[BLOG] Barry Coetzee Column: The Return of the Regulator
Banking is said to be the most regulated industry on the planet. It would therefore make sense that Regulators were core to the development and progression of financial services. This may sound like an obvious statement, but, of late, this obviousness has become muddied by the rise of mobile money.
In the majority of countries in the world, if you want to take deposits, or make loans, or generally deal with money, you would fall within the ambit and regulations of the Financial Regulator. There are many good reasons for this, it is the duty of the Financial Regulator to manage the risk of a country’s finance system and also to protect the money of citizens. This status quo was solidly rocked by the advent of the Mobile Network Operator (MNO) and their introduction of mobile money.
The introduction of mobile devices and mobile networks certainly caused the kind of status quo disruption that is normal in innovation. The trouble is, MNO’s did not fall under the ambit of the financial regulator, they operated under the rules of the telecoms regulator. The reaction from the financial regulators to mobile money was not universal. There was not enough time to get everyone together in order to agree on some universal accord to regulate mobile money. Further, mobile money was being implemented in countries where the regulators were financial followers rather than financial innovators. The resulting uncoordinated regulation was rushed in to either accommodate or manage the exploding mobile money phenomenon. So today, we have many countries with mobile money rules that are very peculiar to their local conditions. This is all very well, but in the long run, there are universal rules that all financial products have to adhere to.
After the initial “knee jerk” regulations that were implemented as a stop gap to prevent losing control over a large part of the country’s transactions, two definite trends started to emerge. The so called “operator led” versus the “bank led” models. They were both good ideas and brought in some regulatory stability. This bought time for the regulators to calm the storm enough to be able to try and work out what they need to do in the long term.
I am now speculating that the regulators have seen the long term and they are now entering a new phase and will start with normal regulation of mobile money. Early indications are that the future is going to look very much like the past.
This is not as bad as it sounds. Remember, money has gone through this cycle successfully many times. Shells to precious metals. Cash to Cards. Analog to digital. Looking back at what happened previously will inform us as to the likely directions and outcomes that face us in the future.
Firstly, because of trade, no business, bank, regulator or country is a financial island. Sooner or later you have to interact financially with some party in a place that has a different regulator. This applies even to the poor as they are often recipients of foreign remittances. This is squarely the ambit of the regulator. They make the rules governing the interface of their territory’s financial system to all other territories that they wish to interact with. This bilateralism is done by consensus and negotiation. This means that no one system dominates. A generally agreed system of rules evolves that facilitates the smooth running of the world’s trade. In many countries, mobile money is a closed system. That is, it can only be used by the customers of one particular MNO. This results in many, disparate mobile money “currencies” in one territory. History shows us that this is obviously not sustainable. So I am confidently predicting regulation emerging that addresses this problem. I am hoping that the regulation is mindful in accommodation of the advantages that mobile money has created. However, what should emerge from enabling regulation are the common standards that create the openness and interoperability required for sustainable money systems.
Regulation creates the rules and level playing field. We have seen this across the history of money. Mobile money will not be an exception. Enabling regulation creates the environment that sets the agreed standards, that defines the business rules and technology required for an evolving industry.
Watch the media. I predict the return of the regulators.
Author: Barry Coetzee,
South Africa
Barry Coetzee is a regular columnist on Africa Business Communities
