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

January, 2008     Timothy R. Lyman, Mark Pickens, David Porteous

When a cover story last year in The Economist forecast provocatively the “end of the cash era,” some in developing and transition countries were thinking “not yet, for us at least.” Surely the high-tech electronic substitutes for cash described in the issue as taking Japan by storm would take quite a while to reach poorer countries.

And yet, the transformation from cash to electronic value, stored and conveyed by mobile phones, is hitting developing countries, too. In Kenya, the M-PESA mobile wallet service offered by Safaricom attracted 1 million registered users in 10 months (in a country where fewer than 4 million people have bank accounts). And in the Philippines, the country’s two mobile network operators offer the functional equivalent of small-scale transaction banking to an estimated 5.5 million customers.

In a fast increasing number, policy makers and regulators in other developing and transition countries are embracing “transformational branchless banking”—the use of information and communication technologies (ICTs) and nonbank retail channels to reduce costs of delivering financial services to clients beyond the reach of traditional banking.