Mobile Financial Services (MFS) Business and Regulations: Evolution in South Asian Markets

Abstract

Globally 245 mobile money services are active in 84 countries, 52 markets have two or more Mobile Financial Services (MFS) services and it’s now available in most developing and emerging markets. The industry continue to grow since its inception in 2001 and the number of active mobile money accounts stands over 60 million active accounts globally (end of June'13). A total of 13 mobile money services have now reached scale, with over 1 million active users. 123 mobile insurance, credit and savings are live with an indication of deepening MFS trend (GSMA, 2014). These facts and numbers are not mere facts but each of those marks leap toward financial inclusion specially in developing markets (CGAP, 2014). Like other developing countries, South Asian region have taken the agenda of financial inclusion very seriously and the respective markets and regulators are putting their efforts to leave a mark in the lives of millions of financially excluded population. Four years back, in a paper titled 'mobile banking: overview of regulatory frameworks in emerging markets', I tried to go through and compare the very nascent MFS regulatory regimes of selected South Asian countries and that of some MFS pioneers. In mid 2014, it gives me immense pleasure to observe that already two (Pakistan and Bangladesh) of the discussed four markets in the region have really picked up and joined the race of leading MFS markets. The journey of these four markets has come up with some new learning. These learning give us the opportunity to instate more forward leaning, consumer friendly regulatory framework that will pave the way to a more financially inclusive South Asia. This paper in first part analyses current market situations, the concerns arising from existing setup, the regulatory moves that are under way to address the current challenges and complementary regulatory developments of selected markets (Bangladesh, India, Pakistan, Sri Lanka). In the latter part, the paper attempts to look into future trend of MFS, compare learning from these markets with that of global pioneer of mobile money, Kenya. The key questions this paper aims to answer are: -What are the existing MFS Business models in Emerging Markets of South Asia (Bangladesh, India, Pakistan, Sri Lanka)? -What are the current market scenario (market size, competitor, penetration, uptake situation)? -What are the challenges in these markets? -What regulatory and policy evolution took place in these markets? -What constitutes a futuristic and consumer friendly regulatory approach? The answers to the above questions might help to expedite MFS adoption in South Asia further.