Regulating transformational branchless banking

This report is a good summary of learning across various countries

Among the countries studied, a surprising consensus surrounds the short list of most critical topics policy makers and regulators should address to formulate proportionate regulatory policy for transformational branchless banking.

The report classify two topics as “necessary but not sufficient” preconditions:
• Authorization to use retail agents equipped with ICTs as the “cash-in/cash-out” point and principal customer interface
• Development of risk-based anti-money laundering (AML) rules and rules for combating financing of terrorism (CFT), adapted to the realities of remote transactions conducted through agents.

But the report does not highlight several operation risk ( like fake money ) and viability risk for the entreprenuer and bank .

Report classify four topics as “next generation” policy and regulatory topics. Though they may not prevent branchless banking from getting a start in a given country, they will figure in its success and sustainability as a means of getting financial services to the unbanked poor:

• Appropriate regulatory space for the issuance of emoney and other stored-value instruments
(particularly when issued by parties other than fully prudentially licensed and supervised banks)
• Effective consumer protection (on a variety of fronts)
• Inclusive payment system regulation and effective payment system oversight as branchless banking reaches scale
• Policies governing competition among providers (which balance incentives for pioneers to get into the branchless banking business against the risk establishing or reinforcing customer-unfriendly monopolies and which promote interoperability) So what are our recommendations? Despite the difficulty of making strong normative statements in such a dynamic environment, our research leads us to make both process-related recommendations (see pages 17–19) and content-related recommendations (see pages 19–20). The core content-related ecommendations can be summarized as follows:
• Permit nonbank retail outlets to serve as agents— and consider carefully any restrictions on the range of permissible agents and types of relationships permitted (page 19).
• Evolve a risk-based AML/CFT approach adapted to the realities of small, remote transactions conducted through agents (page 19).
• Clarify the legal boundaries between retail payments, e-money, and other stored-value
instruments and bank deposits (page 20).
• Create a regulatory category for electronically stored value that allows nonbank participation on defined terms (page 20).
• Create robust but simple mechanisms for consumer protection, covering problems with retail agents, redress of grievances, price transparency, and consumer data privacy (page 20).
• Consider the likely longer range competitive landscape today and how to reach the goal of
interoperability (page 20).

The real situation in India the pilots have not been scaled up and lot of talk has been a big hype to please regulators and funding agencies alike ...

for Details on this report pl refer...http://www.ruralfinance.org/id/56259