During the past decade, mobile money has helped reduce the financial exclusion gap in low- and middle-income countries, with 290 live deployments in 95 countries and more than 1 billion registered accounts. In Sub-Saharan Africa, almost half of mobile money users are reliant solely on it to access financial services.
Mobile money, therefore offers a route to financial inclusion for the 1.7 billion people in the world that are currently unbanked.
This has taken on increasing importance since the outbreak of Covid-19 (coronavirus). The pandemic has had far-reaching impacts, including spikes in hospital admissions, office and shop closures, and restrictions on movement to limit contact between citizens. IMF figures from end-September 2020 show it also caused the biggest contraction in economic output since the Great Depression and the first increase in global poverty in more than two decades.
Low- and middle-income countries are more exposed to the intrinsic risks of Covid-19. Social distancing is more difficult to achieve and maintain in economies that are reliant on cash and the physical purchasing of goods. It has therefore been imperative these markets accelerate the adoption of digital payments, and mobile money offers a ready-made vehicle for this.
How can the use of mobile money be accelerated?
In this context, it is timely to consider the role regulation can play in terms of the adoption and use of mobile money services. A recent paper published by GSMA Intelligence provides new evidence on the relationship between mobile money regulation and usage, by leveraging data from the GSMA Mobile Money Regulatory Index (MMRI), the most comprehensive assessment of mobile money regulations developed to date, and the Global Findex Database.
Encouragingly, the study finds compelling evidence that countries with enabling regulatory frameworks, as measured by the MMRI, have significantly higher levels of mobile money use. It also highlights some of the specific regulatory policies that are linked to an increase in the use of mobile money. These include, for example, allowing non-banks to issue mobile money and not imposing strict transaction limits, taxes or price controls on transactions.
The study also suggests that enabling regulation can especially help increase mobile money adoption for women and the poorest population segments. Some of the policies that are important for these groups include less strict Know-Your-Customer (KYC) requirements and regulations that permit mobile money agents to register customers and carry out a range of services (id est, not just cash-in and cash-out). Regulation therefore affects the ease with which new customers can enrol to a mobile money service, as well as the commercial and operating environment for providers and investors.
Positive steps have been taken in response to Covid-19, but more can be done
Encouragingly many governments have moved quickly to switch their economies towards mobile money in response to the outbreak of Covid-19. This has enabled the disbursement of social welfare and relief payments during the pandemic and it has also helped maintain continuity for businesses that have been able to scale up (or switch to) digital payments. And, of course, mobile money reduces contact with physical cash, thus helping to limit the risk of spreading Covid-19.
Many of the enabling regulations highlighted in the GSMA Intelligence study have formed the basis of policy responses to Covid-19, for example:
- Relaxation of KYC requirements: Several regulators relaxed KYC and on-boarding procedures. The Bank of Ghana, for example, allowed mobile operators to use existing mobile phone registration details for on-boarding minimum KYC accounts. This measure was subsequently made permanent.
- Increased transaction and balance limits: Several Central Banks in Sub-Saharan Africa (for example, in DRC, Rwanda, Zambia) increased daily and monthly transaction and wallet balance limits, and some are also making these changes permanent.
- Fee waivers: Removing charges on certain transactions has been a popular short-term policy instrument in response to the pandemic. However, many regulators have noted that these are not sustainable in the long term and are engaging with service providers on a return to normal approach (for example in Kenya, Zambia and Ghana).
The move to formalise enhanced transaction limits and flexible KYC requirements, and to avoid making fee waivers permanent, is to be welcomed in light of the recent evidence. This should benefit both consumers and also SMEs, many of which had previously been unable to use mobile money extensively due to low transaction limits. Other countries would therefore benefit from following these examples.
Covid-19 has increased the awareness and familiarity with mobile money among citizens, particularly those that still prefer to use cash. Governments and policymakers should therefore take this opportunity to boost financial inclusion and drive the digitisation of their payments systems and wider economies.