Issues in Mobile Banking 2: Regulatory and Technical Issues
Regulation requirements – or in some cases the lack of understanding/interest of the central banks – remain one of the key barriers to implementing mobile banking by financial institutions. In addition, many financial institutions struggle with technology issues around selecting appropriate systems and delivery channels. This Briefing Note seeks to shed some light on these issues. For example, the Note explains that in some countries only a bank can participate in the national payments system and all instructions to make payments on behalf of a customer are deemed to be acceptance of deposits and can therefore only be undertaken by a bank. If this is the case then a non banking operator will need to either obtain their own banking license or else form an alliance with a bank so that deposits or ‘the business of a bank’ will be done within a division of that bank.
Issues related to anti money-laundering legislation and the use of agents are explained. Agents enable service providers to interact with large numbers of customers. However, the selection and management of agents will be restricted to those who can meet the specific regulatory requirements for the taking of deposits and management of documentation in the country of operation and this may add significantly to costs. Furthermore, regulation may be a factor in the services that can be offered by an agent and their ability to manage operational and reputational risks.
Finally the Note examines the issues surrounding the choice of system to be used, i.e. the computer platform, the enabling technologies such as the SIM toolkit or browser, the interactive technologies such as WAP, SIMToolkit and Java, and the transport channels on the mobile network such as voice/touch tone dialing (IVR), SMS or USSD. Decisions will be driven by various factors including:
- The regulatory environment
- The level of functionality required by the market
- The availability of secure infrastructure such as SIM toolkit
- The availability of features on handsets such as WAP, Java or the Simtoolkit GSM 03.48
- The level of risk of transactions.
- The sophistication of the market and affordability for the customer.