Branchless Banking Policy

Branchless banking is the delivery of financial services outside conventional bank branches through the use of retail agents and information and communications technologies to transmit transaction details. By relying on already existing retail infrastructure and widespread technologies, such as mobile phones, branchless banking dramatically reduces the cost of delivery and increase convenience for customers.

As a relatively new business model, branchless banking cuts across a broad spectrum of regulatory “domains,” making a cohesive and coordinated policy and regulatory environment a challenge for policymakers. The key to unlocking branchless banking’s potential depends on policies and regulations that mitigate the risks to customers and their funds without stifling the innovation of new business models and market actors.

There are two central preconditions to regulating branchless banking:

  1. Use of Agents. Authorization to use nonbank retail agents as the “cash in/cash out” point and principal customer interface, so as to increase the number of accessible service points; and
  2. A risk-based approach to AML/CFT (anti-money laundering / combating financing of terrorism) rules adapted to the realities of (i) poor customers who often do not have required documents and (ii) remote transactions and customer enrolment conducted through agents.

In addition, regulators must address another key regulatory issue—whether they will permit e-money issuance by parties such as mobile network operators (MNOs), who are not fully prudentially licensed and supervised banks. Due to their experience with retail distribution networks and with high-volume, low value transactions, MNOs have often taken the lead in branchless banking models. Regulators permitting nonbank e-money issuers typically impose fund safeguarding and isolation requirements.

Other key regulatory issues include effective consumer protections to address the risks involved in electronic payments and promoting interoperability and related competition issues.

Topic Contact: Michael Tarazi

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Publications

11 April 2014
While many banked people already use mobile banking in China, the country also has the potential to emerge as an important success story for branchless banking and financial inclusion and potentially a new paradigm.
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15 July 2012
This Brief addresses the supervision of e-money issuing activities of nonbank e-money issuers.
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From Our Blog

14 July 2014
1 comment
Kenya recently granted MVNO licenses to several new companies, allowing them to provide mobile money services without building new cellular infrastructure. This could shake up the mobile money market in Kenya, which has been dominated by Safaricom.
08 July 2014
5 comments
Financial inclusion in India has the mandate at the highest level of policy making, but the market has yet to respond positively to regulations that allow both public and private actors to pursue digitized payment services. Understanding demand for financial services is key to design services that reach scale.
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