REGULATING MOBILE MONEY BEING ISSUED BY THE TELE COMMUNICATION COMPANIES : WHO IS WATCHING?

Introduction

My first concern on monitoring the telecommunication industry with respect to E-money development by way of Mobile-Money was in my article in the Ghanaian Times (November 2009) captioned “Regulating E-Money: Watch and Monitor the Telecommunication and IT Companies”. This article is available on my blogspot: kofianokye.blogspot.com published June 2011 and if you have time I recommend you kindly take a quick glance at it for a different perspective that may enrich your appreciation of my concern.

I am tempted to re-echo the issue of regulation after reading in the BF&T a news extra captioned “Airtel Launches online shopping portal” indicating that Airtel has recently launched Airtel Money Market, an e-commerce website and online shopping platform that allows its customers to use their mobile money (m-money) wallets to purchase goods and services from participating merchants. For this particular platform if what the consumer saw on the website is not what was physically delivered where is the redress and who regulates this but unfortunately this is not the purpose of this article.

I would also not go into what e-money is, the variants and some regulatory tools since my earlier article as on my blogspot tried to give a flavor to it but this time I intend to concentrate on why mobile money needs to be closely regulated since it seems the Telecommunication Companies (Telcos) are gradually testing the “waters” and would be moving into sophiscated mobile money models for which mangers of the economy need to be concerned.

These e-developments are “cool” and necessary for the development of the Ghanaian     

”e-conomy” and the advantages that IT guys will enumerate are mouth watering and I believe in them. The other side of the coin which I do not expect the IT guys to be worried about is the risk issues which off course should be the headache of the managers of the economy. A situation of  “catch me if you understand what I am doing and have the tools”.

Are there possibilities for Money Laundering, Non-cash backed Unauthorised M-Money creation, Double Spending, Deferred cash Payments, Increase in money supply, loss of value due to system errors? If yes then who should be concerned. Is it the Central Bank, the National Communication Authority (NCA) , the Ministry of Communication or National Security?

In my opinion, all should be concerned and closely monitor aspects that impact on their regulatory space and this article is intended to raise some of these possibilities to trigger some thinking to those concerned since to quote the economist  David Saxton "Digital cash is a threat to every government on this planet who wants to manage his own currency"

Non Cash Backed M-Money  

Basically the transfer of m-money works like this. You give physical cash to the issuer (Telco) and they credit your wallet on your phone with the m-money. Now is it possible that m-money can be issued without a corresponding equivalent physical cash being exchanged for it? If the answer is yes, what has the Telco done? and depending on how this is done it may fall into crime, money laundering and/or lending activities. Since the impact of non cash backed issuance of m-money with respect to crime, money laundering and/or lending activities can be phenomenal on our economy I think I would have to give it some special awareness.

M-Money, Crime and Money Laundering 

If the Telco issues m-money without cash backing. What has it done? Is it a fraud/crime? Is it possible for someone with proceeds of criminal activities to pay more cash to the Telco for less m-money? If that is done is money being laundered? If proceeds from criminal activities are used to purchase M-money even for full value and held in the mobile wallet with the cash being used by the Telco, whilst the consumer still has the m-money on the phone. What has taken place or happened? This may be done either with full knowledge of the Telco or by some fraudulent Telco staff. Now in such a situation what institution should be concerned?

M-Money and Lending Activities 

Can I go to the Telco without cash but go into a contract that they issue me with m-money worth GHS2,000 to be repaid at a future date with interest which I use to purchase goods on for example the Airtel e-commerce site. What has happened? What if the Telco alternatively issues the GHS1,700 m-money but I have to pay GHS2,000 at the future date?  Is the Telco becoming a lending institution? Is money supply being increased by way of money creation? Is it possible it will affect monetary policy? If yes, who should be regulating and checking this possibility?

M-Money and Double Spending

I pay GHS 1,000 cash to the Telco and I receive m-money worth GHS1,000 on my phone’s m-wallet. Fair deal I guess. Now the Telco uses the cash to pay a supplier and I use my m-money to buy goods on the e-commerce website. What has happened? Has spending money been doubled? Traditionally where would the Telco go to get an overdraft of GHS1,000 to pay the supplier? Is it the bank? Now does the Telco need the bank with such cost free funds? Has money supply increased?  Does this lead to inflation? Should certain institutions be concerned?    

M-Money and Loss of Value

Is it possible a technological error could wipe off the value of the m-wallets of consumers? Well may be not but Human Beings even die so is it just possible? If it does happen who do consumers turn to? The Bank of Ghana or the Telcos? What compensation scheme is in place? Would such an occurrence have contagion risk on the financial system? If yes, who should be concerned?  

Conclusion

I believe Mobile Money will significantly improve our payment system on the digital platform and off course Ghana’s “E-conomy” must by all means be developed. The concern however are if managers of the economy know, understand and are monitoring what is happening and the extent to which we can allow the Telcos to go. Is it possible the Telcos see Ghana as a “Regulatory Haven” and might be operating certain technology enabled financial services models that they dare not do in other jurisdictions without being checked? or moving from highly regulated environments to cream maximum benefits in havens such as Ghana till we catch up with them with the needed regulation.

We just first need to conceptualise what we want by way of regulation and then go looking for how best to achieve it considering what other jurisdictions are doing instead of the usual African way of travelling the world to study what others are doing and  implementing frameworks when we are not fully aware of what we really want in our peculiar social and economic developmental process . What if those we copy from are wrong? We can only change if they change.

Fortunately, whatever regulatory framework we as a country would want to put in place exist in one form or the other in other jurisdictions and we have the luxury of mixing and matching for the “best of breeds” approach.

A regulatory framework and constant monitoring is inevitable and I wish to re-iterate the fact that we keep an eagle eye, watch and monitor the morphology of the mobile financial services models and the developments in the mobile money telecommunication space to move in when the Telcos are going overboard. The Central Bank, National Security, National Communication Authority, Ministries of Communication andFinance should watch their respective related spaces.