Trends in Telecommunication Reform 2010-11 two million customers, with PKR 4.8 Billion (USD 55 mil-lion) For example, m-Banking services such as Zain’s having passed through the system. Perhaps more (now Bharti Airtel) Zap service in East Africa are already starting to defy this classification, falling in a possible hybrid category where collaboration between banks and mobile providers is tighter.113 Similarly, in some ju-risdictions interestingly, 65 per cent of easypaisa transactions are from people who are neither Telenor Pakistan nor Ta-meer Microfinance Bank customers, further fostering financial inclusion.116 where regulation requires bank-based mod-els to be implemented, mobile providers have opted or have been required to acquire a controlling stake in fi-nancial m-Banking presents certain regulatory challenges, however, as banking laws and regulations often were not designed to incorporate the possibility of such ser-vices. institutions to launch m-Banking services. This is the case of Pakistan, where Telenor Pakistan acquired 51 per cent of Tameer Microfinance Bank and together entered into a partnership agreement to launch the ea-sypaisa Accordingly, there is often a need to adapt bank-ing regulations to facilitate m-Banking. This is evidenced by the case of Peru. Peruvian regulations currently permit third parties, such as mobile operators, to deliv-er service. banking services as an agent of a licensed banking There are notable examples of success stories of m- institution, subject to the banking regulator’s authoriza-tion. Banking in developing countries. In Kenya, M-pesa by Safaricom, launched in March 2007, has handled over KES 130 billion (USD 1.7 billion).114 It has nearly seven million registered customers transferring an average of KES 150 million (USD 1.96 million) per day, mostly in small amounts of approximately KES 1,500 (USD 20) per transaction. M-pesa customers can visit more than 10,000 merchants who act as “agents” for account opening and handle deposits into and withdrawals from the customer’s virtual “wallet.” Customers can use their mobile phones to check bank balances, pay bills and purchase airtime.115 In Pakistan, easypaisa was launched in October 2009 and supports a full portfolio of financial services, including loans, deposits, transfers and payments. By July 2010, it had reached more than 117 Although some banks provide access to Internet banking through mobile phones for pre-existing cus-tomers, there is no relevant mobile banking business in Peru due to stringent regulations that include a prohibi-tion on opening an account outside of a bank branch.118 Since only 26 per cent of Peruvians use banks, the banking regulator, the Superintendence of Banks, In-surance and AFP (SBS), announced in May 2010 that it will introduce new regulations to allow full-service mo-bile banking services.119 By introducing this regulation, SBS aims to reach the 80 per cent of Peruvians who use mobile phones and to create “electronic money” com-panies to promote access to financial services for the unserved.120 Box 3.11: Relevant financial regulatory issues to be addressed to enable development of m-Banking The following are areas where sharpened regulatory analysis would result in a better balance between maximizing the op-portunity of m-Banking models and mitigating their risks: • More flexible branch regulations that permit banks to manage more differentiated customer sales and service models, based on the transaction types and volumes performed. • Banking agent regulations that permit banks to engage third-party retail outlets as cash merchants, with minimal fi-nancial risk for both banks and their customers. • Consumer protection regulations that help customers understand and act upon their rights in a more complex ser-vice delivery chain, without burdening banks with unnecessary provision. • Tiered Know Your Customer (KYC) regulations that permit immediate account opening with minimum barriers for poor people, with a progressive tightening of KYC as their usage of financial services grows. • Creating regulatory space for a class of non-bank e-money issuers authorized to raise deposits and process pay-ments, but not to intermediate funds. Source: Claire Alexandre, Ignacio Mas and Dan Radcliffe, Regulating New Banking Models that can Bring Financial Services to All. Chapter 3 107