Regulating Transformational Branchless Banking: Mobile Phones and Other Technology to Increase Access to Finance

This paper discusses issues related to regulation of branchless banking targeting the unbanked poor. Based on research from seven countries in Asia, Africa, Central Asia, Europe and Latin America, it observes that policymakers and regulators in developing and transition economies are increasingly embracing transformational branchless banking.

The paper identifies a common challenge faced by policymakers in terms of formulating proportionate regulatory policies that give space for innovation and permit branchless banking to scale up safely. It states the following necessary, but not sufficient preconditions to such regulation:

• Authorizing use of retail agents equipped with information and communication technology as the principal customer interface;
• Developing risk-based anti-money laundering rules, and rules for combating financing of terrorism.
• Addressing next generation policy and regulatory issues such as effective consumer protection, inclusive payment system regulation and policies governing competition.

Branchless banking is new and dynamic, making it difficult to make strong normative policy recommendations. The paper, however, offers some general process and content related recommendations for policymakers and regulators.