As global remittances rise, regulatory issues hinder impact of mobile money
The use of mobile phones has skyrocketed worldwide from 0.7 billion in 2000 to 6.0 billion in 2011, of which 4.6 billion are being used in developing countries. Mobile phones have been used to facilitate international remittances, a World Bank Brief has said.
But despite the success of mobile money, the technology that allows money to be sent and received through a mobile phone, it has not made significant impacts in the international remittances market due to regulatory challenges.
Meanwhile, remittances to developing countries in 2012 have risen to more than $400 billion, according to the World Bank.
And as of early-2012, only 20% of 130 mobile banking operators worldwide offered international remittance services, the Bank noted.
Kenya is the country with the most visible success story with mobile money, and it is estimated that there are more cell phone subscriptions than adult citizens and more than 80 percent of those who use mobile phones also use mobile money.
Available data published by the Bank shows that there are approximately 60 million mobile money users in the world, which means that almost one in three is a Kenyan. Half of all mobile money transactions are taking place in Kenya where annual transfers are now around $10 billion, but that growth has not been replicated in other parts of the world yet.
The Bank argues further that although, channeling international remittances through mobile phones has the promise of expanding access and lowering costs, this service has yet to take off in a substantial way.
Traditional money transfer operators, such as Western Union and Moneygram, have also partnered with some providers to offer international remittance services via mobile phones.
Some of the factors that has hampered the growth of international remittances through the mobile phone include regulatory frameworks.
According to the Bank, cross-border mobile remittances have not taken off due to a variety of regulatory and operational challenges. AML/CFT and “know-your-client” requirements also exacerbate the regulatory hurdle for mobile money operators that raise cost and operational burden.
“Mobile remittances fall in the regulatory void between financial and telecom regulations, a reality which creates regulatory uncertainty for potential market entrants,” it said.
The Bank also indicated that many central banks do not allow non-bank entities to conduct cash-in and cash-out services.
“Mobile remittances will not take off until central banks and telecom authorities come together to craft rules that facilitate branchless banking. International remittances via mobile phones will also not take off until there is an ecosystem of domestic services built around mobile payments,” the Bank recommends.
By Emmanuel K. Dogbevi