Monday, August 24, 2009

Mobile banking regulations should be tiered more

This is so obvious that I am hesitant to blog about it: Regulatory guidelines for mobile banking should be tiered - it should allow for different layers of compliance. As far as I can gather (and I have read widely), it is only in South Africa where this is explicitly stated (with the E17 exclusion). As always, I would be happy to be corrected.

Different layers of compliance should be the basis (the foundation) of thinking about banking regulations applied to the marginally banked. It stands to reason that it does not make sense to apply the same rigour to an account for low value simple transactions, compared to a high value, sophisticated bank account. This approach would give comfort to all the participants in the banking industry as it would be ideal to manage risk.

We at Fundamo have always postulated and worked towards a four layered tier for compliance. The lowest layer or tier should provide for very little KYC (or client identification), but should be very strict regarding limits and functionality. This lowest tier becomes the entry point into banking for subscribers without a strong banking relationship. This provides for rudimentary services, but does not compromise the integrity of the system. With higher levels of compliance, more rigour is added to the registration and client management process, but at the same time, more functions and higher limits are associated with the account.

Tiers are the only way to think about compliance.

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