Trends in Telecommunication Reform 2010-11 nonbanks) that carry out transactions on behalf of the bank. In a nonbank-based model, on the other hand, the customer does not have a direct contractual rela-tionship In countries, such as Afghanistan, Kenya, Indonesia, Pakistan, the Philippines and South Africa, various forms of m-Banking services are expanding the financial services frontier. These services allow users to make payments and remittances, access existing bank ac-counts, with a prudentially licensed and supervised financial institution. Rather, the customer exchanges cash at a retail agent for electronic value (i.e., e-money) that is recorded in a virtual account on the server of a non-bank, such as a mobile operator or an issuer of stored-value cards111 (see Figure 3.10). While this dis-tinction conduct financial transactions, engage in com-merce and transfer balances, for example (see Box 3.10). is useful in delineating the two different mod-els, Two main models of m-Banking have developed over the last few years: (i) bank-based and (ii) nonbank-based. ultimately even nonbank-based models rely on In a bank-based model, customers establish a banks, as the money collected from the public must be intermediated by a bank under the full purview of pru-dential direct contractual relationship with a prudentially li-censed regulation and supervision.112 and supervised financial institution, even though the customer may only deal with agents (i.e., Box 3.10: Various types of m-Banking services m-Banking refers to a variety of services, and we use the term in a broad sense here. Services can be broadly summarized as: i) m-Transactions and m-Payments, which refer to financial transactions (remittances and payments) made using a mobile phone without visiting a financial institution; ii) m-Banking which involves financial institutions in cooperation with mobile operators offering a channel to an exist-ing bank account. The service is both transformative in targeting the unbanked, (e.g., those who do not have bank access or bank accounts) and additive by targeting those who already have bank accounts and providing an extra means of accessing the bank account; iii) m-Commerce, sometimes called u-Commerce given its ubiquitous nature, which refers to the buying and selling of goods and services through wireless handheld devices such as mobile phones; and iv) Airtime transfer or balance transfer, which is a person-to-person transfer of the electronic value that has been pur-chased for purposes of making phone calls or sending text messages within one network. Source: Johan Hellström, The Innovative Use of Mobile Applications in East Africa, Sida Review 2010:12 (May 2010) at www.sida.se/publications. Figure 3.10: M-Banking models Bank / Nonbank involvement in M-Banking Nonbank issues electronic value and holds matching value assets in pooled account Bank issues electronic Bank(s) offer individual accounts accessed through nonbank-managed Bank(s) offer value which is individual accounts that can be used purchased from bank and redistributed by nonbank directly to agent through in regulated bank networks and/or bankmanaged customers technological platforms branchless channels Safaricom (M-Pesa in Kenya) Globe (GCASH in the Orange Money (Cote D’Ivoire, Senegal and Mali) SMART (for 21 banks in the Philippines) XacBank (Mongolia) Philippines) Bank-based model Nonbank-based model Source: Adapted from Michael Tarazi and Paul Breloff, Nonbank E-Money Issuers: Regulatory Approaches to Protecting Customer Funds, CGAP Focus Note No. 63 (July 2010) at www.cgap.org/gm/document-1.9.45715/FN63_Com.pdf 106 Chapter 3