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IEET > Location > Africa > Life > Access > Vision > Contributors > Lee-Roy Chetty

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Mobile technology – creating an enabling environment in Africa


Lee-Roy Chetty
By Lee-Roy Chetty
Ethical Technology

Posted: Feb 3, 2013

With an increasing use of retail agents and communications technology, bank-led and nonbank-led models are found to be converging not in branchless banking but a banking beyond- branch (BBB) arrangement.

Operating in a banking-beyond-branch environment would require a regulatory framework which presently does not exist in many African countries. Indeed, many of these countries have issued legal acts on regulation of banking and payment systems.

The acts are found, however, to be insufficient in:

• Defining the conditions under which nonbank third party agents can conduct cash transactions on behalf of mobile financial service (MFS) providers, and possibly initiate account opening process (as this would be a key driver to increase outreach of a branchless banking initiative).

• Defining reduced “Know Your Customers” (KYC) requirements to avoid burdensome procedures for low value accounts and small transactions, given the low level of money laundering- related risk.

• Defining e-money, protecting the funds deposited in e-money accounts and adapting legal account features (KYC, ceilings for account balance and transactions).

However, in addition to sound regulation (including tackling organized crime and money laundering), adequate investment in hard and soft mobile infrastructure, partnerships between banks and MNOs and a sound environment are also needed.

The latter is needed to sustain domestic mobile payment and comprises the following success factors:

  1. A risk-based and proportionally oriented regulation (critical success) factor that balances innovation, competition and protection of customers: Innovation not only fosters competition, but also challenges regulation. Innovations should be regulated, therefore, in proportion to the risk weights and can’t be made too risky for regulators and too complicated for consumers. To enhance market transparency, MFS providers need to disclose related risks adequately, adopt minimum quality standards for their services, and set up appropriate mechanisms to address customers’ grievances. For the unbanked population, financial education is needed to help address financial illiteracy.

  1. A policy-led interoperability factor for different mobile payment products; Governments need to facilitate operational ease among different payment systems to ensure that m-wallets, ATMS, chip cards and chip card-based point-of-service (POS) terminals are interoperable. Besides, African Regional Economic Communities that are in, or moving towards, a monetary union, need to develop a regional mobile payment systems and related regulation.

  1. A development-oriented (Critical Success) factor for mobile payments’ expansion; Governments are recommended to support “Government to Person” (G2P) transfer in addition to improving regulation of financial sector. For mobile payments to realize their potential, policymakers need to improve soft and hard ICT infrastructure by enhancing investment and governance in collaboration private sectors, and launch G2P payment schemes, which will present an opportunity to provide access to financial services to unbanked beneficiaries by channelling a consistent flow of money into financial accounts.

  1. A strategic partnership (critical success) factor for all stakeholders: The economics of the mobile payment business model require close attention from all parties — mobile operators, banks, card issuers and technology players — if scalable solutions are to gain traction. Energizing embryonic value chains, while reassuring end users, will require greater levels of collaboration between operators themselves, as well as, with partners in different sectors and geographies.

There is also a strong need for development partners collaborating together and along African regional economic groupings, central banks, commercial banks (including microfinance institutions), telecom authorities, MNOs, technology firms, and MPS providers to help identify constraints to mobile payments and cross-border transfers, prioritize solutions to the identified constraints, engage in policy dialogues with regional and national institutions on institutional strengthening and capacity building programs in addition to mobilizing resources for infrastructure development.

In particular, to facilitate extension from mobile payment services to a full suite of banking services, central banks are recommended to create a complete framework for mobile banking and taking concrete steps to allow the use of agent networks by banks as another channel for increasing financial inclusion. Regulations addressing e-payments, agency guidelines, and money laundering have to be promulgated to the public to guide operations.

These are critical to a sufficient regulatory framework that provides more clarity for mobile banking services to be offered in Africa in a manner that is conducive to further deepening the level of financial access.

Mobile payment has proved to be financially inclusive, and offers a great potential for financial integration.

For mobile payments to realize their potential and contribute to financial inclusion and integration, policy makers have to choose the right model that is in line with national economic and financial sector development.

However, the adoption of the right model does not guarantee the success of mobile payment programs. In addition to the appropriate model, other critical success factors such as ICT infrastructure, sensitivity of regulation to risks and proportionality, enhancing investment and governance as well as strategic partnerships also account for the performance of mobile payment development; and in facilitating financial inclusion and integration.


Lee-Roy Chetty holds a masters degree in media studies from the University of Cape Town and the University of Massachusetts, Amherst. A two-time recipient of the National Research Fund Scholarship, he is currently completing his PhD at UCT and an economics degree with Unisa.
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