MOBILE PAYMENT REGULATION IN THE 'STATES MEMBERS OF THE WEST AFRICAN ECONOMIC AND MONETARY UNION (WAEMU) (UEMOA)

WORKSHOP ON CROSS-BORDER MOBILE PAYMENTS REGULATION AND REGIONAL INTEGRATION (Mumbai, March 29-30, 2012)

Presented by : Mrs Jocelyne Akuwa DOGBE AZOMADeputy Director - Payment Systems DirectorateBanque Centrale des Etats de l'Afrique de l'Ouest

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OUTLINE

INTRODUCTION

• FINANCIAL INTEGRATION AND CROSS-BORDER PAYMENTS IN THE WAEMU

• MOBILE PAYMENTS IN THE WAEMU AND CROSS-BORDER PAYMENTS ISSUES

• CURRENT SITUATION AND PROSPECTS FOR REGULATING CROSS-BORDER MOBILE PAYMENTS IN THE WAEMU

CONCLUSION

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INTRODUCTION

Eight (8) countries : Bénin, Burkina Faso, Côte d'Ivoire, Guinée-Bissau, Mali, Niger, Sénégal et Togo ;

A single currency ;

A common central bank (Banque Centrale des Etats de l'Afrique de l'Ouest) ;

Centralization of foreign currencies reserves ;

Uniform banking, payment systems, and external financial relations regulation ;

A supranational banking supervision : Banking Commission of the West African Monetary Union.

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WAEMU socio-economic environment favourable to the development of mobile payment

Weak banking rate (lower than 15%)

Development of new technologies of information and telecommunication in recent decades (Rate of mobile phone usage estimated at à 38%) - vary between 9 % in Niger and 70% in Senegal

Modern payment systems

Important mobility of the population within and outside the WAEMU (large flow of funds within as well as in and out the WAEMU)

Development of the microfinance sector

INTRODUCTION

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In the financially integrated environment of the WAEMU, BCEAO has set a regulatory framework to promote the emergence of banking and non banking actors offering e-money services, such as mobile payment

Given the potential of mobile payment for the monetary Union population's financial inclusion : BCEAO is challenged to update its current regulation and is implied along with all stakeholders in the development of mobile payments in and outside the WAEMU

Accordingly, the Governor of the BCEAO put the development of financial services based on mobile phone on the top of the institution 2012 agenda

INTRODUCTION

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1.1. Classification of cross-border payments in regards to regional regulations

Payments between WAEMU countries : totally free, not subjected to any restrictions under the Treaty of the Union

Cross-borders payments (between WAEMU countries and other countries) :

- Funds reception : Free, no restrictions

- Sending funds : regulated in function of the underlying transaction (whether it is for current transactions or investments)

I- FINANCIAL INTEGRATION AND PAYMENTS BETWEEN WAEMU COUNTRIES

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1.2. General rules on payments between WAEMU countries

Authorized institutions : Banks and authorized intermediaries ; Postal administrations ; Financial payment institutions.

I- FINANCIAL INTEGRATION AND PAYMENTS BETWEEN WAEMU COUNTRIES

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1.2. General rules on cross-border payments towards non WAEMU countries

Compliance with the external financial relations regulation and AML/FT standards, such as :

No restrictions on reception of funds from other countries ; Ceilings of remittances to countries outside the WAEMU without

proof : 500 000 FCFA ($1 000) per transfer ; Freedom of issuing payments to other countries for common

operations with a justification of the fund provenance (imports, remittances from migrants) ;

Verification of the identity of the senders and recipients of transfers (KYC) ;

Prior approval for investments transactions.

I- FINANCIAL INTEGRATION AND PAYMENTS BETWEEN WAEMU COUNTRIES

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2.1. Type of mobile payments in the WAEMU

Payment services by mobile phone with issuance of e-money (Prepaid / Electronic wallet)

Payment services by mobile phone without issuance of e-money and backed by a bank account (mobile banking)

II- TYPES OF MOBILE PAYMENTS IN THE WAEMU AND CROSS-BORDER ISSUES

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2.1. Types of mobile payments in the WAEMU

Payment services with mobile phone with the issuance of e-money : Two models of e-money issuance (9 authorized projects, only 4 are functioning)

Banking model (8/9) : a bank in partnership with a Mobile Network Operateur

Non banking model (1/9) : Electronic money issuer institutions with a specific license delivered by the Central bank

II- TYPES OF MOBILE PAYMENTS IN THE WAEMU AND CROSS-BORDER ISSUES

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2.1.Types of mobile payments in the WAEMU

Mobile phone payment services with domestic issuance of e-money (for the time being) : GIM-Mobile within WAEMU/ Orange Money : Côte d'Ivoire/Mali/Sénégal / Yoban'tel in Senegal only.

Reloading ; Withdrawals ; Money transfer within WAEMU ; Airtime purchase. Balance inquiry for prepaid account or electronic wallet.

II- TYPES OF MOBILE PAYMENTS IN THE WAEMU AND CROSS-BORDER ISSUES

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2.1. Types of payments services offered with mobile phones in the WAEMU

Mobile services attached to a bank account for WAEMU countries only (Mobile banking) : All WAEMU banks can offer these services through the GIM-UEMOA (common platform)

Withdrawals / Transfers / Airtime purchase ; Bank accounts balance inquiry ; Mini-statement : detail of last five transactions ; Checks : checks order and status inquiry, check opposition ; Cards : association du téléphone à une carte bancaire, statut, opposition ; Exchange rates inquiry.

II- TYPOLOGIE ET ENJEUX DES PAIEMENTS TRANSFRONTALIERS PAR TELEPHONE PORTABLE DANS L'UEMOA

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2.2. What are the stakes ?

Between WAEMU countries

No specific regulatory constraints, under the free movement of funds within the monetary Union ;

Compliance with the regulation of the fight against money laundering and terrorist financing

Operational modalities to be implemented in connection with MNOs in order to reach interoperability between technical platforms

II-TYPOLOGIE ET ENJEUX DES PAIEMENTS TRANSFRONTALIERS PAR TELEPHONE PORTABLE DANS L'UEMOA

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2.2. What are the stakes ?

Between WAEMU countries and others

Ensure that transfers are performed by authorized institutions (banks, postal administration, financial payment institutions)

Compliance with the governing rules of external financial relations, on the grounds of transfers (preserving the common pool of foreign exchange) ;

Compliance with the anti-money laundering and terrorist financing (maintaining the integrity and stability of the financial system of the Union).

II- TYPOLOGIE ET ENJEUX DES PAIEMENTS TRANSFRONTALIERS PAR TELEPHONE PORTABLE DANS L'UEMOA

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3.1. Current regulation in WAEMU countries

Regulation on external financial relations

Regulation on payment systems

AML (Anti Money Laundering)Directive

Directive on measures to promote banking and the use of cashless payments

Banking Law

Circular on the issuance of electronic money and electronic money issuers

III- CURRENT SITUATION AND PROSPECTS OF THE REGULATION OF CROSS-BORDER MOBILE PAYEMENTS

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3.1. Current status of the implementation of regulation in the WAEMU

Since 2006, no MNO has requested a license to issue e-money in spite of the regulation allowing non bank institutions to issue electronic money and financial services using modern means of payments such as mobile phones;

No precise procedures for the reception and the safeguarding of funds received in exchange for the issuance of electronic money

Technical security and organizational requirements to issue e-money not specified in the current regulation

III - CURRENT SITUATION AND PROSPECTS OF THE REGULATION OF CROSS-BORDER MOBILE PAYEMENTS

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3.2. Outlook of the regulation

Clarification of the principle of allowing banking and non banking institutions to promote the use of electronic money and to issue modern means of payment

Strengthening of the licensing process and supervision of mobile money issuers, in particular through the involvement of telecommunications' regulators

Clarification of the categories of actors entitled to distribute payment services by mobile phone and of the process of risks management

III- SITUATION AND PROSPECTS OF THE REGULATION OF CROSS-BORDER MOBILE PAYEMENTS

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3.2 Outlook of the regulation

Consideration of the WAEMU current regulation on external financial relations when looking into the propositions of mobile payments

Cross-reading of the external financial relations and the electronic money regulations

Definition of a supervision process for MNO offering mobile payments in connection with the Telecom Regulatory Authorities

III- SITUATION AND PROSPECTS OF THE REGULATION OF CROSS-BORDER MOBILE PAYEMENTS

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CONCLUSION

Financial services offered through mobile phone increasing Aspects to be considered in regulating cross-border mobile

phone payments and balancing the search for financial stability and financial inclusion :

Balancing mobile phone payments' requirement and risks control ; Procedures for reception of funds by non banks stakeholders ; Terms of distribution of financial services through mobile phone ; Interoperability of mobile payment regionally and internationally ; Consideration of external financial relations regulation in the

operational level : payments localization, implementation of ceilings in the e-money issuers information system

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CONCLUSION

Development of a scheme to supervise issuers and distributors in all organizational, prudential, operational and technical aspects, along with the following stakeholders :

Mobile Network Operator and and issuers of means of payments :

supervision of distributors ; Regulatory Authority for Telecommunication : definition and

verification of quality and safety compliance Banking supervisor : verification of compliance with prudential

standards ; Payments overseer : efficiency, technical and organizational security

of e-money ecosystem

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THANK YOU FOR YOUR ATTENTION