Transforming Access to Finance in Developing Countries Through Mobile Phones: Creating an Enabling Policy Framework

Technology, and in particular the spread of real-time communications networks, permits banks to delegate last mile cash management and customer servicing functions to third-party retail outlets. By making basic deposit, withdrawal, and payment functions available securely through retail shops that exist in every village and neighborhood, there is an opportunity to dramatically increase the physical footprint of banks and to transform the basic economics of low-balance savings. Banking regulations need to be adapted to these new possibilities of banking beyond bank branches. This paper highlights three specific areas where sharpened regulatory analysis would help strike a better balance between maximizing the opportunities of these models and containing risks.