Dear *|TITLE:FNAME|*,
Amid some big news this week in the MVT world, we look at a place that has been at the root of the MVT explosion and what is currently happening there - the Philippines.
Welcome once again to a glimpse into Mondato's view on the convergence of financial, mobile and online services into international transfers of value: money, airtime, bill payments, more.
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See us in Johannesburg May 5-6 at the MMT09-Africa Conference
We will be there and will give a preview of some insights from the Globel MVT Index. The conference website is: www.mobile-money-transfer.com/africa
Correction
Apologies to Mr Karim Khoja, CEO of Roshan, whose first name was incorrectly listed in the last newsletter.
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In this issue:
New Regulatory Ruling in the Philippines
Balancing consumer protection and business incentives, the Philippines looks to continuing its trend of openness to mobile value transfer (MVT) with new rulings that will impact ongoing and future business models - a new layer of legal certainty for e-money in the country
The Philippines MVT Potential
Looking at some of the influences on MVT potential
Bring 'E' On: A New Layer of Legal Certainty for E-money in the Philippines
A central bank directive that sets the tone for the future of MMT in the Philippines and perhaps in future in other countries
The Philippines, a country that has been on the forefront of the mobile payment sector since its infancy, is once again making headlines, but this time in the regulatory sector. The Bangko Sentral ng Pilipinas (the “BSP”), the Philippines’ Central Bank, issued on 26 February 2009 an “e-money” circular that aims to formalize the issuance of “e-money” to protect consumers while promoting innovation in the sector.
The BSP wishes to “ensure that risks inherent in the e-money business are mitigated and that e-money institutions adhere to prescribed levels of safety, security and soundness.” Defined as “monetary value electronically stored in an instrument or device such as cash cards and e-wallets on mobile phones that may be acceptable as a means of payment by a third party or withdrawable in cash or a cash equivalent,” e-money will not be considered as a deposit, and thus its issue will not be regulated by the main banking regulations nor insured by the Philippine Deposit Insurance Corporation. Rather, special rules will be put in place for e-money issuers (EMIs) by the Monetary Board, including the requirement for EMIs to register with the BSP as money transfer agents if not already registered with the BSP under the main banking regulations, to maintain accurate and complete records of e-money transactions, to fully comply with anti-money laundering rules, to provide a transparent redress mechanism for customer complaints, and to adhere to monthly load limits on e-wallets of P100,000 per customer (equivalent to approximately US$2000).
What makes these rules especially innovative is that e-money issuance will be open to banks, non-bank financial institutions (such as investment funds) and certain non-financial institutions such as telecommunications operators if they register as money transfer agents and abide by certain requirements – minimum paid-up capital of P100 million, the creation of a subsidiary that is uniquely engaged in e-money activities, and minimum liquidity requirements equal to the amount of outstanding e-money issued. This new regime will in particular benefit Globe/G-Xchange Inc., who currently offers the G-Cash service, and Smart Communications Inc., with its “Smart Money/ Smart Padala offerings, both who have been until now working in a hazy regulatory environment through bilateral letters of agreement with BSP.
The Philippines government interestingly would seem to have heeded advice from the consultants at Bankable Frontier Associates (BFA), who, in a recent article in conjunction with a seminar at the GSMA 2009 World Mobile Congress in Barcelona, identified the Philippines as a country with a sufficiently open environment for the development of transformational banking models but with a less than optimal level of legal certainty given the lack of an overall regulatory framework.
According to BFA, the more a country is open to innovation and the more policy makers and regulators provide clarity to reduce the level of legal risk undertaken by private-sector operators, the more potential that country has to allow transformational branchless banking to emerge and develop successfully. Accordingly, in their eyes, South Africa exhibits both optimal openness and optimal levels of legal certainty, thus being prime ground for mobile money expansion, even though the role that non-banks can play in issuing e-money is limited by the Government’s current guidance note on e-money. Now, however, the Philippines has entered this domain more definitively and with the issue of its recent e-money circular, looks to aim for continued primacy on the mobile money frontiers and perhaps momentum to remain a high-scorer on the Global MVT Index as well.
The Philippines - A Few Thoughts on MVT Potential
What if you could send value on Facebook?
There are an estimated 900k Facebook users in the Philippines as of March 2009, compared to around 100k just over a year ago. That, combined with a rapidly growing addressable internet user market (doubling in three years to 14m+ users n 2008 out of a literacy-enabled population approaching 90m), may be a beckoning call to the mobile payments world to plug in. (This comes on the heels of an announcement that Zuora, a recurring and subscription payments platform, was launching its Facebook service geared to apps. But ultimately, perhaps this will extend to mobile payments?)
What do remittances to the Philippines do?
An ongoing debate among development folks and others interested in understanding remittance patterns, and that could also be relevant to those creating value transfer services, is just what recipients are doing with incoming funds. Do they use them primarily to supplement below or at subsistence level incomes? What if any portion goes towards investment in business or other future-oriented potential returns?
The situation clearly is difficult to measure and varies by a variety of factors such as socio-economics. But for one current understanding of remittance uses in the Philippines, we turn to Aubrey Tabuga’s assessment produced for the Philippines Institute for Development Studies. Tabuga states that, “Spending remittances on mere consumption has less contribution to local development. In fact, if remittance income induces people to consume more and produce or work less, it is preventing its potential to spur local development and may even produce dependency among migrant workers’ families thereby disrupting local production.”
Regardless on which side of the argument a study falls regarding whether remittances spent on basic or extended consumption do or do not indirectly drive overall progress, there is nevertheless evidence of remittances relationship to increased expenditure on human development (e.g., schooling), healthcare or housing and in some cases business or other savings/investments. In conditions of economic shock or downturn, it is posited that remittance spending on non-direct consumption items may actually increase.
In the m-payments space, looking to connecting remittance recipients with their likely spending channels could be timely and may make sense in the open-for-mobile environment in the country. If senders could not only make airtime top-up purchases for recipients, but also for example contribute to an education fund, allocate money towards capital expenditures of small or micro-businesses, the longer-term effects are still fairly clear. The relative openness of the Philippine Central Bank to mobile value transfer may be laying the groundwork for a plethora of economic advantages for the country in the future.
Looking for more on the Philippines and MVT?
The Mondato Philippines MVT Index Report is the perfect accompaniment to the Global MVT Index Overview to look in greater detail at this country’s MVT potential. Find it on our website at www.mondato.com
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