Tuesday, April 06, 2010

A coordinated regulatory dispensation between telecommunications and banking

Financial and telecommunication regulators are very different. Both in their objective as well as how they go about doing it. Financial regulators are in essence concerned about the systemic risks associated with a complex money system. Their approach is to ensure that all players conform to certain rules so as to ensure that the financial system do not collapse. They develop and enforce detailed rules to ensure that they can monitor and protect the inter-connected money-world.

Telecommunication regulators, on the other hand, are concerned about the fair allocation and usage of scarce resources. It is a fact that we only have so much spectrum or sixteen digit numbers available. The challenge is to ensure that all players in the telecommunication system get access to this limited supply. They are (of course) also worried about the integrity of the telecommunication system, but it is my contention that this is not their primary driver.

I have always been of the opinion that mobile banking and payment solutions should be governed by the financial regulator because mobile banking have the potential (if not properly managed) to destabilise the financial system and the impact of this will just be very bad for all. Much of the regulatory discourse has been to discuss financial regulation topics: KYC, money supply etc. However, the industry should also develop mechanisms to ensure fair access to limited resources. One could for instance argue that MNO's should allow any bank access to their SIM cards (as it is impossible for banks to distribute their own), and this is where the Telecommunication regulator do have a role to play.

This is why I was impressed with the recent announcement out of Pakistan (Read here), where both regulators announced that they would work together to develop a new generation of framework for mobile banking. Is this a first in the world?


Appachoo said...

Hi, I am currently doing a research on mbanking and in particular the customer preferences for mbanking application. Do you have any views or any data about the customers who use mbanking applications?

Anonymous said...

I think there's another difference, which is that telecoms regulators like to see competition, and are used to operating in a competitive environment where a player may fail.