Mobile Money: The Opportunity for India

Abstract

The full potential of digital financial services in India has not yet been realised. Millions of people still lack a viable alternative to the cash economy and informal financial services, and mobile money represents a great opportunity for the country. For mobile network operators (MNOs), launching and scaling services for the unbanked has proved very challenging because of several regulatory barriers. This paper provides evidence of the benefits and the business case for mobile money for Indian MNOs, and proposes a set of regulatory reforms that would clear the way for viable and sustainable mobile money deployments, driving financial inclusion, improving financial stability and integrity, protecting financial consumers, and guarding the financial system against the risks of the widespread use of cash. The key tenets of enabling mobile money regulation are: a) allowing a business model that safeguards customer money stored in the system and preserves financial stability; b) proportional (risk-based) anti-money laundering and combating the financing of terrorism (AML/CFT) regulations and promoting tiered know-your-customer (KYC) procedures; and c) putting cost-effective regulatory solutions in place to set up and manage distribution networks and accelerate customer adoption. This paper was formally submitted to the Reserve Bank of India (RBI) by the Mobile Money Association of India (MMAI) and the GSMA with the aim to outline reforms that would enable innovation in mobile financial services and build a stable, inclusive, secure, and efficient financial sector.