Branchless banking and mobile solutions in developing countries tend to be dominated by very few large (mostly telco) players, focus narrowly on the payment function of money that calls for a national footprint, elicit relatively infrequent usage from the majority of customers, and exhibit low levels of service innovation. There are few examples globally of what I call an intensive model: smaller players making the business economics work by driving much greater usage from a much smaller customer base.
Tackling financial inclusion — that is, making financial services truly a mass-market offering — will require more, and more diverse, players contributing variously their resources, inventiveness and goodwill. We need more players jumping in: to create more competitive tensions and force more service and business model differentiation, but also because in most markets the usual path to scale is through specialization.
In a recent paper, I argue that the prevailing regulatory “best practices” in branchless banking and mobile money focus on enabling participation in the market but are not sufficiently strong in fostering competition. There are two sides to this.
First, regulators can reduce the cost of entry and give much more flexibility for new entrants wishing to contest the market, while still entirely protecting the integrity and safety of the system. There are usually strong barriers to entry embedded in the following types of regulations:
Second, there is a growing need for policymakers to ensure there is a level playing field across all players, whether they are large or small, whether they have one type of license or another, and whether they are banks, telcos or any other type of players. The following issues need to be placed more squarely in the center of the emerging regulatory framework for digital financial services:
Source : blogs.worldbank.org