M-PESA DEVELOPMENT, OPERATIONAL RISK MANAGEMENT AND CONSUMER PROTECTION By Mrs. Anne Mariga Head National Payments System, Central Bank of Kenya Innovation on Retail Payment System: Issues, Policies & Challenges Sheraton Mustika Resort & Spa, Yogyakarta November 13-17, 2017
Outline 1. Payments System Structure 2. M-Pesa Evolution to a Complex and Dynamic Ecosystem 3. Mobile Payments Landscape – 10 years of Transformation 4. M-Pesa Key Critical Success Factors, Risks & Mitigation Measures and Consumer Protection 5. Key Outcomes & Lessons Learnt 1
Payment Systems Structure in Kenya Infrastructure In Kenya, the payment system architecture is subdivided into 2 broad areas: 1. Large value payment system – RTGS- KEPSS (Kenya Electronic Payment and Settlement System). 2. Retail value payment systems – ACH (Automated Clearing House). – Payment Card Infrastructure. – Mobile Payment Platform. Regulatory Environment » Central Bank of Kenya Act under Section 4A(1)(d) » National Payments System Act, 2011 » National Payments System Regulations 2014 2
Payment systems Structure KEPSS moves highest value of transactions Mobile Money moves the highest average of Ksh. 105 Billion (USD 1.01 number of transactions with an Billion) daily with a volume of 15, 000 average of 4.8 Million per day transactions 3
M-PESA MOBILE MONEY TRANSFER SERVICE 4
M-Pesa Evolution KCB M- Pesa Short Term launched. Paybill A loan Allowing for product fundraising Obtained Expansion Of Functionality purposes. Moneygram a letter of Partnership involving partnerships Weddings, no • Interswitch-ATM Funerals etc . enabling objection E-Citizen consumers withdrawals to offer for all • Western Union-In in over 90 Mobile government bound transactions countries to Financial payments M-AKIBA send money from UK then later Services Allows Mshwari is from 45 countries directly to launched in customers to M-PESA • M-Ticketing-purchase buy partnership of event tickets customers . with government Officially • Dividend pay-out M-Pesa Commercia securities launched • Retirement savings and l Bank of through M- M-Pesa to scheme Lipa Na M- Vodacom Africa Pesa the market Pesa allowing Tanzania as a Money consumers to Piloted as a partner Transfer Microfinance pay for goods allowing Service and services Service customers from funded by to send merchants Vodacom and through M- receive Pesa money from Tanzania 2004-2006 2007 2008 - 2011 2012 2013-2014 2015 2016-2017
A complex and Dynamic Ecosystem Consumer Credit – Information – Mshwari, credit terms, KCB Mpesa prices MFS Insurance & Pension – Micro- Savings and Insurance and Investments – M- Mbao Pension Akiba, equities trading 6
Mobile Payments Landscape – 10 years of Transformation Area December 2007 June 2017 Mobile Phone 11.34 million 40.26 million Subscribers Penetration rate of 30.5 percent Penetration rate of 88.7 percent Mobile Money 1.4 million 28.07 million Subscriptions 12.35 percent 69.72 percent 1.3 million Number of Transactions 480.59 million Value of Transactions Ksh. 3.8 billion (USD 37 mn) Ksh. 1.22 trillion (USD 12.2 bn) Active agents 1,582 mobile money agents 180,657 mobile money agents Source: June 2017 CAK Report and CCK Report December 2007-June 2017 • Six (6) mobile money transfer and mobile money commerce operators provided these services at June 2017 – Safaricom ( Mpesa ), Airtel ( Airtel Mone y), Telkom ( T- Kash ), Finserve Africa Ltd ( Equitel ), Mobikash Africa Ltd ( Mobikash ) and Mobile Pay Ltd ( Tangaza ). 7
M-Pesa Critical Success Factors 1. Efficiency/ Convenience 2. Safety, 3. Dominant Market Positioning 4. Enabling regulatory environment 5. Effective partnerships – with regulator, other service providers 6. Private sector players have also invested substantially – Mshwari, KCB Mpesa etc 8
Risk And Mitigation Measures No. Risk Mitigating Measure 1. • Blurred regulatory lines and Recreating regulatory oversight and retooling borders supervisory staff to understand new emergent risks and players 2. • Data Privacy breaches Ensure data protection mechanisms and frameworks are in place. 3. Threat to customer loyalty • Ensure proper transparency and disclosure & and trust Consumer Protection 4. Increasing cybercrime and • CBK has issued a guidance note to institutions cyber-attack threats on cyber security. 5. Emerging ICT Risks due to • NPS Regulations 2014 guidance on Outsourcing new/emerging technologies by PSPs (third party providers) 6. • Money Laundering and Integrated Population Registration System Financing of Terrorism (IPRS) threats • M-Pesa transaction daily/monthly limits • POCAMLA Laws - FRC 10
Consumer Protection Mobile Money Transfer Platforms/Operators are required to; Resolve all complaints within thirty days of being filed within laid out procedures in the NPS Regulations 2014. Disclose of all fees to the sender and to the recipient. Information on any system upgrades and accompanying downtime Enable refund and cancellation of transactions in case of error. (Refunds only possible if money not cashed out.) 11
KEY OUTCOME 1: More Financial Services Access Overall access to financial services: 75.3% of Kenyans formally included in 2016 from 26.7% in 2006. Working towards bringing the 25% on board! Source: 2016 FinAccess Household Survey 12
KEY OUTCOME 2: low cost to access to Financial Services Mobile Phone Financial Services Distance to the nearest mobile financial Touch Points in Kenya services provider – proxy for cost More people spending less to access 3km financial services in 2015 due to 5km Mobile Phones Usage compared to 10km 2013 Source: Insight to Impact Analysis of FinAccess Geospatial Mapping Survey 2015 13
Low cost of financial services access Cost to Population to the nearest Financial Service Access Point: 2013 Vs. 2016 (%) 100 89,9 90 82,1 80 70 PERCENTAGE 60 50 40 30 20 11,1 6.2 5.1 4,3 10 0,6 0,7 0 Less than KSh 50 KSh 51-100 Between KSh 101 Above KSh 500 and KSh 500 2013 2016 • About 94% of Kenyans pay less than USD 1.00 to Access Financial Services 14
Reducing Gender Gap 79,7 71,2 71,2 80 62,8 Formal Financial Inclusion Rate by 2016: 75.3%>70% target 70 60 48,1 50 % FORMAL INCLUSION 40 33,7 33,2 30 20,5 20 10 0 Male Female Male Female Male Female Male Female 2006 2009 2013 2016 Source: 2016 FinAccess Household Survey Kenya surpassed the set 70% target of inclusion in the formal financial services by 2018 in for both men and women as envisaged in the country’s medium term development blue print – Vision 2030 15
Benefits to less Educated population USAGE OF FORMAL FINANCIAL SERVICES BY EDUCATION 2009 -2016 (%) 97,9 97,4 89,8 88,6 83,1 73,1 63,7 59,7 37,3 30,0 27,0 12,0 2009 2013 2016 2009 2013 2016 2009 2013 2016 2009 2013 2016 Primary Secondary No Formal Tertiary Education Education Education Education The MFS have greatly enabled the Usage of Formal Financial Services Across all Education Levels…benefiting most those with No Formal Education 16
The Role of CBK in Policy Development & Oversight of MFS Stability Access Efficiency Legal, Regulatory and Competition Policy Enabling environment: MOBILE PAYMENTS AML-CFT Compliance Promote Innovation 12
Lessons Learnt • Regulatory objectives remain the same; enhance market confidence and safeguard stability of the financial system. However, we must balance stability and inclusion goals to support innovation. • As regulators we should work alongside innovators so as to understand and facilitate these innovations • Regulatory frameworks should be robust and balanced, dynamic across time and space, to support the provision of sustainable digital financial services to users and to guarantee the stability of the overall financial system. 17
Lessons Learnt Cont …. • Continuous application of the ‘‘Test and learn’’ model to keep up with the rapidly changing environment to ensure: – Establishment of resilient and viable business models and ecosystems – Enhanced corporate governance practices – Improved transparency – Management of emerging technology and emerging inherent risks. • Consumer protection in the face of innovations must be given attention deservedly 18
Q&A THANK YOU 19
Recommend
More recommend
