and the impact of increased compliance requirements for operators. Most LatAm markets have set out regulations which are conducive for deployment of mobile financial services; mobile remittance schemes are emerging in the region.

21. Thank you for listening Any questions please contact us Elizabeth Muñoz Legal Analyst elizabethm@paymentscompliance.com +44 (0)20 7921 9980 Jose Jaramillo-Contreras Research Analyst josej@paymentscompliance.com +44 (0)20 7921 9980 paymentscompliance.com