Regulators, agent networks must embrace service digitalization

Mobile money agents must adapt to the accelerated digitalization of financial services as regulatory policy responses to COVID-19 continue to encourage cashless transactions, speakers said during a webinar for AFI members in the Africa region on 5 August.

Buoyed by global efforts to promote physical distancing, regulators from AFI’s African Financial Inclusion Policy Initiative (AfPI) have been  reviewing the robustness of agent networks in delivering digital financial services (DFS), particularly critical in bringing financial services to the unbanked.

But regulators must do more to strengthen agent networks so that they can be resilient against widespread shocks, AFI Deputy Executive Director Norbert Mumba said at the opening of the virtual gathering. He noted that while greater usage of DFS combined with ongoing efforts to deepen financial inclusion has increased business traffic for agent networks, movement restrictions had hurt operations.

“AML screening and centralized platforms that utilize big data as well as artificial intelligence learning are already reforming this space, but on the regulatory side, some overhaul is required to ensure that data can be taken out of country to benefit from some of those innovations,” she said, highlighting examples of e-KYC and biometric registration.

Mobile money agents play a key part in accelerating financial inclusion, especially in emerging and developing countries where they provide payment and financial services access to poor and vulnerable populations. This includes women, youth, rural populations, displaced persons and informal sector micro, small and medium-sized enterprises (MSMEs).

Their global popularity is echoed in Sub-Saharan Africa – where most AfPI members are based –, with 1.4 million active mobile money agents and 866 million mobile money accounts registered in 2018. On a global scale, there are roughly 228 agents per 100,000 adults, as compared to 33 ATMs and 11 banks per 100,000 adults.

Given their community reach, proper functioning agent networks are critical to the overall growth and performance of the DFS ecosystem and to advancing financial inclusion. Both industry players and regulators called for agent networks to be established, monitored and managed effectively so that the customers receive appropriate services and are protected against malpractice.

Sharing National Bank of Rwanda’s experiences was Director of Payments Systems John Bagirishya, who outlined steps taken to incorporate new requirements – such as anti-money laundering (AML) and countering-terrorist financing, monitoring systems and financial Inclusion – through the testing and refining of regulatory frameworks.

He said that market trends had shown a rise in digital versus physical cash out transactions, urging regulators to consider new models that embrace DFS. Bagirishya added that new regulatory laboratories in Rwanda were helping keep regulations “dynamic”, noting that Rwanda already had enacted regulations on agents, e-money, mobile network operators and consumer protection.

“Agent networks are very key when it comes to moving from cash-based to cashless and we can say that we are the crossroads … but we also need to be proactive and ensure that we respond to market change,” he said.

Supporting the need for more investment was Kuassi Satchivi, Banque Centrale des Etats de l’Afrique de l’Ouest’s chief of digital development for financial inclusion, who highlighted the importance of local infrastructure to boost interoperability and the number of access points across targeted populations.

“We need to work on models that optimize the value chain … The future of agent banking will be rethought with the new solutions,” he said. Movement restrictions during the pandemic, he added, meant that agents had struggled to reach certain areas and that this was also hindering liquidity.

Members also mentioned several policy responses designed to mitigate the negative impacts of COVID-19, including moratoriums on debt repayments and efforts to ease access to money and account opening.

Seeking to draw attention to not only the regulatory perspective, but also that of key industry players was Judith Obholzer, group managing director for public policy at Vodacom, a mobile communication company with operations in over 30 African countries.

During the virtual event she said that government classification of agent banking as an essential service had proved critical in agent business continuity, but that the move was far from uniform across the continent. A poll of webinar participants echoed her statement, with 85 percent saying that mobile money and agent banking had been considered essential services during lockdown periods in their country. A further 14 percent disagreed.

Amid these challenges, she encouraged agents and regulators to take advantage of new opportunities presented by the “digital first” approach, particularly with measures in place that encouraged electronic Know-Your-Customer (e-KYC) for onboarding.

“AML screening and centralized platforms that utilize big data as well as artificial intelligence learning are already reforming this space, but on the regulatory side, some overhaul is required to ensure that data can be taken out of country to benefit from some of those innovations,” she said, highlighting examples of e-KYC and biometric registration.

In the short-term, she added that data analytics could help combat fraud adding that “the more data one can crunch, the better the systems can become”, but that progress was often constrained by restrictive data localization requirements.

Raising concerns over the future profitability of agents was Brad Magrath, co-founder of mobile money provider Zoona, who said that the “distribution of mobile money will shift from being human-led to tech-enabled, and see a faster decline in cash in, cash out but a lot more ‘push and pull’ payments in the next five to 10 years”.

He made several recommendations for regulators, including to ensure that regulations were aligned, continued investment in platforms so that agent networks can break into rural areas.

Outcomes from the discussions will feed into AfPI’s policy framework on Agent Network Management and help develop additional interventions.

AfPI is the primary platform for AFI’s African members to support and develop financial inclusion policy and regulatory frameworks in Africa, and to coordinate regional peer learning efforts. It is made up of nearly 50 member institutions from around 40 countries in Sub-Saharan Africa as well as the Middle East and North Africa.

Roughly 80 participants, from over 30 different institutions, including 20 AfPI members, attended the event, which was supported by the Mastercard Foundation under AFI’s COVID-19 Policy Response for Africa Region. AFI’s work in Africa with the Mastercard Foundation aligns with the network’s ambition to leave no one behind by building on its 2019 Kigali Statement, which calls upon the acceleration of financial inclusion for disadvantaged groups, including the youth. Policy interventions across the region will be delivered through peer learning, policy guidance, development of knowledge products and AFI’s public-private dialogue platform. In-country implementation activities would be conducted specifically in Nigeria, Uganda, Rwanda, BCEAO, Senegal and Ghana.

In collaboration with the Mastercard Foundation and other AFI funding partners, AFI aims to enable financial sector regulators in Africa to deliver quick and appropriately gender-sensitive policy responses that mitigate the effects of COVID-19 on businesses and individuals, especially for MSMEs, women and youth.