The Regulation of Mobile Money (eBook)

Sunduzwayo Madise  recently finished his PhD at the University of Warwick, UK, and holds BSc and LLB degrees from the University of Malaŵi and an LLM from the University of the Western Cape, South Africa. He also holds a Post Graduate Degree in Higher Education from Warwick. He is currently the Dean of the Faculty of Law, University of Malaŵi. Sundu is also a Fellow of the Higher Education Academy, UK (now Advance HE). A former engineer, his research interests lie in the intersection of law, technology and finance. 

Foreword 7
Preface 9
Contents 10
About the Author 13
List of Figures 18
List of Tables 20
Chapter 1 Introduction 21
1.1 Chapter Outline 30
References 32
Chapter 2 Introduction to Money 35
2.1 Introduction 35
2.2 Origins and Nature of Money 37
2.2.1 Evolution of Central Banks 42
2.2.2 From the Gold Standard to Fiat Money 48
2.2.3 Money as a Creation of the Marketplace? 51
2.2.4 Standards and Qualities of Money 52
2.2.4.1 Utility and Value 52
2.2.4.2 Portability 52
2.2.4.3 Indestructibility 53
2.2.4.4 Homogeneity 53
2.2.4.5 Divisibility 53
2.2.4.6 Stability of Value 53
2.2.4.7 Tangibility 54
2.2.4.8 Cognizability 54
2.3 Money the Oil That Drives the Financial System 57
2.3.1 A Brief Overview of Mala?i’s Financial Sector 58
2.3.2 Structure of Mala?i’s Central Bank 59
2.4 The Nature of Payment Systems 61
2.5 The Mala?i Payment System 66
2.5.1 Development of the National Payment System 67
2.6 Emerging Forms of Money 69
2.6.1 Electronic Money and Virtual Currencies 70
2.6.1.1 Cryptocurrency 71
2.6.2 Cash and Digital Currencies Contrasted 74
2.7 Conclusion 75
References 76
Chapter 3 Developments in Mobile Technology and the Emergence of Mobile Money 82
3.1 Introduction 82
3.2 Development of the Telephone 84
3.3 Development of the Mobile Phone 88
3.4 A New Service Is Born: Mobile Money 90
3.4.1 The Remittance Dilemma 91
3.4.1.1 Road Network 92
3.4.1.2 Inaccessibility of Banking Services 92
3.4.1.3 Expensive Remittance Services 94
3.4.1.4 Unreliable but Relatively Expensive Postal Services 94
3.4.1.5 Unreliable Friends and Relatives 95
3.4.2 The “Revolutionary Solution”: Mobile Money Remittance 95
3.4.2.1 Analysis of Mobile Money Using the Framework for Identifying Money 100
3.4.3 Airtime 102
3.4.3.1 Analysis of Airtime Using the Framework for Identifying Money 104
3.4.4 Analysing Mobile Money and Airtime Using the Money Framework 108
3.5 Mobile Money in Operation 110
3.6 Mobile Money and the National Payment System 114
3.6.1 Role of the Regulator: Authorising Mobile Money Operations 117
3.6.2 The Mobile Money Ecosystem 119
3.6.3 Mobile Money Not Yet Systemically Important 121
3.7 Conclusion 123
References 124
Chapter 4 Different Types of Regulation 130
4.1 Introduction 130
4.1.1 Public Interest Theory 133
4.1.2 Capture Theory 134
4.2 The Regulatory Spectrum 136
4.2.1 Command and Control 138
4.2.2 Principles-Based Regulation 140
4.2.3 Self-Regulation 144
4.2.4 Responsive Regulation 146
4.2.5 Reflexive Regulation 148
4.3 Analysis of the Regulatory Approaches 153
4.4 Regulatory Space 159
4.5 Conclusion 161
References 162
Chapter 5 Regulating Money 167
5.1 Introduction 167
5.1.1 Regulating the Financial Sector 169
5.1.2 The Regulatory Issues Involving the Financial Services 177
5.1.2.1 Genuineness of Money and Stability Value 178
5.1.2.2 Maintaining Financial Stability 178
5.1.2.3 Consumer Protection 180
5.1.3 The Regulatory Issues Involving Globalised Money 181
5.2 Regulatory Approaches to Mobile Money 183
5.2.1 Business Conduct Regulation 184
5.2.2 Prudential Regulation 185
5.3 Regulatory Issues Around Mobile Money 186
5.3.1 Genuineness of Money and Stability Value 191
5.3.2 Maintaining Financial Stability and Integrity 192
5.3.2.1 Assessing Risk 193
5.3.2.2 Balancing the Risk 199
5.3.3 Consumer Protection 202
5.3.4 Operational Risk 203
5.3.5 Fraud 204
5.3.6 Data Security and Integrity 204
5.3.7 Resolution Risk 206
5.3.8 Investment Risk 207
5.3.9 Systemic Risk 208
5.4 Conclusion 210
References 211
Chapter 6 The Concept of Financial Inclusion 219
6.1 Introduction 219
6.2 Financial Inclusion in the Mala?ian Context 221
6.3 Village Banks 232
6.4 Mobile Money: A Solution to Needs of the Rural People? 239
6.5 Conclusion 242
References 243
Chapter 7 Comparative Study of Mobile Money in Kenya and Mala?i 246
7.1 Introduction 246
7.2 M-Pesa Leads the Way 247
7.3 Why M-Pesa Succeeded in Kenya 248
7.3.1 A Good Agent Network 252
7.3.1.1 The Dual System 253
7.3.2 Strong Brand, Clear Message and Optimised Pricing 255
7.4 Why M-Pesa Did Not Do as Well in Tanzania 256
7.4.1 Economic, Political and Social Factors 257
7.4.2 Other Local Factors 259
7.5 In the Footsteps of M-Pesa: Airtel Money and Mpamba 261
7.5.1 Airtel Money 262
7.5.2 Mpamba 267
7.5.3 Airtel Money and Mpamba Tariffs Compared 269
7.6 Telco-Led Versus Banking-Led Model 274
7.7 Conclusion 278
References 279
Chapter 8 Mala?i’s Existing Regulatory Framework of Mobile Money 285
8.1 Introduction 285
8.2 Regulatory Framework 286
8.2.1 Financial Regulatory Structure 286
8.2.1.1 Payment Systems Act 2016 288
8.2.1.2 The Electronic Transactions and Cybersecurity Act 2016 290
8.2.1.3 Guidelines for Mobile Payment Systems 2011 293
8.2.2 Communication Regulation Structure 298
8.2.3 Consumer Protection 302
8.2.4 Fair-Trading 304
8.3 Regulatory Issues Posed by the Infrastructure 307
8.3.1 Incoherent Regulatory Framework 308
8.3.2 Technical Issues 309
8.3.3 Regulatory Space Contestation 311
8.4 Overview of the Mobile Money Regulatory Framework in Kenya 312
8.4.1 The Communications Sector 313
8.4.2 The Financial Sector 313
8.4.3 E-Money Regulation 2013 314
8.5 Conclusion 316
References 316
Chapter 9 An Alternative Regulatory Framework for Mobile Money 321
9.1 Introduction 321
9.2 The Regulatory Arena 323
9.2.1 Mobile Network Operators and Mobile Money Issuers 324
9.2.2 Banks 325
9.2.3 Regulators 325
9.2.4 Consumers 326
9.2.5 The Legal Structure 327
9.2.6 The Executive and the Political Establishment 328
9.3 Towards Regulatory Homogeneity 329
9.3.1 An Independent Agency? 330
9.3.1.1 Independent Agency 330
9.3.1.2 The Argument for an Independent Agency 338
9.3.2 Streamlining the Existing Regulators? 341
9.3.2.1 Reserve Bank of Mala?i 341
9.3.2.2 Mala?i Communications Regulatory Authority (MACRA) 343
9.3.2.3 Financial Intelligence Authority (FIA) 344
9.3.2.4 Consumer Protection Council 345
9.3.2.5 Competition and Fair Trading Commission 347
9.3.3 Pros and Cons of the Two Options 348
9.3.3.1 Problems with Setting Up an Agency 348
9.3.3.2 Advantages of an Agency 350
9.3.3.3 Problems with Maintaining a Streamlined Status Quo 352
9.3.3.4 Advantages of Streamlining the Status Quo 352
9.3.3.5 Preferable Option: An Agency Within the Central Bank 354
9.4 Conclusion 357
References 358
Chapter 10 Conclusions 364
10.1 Introduction 364
10.2 Challenges of Setting Up an Autonomous Agency 366
10.3 Post-financial Inclusion Regulatory Issues 368
10.3.1 Network and Service Interoperability 368
10.3.2 Allowing Competition 370
10.3.3 Collaboration 371
10.3.4 Paying Interest on Mobile Money Accounts? 374
10.3.5 Scaling Up 375
10.3.6 Evolution of Telecommunication Operators 377
10.3.7 Government, Institutional and Bill Payments 377
10.3.8 Readiness of Individual Districts to the Service 379
10.3.9 Insurance Protection 380
10.3.10 Continuous Monitoring of the Regulatory Cycle 383
10.4 Conclusion 384
References 386
Bibliography 391
Index 428