Effective regulation of mobile payments requires cooperation between telcos and banking regulators. Two international working groups have emerged to better define the role of different regulatory bodies. The Digital Financial Services Working Group of the Alliance for Financial Inclusion advises ministries of finance and banking regulators, and the ITU Working Group on Digital Financial Services provides guidance to telecommunications regulators. Financial services regulators and telecommunications regulators have different but sometimes overlapping responsibilities, and communication between these different types of regulators is essential to keeping order in the marketplace for technology-enabled business models.
Overregulation makes it difficult to innovate and blocks new models from entering the market, while lack of or frequently changing regulation may produce much the same result, as new entrants need some certainty that they will be able to continue operating over time. Taking into account that technology-enabled payments encompass more than just mobile applications, a one-size-fits-all approach does not work.
When mobile payments first appeared, there was a great deal of concern over which type of provider should take the lead on implementation – banks or telcos. People engaged in policy debates asked: Which model promotes the fastest growth? Which model presents the greatest risk? Today, however, we are overwhelmingly hearing providers say, “Just give us a level playing field!” Instead of a binary choice, regulators need to recognize that multiple models can exist in a market – and that new models can emerge as well. It is critical to structure the regulatory environment to respond to what emerges in the market rather than building a structure that preempts the market.