2.2 BENEFICIOS A LOS EMPLEADOS
2.2.5 CASO PRÁCTICO DE BENEFICIOS A CORTO PLAZO
The mobile payments system in Kenya uses an MNO-led model. Mobile Network Operator Led Models requires that the MNO converts its wireless network messaging functionality into a SIM141 based platform in order to provide mobile payments as value
139 Ibid. 140 Ibid.
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added services (VAS) under its telecommunications licence.142 This SIM card enables
subscribers of Safaricom to either transfer their funds or make payments from person to person, which are settled via MNO’s established agent network.143
The transactions, both transfers and payments, are effected completely within the MNO’s network using its platform, thus not requiring the subscriber to have a bank account.144 Safaricom, and other MNOs,145 have adopted this model as a means of
bypassing the regulatory requirements for banking under the Banking Act of 1969,146 the
CBK Prudential Guidelines and other regulations.147 The funds paid in by the payer,
which are also said to be in transit,148 but which have not been withdrawn by the recipient,
are referred to in principle as being in deposit in a separate ‘trust account’ with several banks and are hence not deposits in the context of banking business as defined in the Central Bank Act Cap 491 1966.149
MNOs make use of banking privileges, by way of the trust accounts. This requirement is part of the authorisation and licensing conditions spelt out by the CBK.150
Through short messaging services (SMS) technology, M-Pesa lets users make four basic types of transactions: person to person transfers; person to bank transfers; cash deposits
142 Section 2 of the Kenya Communications Regulations 2001 defines VAS as such services as may be available over a telecommunications system in addition to voice telephony service. Under the Unified Licensing Framework provision VAS fall under the telecommunications licence.
143 Electronic money is an innovation of Safaricom, and is not regulated by either the CBK or the CCK. Parliament is yet to enact a substantive electronic transactions law. Section 83(c) of the Kenya Information and Communications Act, however, gives the CCK the regulatory jurisdiction over electronic transactions. 144 USAID and Kenya School of Monetary Studies (n 104).
145 Such as Telkom Kenya and Essar Telecom. 146 This regulatory gap shall be explored in Chapter 4.
147 Consultative Group to Assist the Poor, ‘Notes on Regulation of Branchless Banking in Kenya’ (2007) <http://www.cgap.org/p/site/c/template.rc/1.26.1480/> accessed 3 September 2014.
148 Jeremy Okonjo, Nature and Impact of Mobile Financial Services on the Telecoms Sector in Kenya’ (2014) <http://www.slideshare.net/JeremmyOkonjo/1-chapter-one-nature-and-impact-of-mobile- financial-services-on-the-telecoms-sector-in-kenya> accessed 3 September 2014
149 Ibid. As part of its risk management regulations, the CBK has required mobile network operators to hold their trust accounts in more than one bank. This came hot on the heels of the Kenyan banking sector expressing reservations that M-Pesa ‘could not meet the risk management requirements associated with a large payment system network; and that it was dangerous for any institution to operate on that scale outside of regulation.’
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and withdrawals from agents who act as the designated outlets;151 they also can perform
loan receipts or repayments. Customers have to register using an official form of identification.152 Cash deposits are converted into a commodity called e-float153 that is
denominated in the same units as the domestic currency.
The MNO only effects its subscriber’s payment instructions through its platform, but does not perform the credit assessment that banks usually do.154 This consequently
highlights the contrasts to the bank led models where cash exchanged for electronic value is not repaid but rather remains with the customer. Agents must always have a float in a bank account so that they may offer the equivalent through M-Pesa Services and the lack of such float may precipitate liquidity risk as opposed to a credit risk to either the customer or the MNO.155 It is unclear as to whether the customer funds in the trust
account attract interest.156 Although this pooled trust account cannot be accessed by the
MNO, practice suggests that all interest earned on the pooled funds are used by the MNOs for charitable causes. This shows that there is no intermediation, a key part of the ‘deposit taking’ definition.157 It is also unclear as to whether the customer deposits
received by the MNO earn interest.
This uncertainty does not clarify whether the e-value created is or is not in fact a deposit.158 Whether mobile payments constitute ‘banking business’ as defined in Section
151 These outlets are discussed in Chapter 4 as being the point of sale for agents.
152 This has proven to be an efficient way of obtaining customer details and enhancing KYC requirements. It has also contributed to M-Pesa’s success in Kenya, and no other country requires its citizens to have national identity cards.
153 See, William Jack, Tavneet Suri and Mit Sloan, 'The Economics of M-PESA' (unpublished paper 2010). On the definition of e-float, where it has been defined as stored value measured in the same unit as money. 154 This causes concerns about integrity risks which shall be discussed in Chapter 3. 3.4.1.2. Integrity Risk pg, 102
155 Alliance for Financial Inclusion (n 5).
156 This presents a regulatory challenge as this clarification provides one of the keys to identifying whether deposit-taking by the MNOs occurs.
157 Ibid at 153. 158 Ibid.
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2 of the Banking Act 2009,159 which consequently suggests that they do not require or
enjoy the scope of regulatory oversight expected for deposits that are used in banking.160
While the bank in which the pooled funds are held, does not have prudential oversight or responsibility or involvement in the payments through the MNO system, this is set against to the convenience of mobile payments, where there are no minimum balances or services charges. This has heralded the arrival of mobile payments in the financial inclusion agenda, and the shift from informal financial systems to formally include cash in the formal financial system in this mostly cash dominant society.161
MNOs increased the competition for banks in Kenya through the introduction of mobile payments especially by MNOs.162 This has resulted in the innovative integration
of banking and transfers through mobile payments services which has greatly increased the access and services offered by banks to their customers as well as MNOs to their subscribers. This integration, led by the MNO model, where payments are via Safaricom,
also led to the development of other products, such as M-Kopa and M-Shwari,163 and
insurance.164 These hybrid models were in conjunction with regulated financial
159 Under Section 2 of the Banking Act 2010 (Cap 488), banking business means accepting from the public money on deposit, or a current account, or employing this money by lending, investment or in any other manner for the account and at the risk of the person so employing the money. Hence, banks are from the outset licensed to provide various financial deposits and transfer services, under different technologies. See United Dominions Trust v Kirkwood (1966) 1 All ER 968.
160 See generally, the CBK Prudential Guidelines on capital adequacy, liquidity management, proceeds of crime and money laundering, consumer protection, etc., issued under Section 33(4) of the Banking Act 2010.
161 James Bilodeaeau, William Hoffman and Sjoerd Nikkelen, ‘Findings from the Mobile Financial Services Development Report’ in the Mobile Financial Services Development Report (World Economic Forum, 2011).
162 Institute of Economic Affairs, ‘The State of Competition Report: Mobile Money Transfer, Agricultural Bulk Storage and Milling, and the Media Sectors in Kenya’ (IEA Research Paper Series No 1/2011) <http://www.ieakenya.or.ke/publications/doc_download/227-the-state-of-competition-report-mobile- money-transfer-agricultural-bulk-storage-and-milling-and-the-media-sectors-in-kenya> accessed 3 September 2014. Both MNOs and banks have their limitations. While MNOs cannot undertake banking business, banks in contrast do not have any outreach costs to rural areas, compelling MNOs and banks to cooperate to form MNO–bank models.
163 M-Shwari on the other hand allows customers to save and borrow money through their mobile phones while at the same time earning interest on the money saved. Safaricom partnered with M-KOPA Kenya Ltd in October 2012 to launch a credit sale, pay-as-you-go solar lighting solution.
164 Christine Zhenwei and others, ‘Mobile Applications for Agriculture and Rural Development’ (World Bank, ICT Sector Unit 2011). Since Kenya is largely dependent on agro finance, mobile applications for agriculture and rural development have increased access to finance and insurance products in rural areas.
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institutions165 pooling strengths from both industries– the financial platform of the banks
on one hand and the technological platform of the telecoms industry on the other – and hence M-Pesa thrived within the MNO-led model as opposed to other bank-led models.166
These hybrid models have resulted in increased transactions where data from the CBK shows that Kshs. 1.117 trillion was transacted through mobile payments as a result of the integration with commercial banks; and by 2013, the increase was positively seen as a result of consumers transferring their funds through their mobile phones.167 The
MNO-led models and mobile financial services that have since launched following the successful premier of M-Pesa, include M-Kesho, Mobicash, Yu-cash Orange Telkom’s
Orange money, Pesa-Pap Essar Telecom’s, Elma, and Pesa-Connect.168