I. Introduction
The long awaited integration of mobile telephone and banking services is beginning to make an appearance - in emerging and developing markets. It has the potential to generate significant economic benefits, extending access to financial services and perhaps stimulating more fundamental changes and increased competition in the sector. Where the costs of traditional retail banking have been too high, or where their distribution arrangements are inappropriate to serve low income clients, mobiles are enabling new business models that could extend access to financial services in these markets. Regulatory reform may also enable mobile banks as a group to foster the rise of new, more efficient international retail settlement networks of particular relevance to the growing population of immigrants and their demand for cross-border banking services.
But these transformations may be constrained by financial and other regulatory frameworks. There are many formal barriers to the provision of payment and transaction services by non-banks. In the short term, current regulatory frameworks may also favour the inappropriate use of pre-paid accounts as substitutes for deposit accounts that provide consumers with greater protection. Added to these complications are formal and informal trade barriers that apply to cross-border services. Without adjustments to regulation at the domestic and international level, valuable legal, operational and organisational innovations important for the success of mobile banking will be impossible or too risky to implement.
Public authorities should be trying to ensure that they facilitate innovations in this area because of the potential benefits for financial sector development. Regulators cannot sit on the fence, waiting to se ...