MOBILE PAYMENT REGULATION IN THE 'STATES MEMBERS OF THE WEST AFRICAN ECONOMIC AND MONETARY UNION (WAEMU) (UEMOA)

1. WORKSHOP ON CROSS-BORDER MOBILE PAYMENTS REGULATION AND REGIONAL INTEGRATION (Mumbai, March 29-30, 2012)Presented by : Mrs Jocelyne Akuwa DOGBE AZOMADeputy Director - Payment Systems DirectorateBanque Centrale des Etats de l'Afrique de l'Ouest MOBILE PAYMENT REGULATION IN THE 'STATESMEMBERS OF THE WEST AFRICAN ECONOMIC AND MONETARY UNION (WAEMU) (UEMOA)

2. OUTLINE INTRODUCTION FINANCIAL INTEGRATION AND CROSS-BORDER PAYMENTS IN THE WAEMU MOBILE PAYMENTS IN THE WAEMU AND CROSS-BORDER PAYMENTS ISSUES CURRENT SITUATION AND PROSPECTS FOR REGULATING CROSS-BORDER MOBILE PAYMENTS IN THE WAEMU CONCLUSION

3. INTRODUCTION • Eight (8) countries : Bénin, Burkina Faso, Côte d'Ivoire, Guinée-Bissau, Mali, Niger, Sénégal et Togo ; • A single currency ; • A common central bank (Banque Centrale des Etats de l'Afrique de l'Ouest) ; • Centralization of foreign currencies reserves ; • Uniform banking, payment systems, and external financial relations regulation ; • A supranational banking supervision : Banking Commission of the West African Monetary Union.

4. WAEMU socio-economic environment favourable to the development of mobile payment Weak banking rate (lower than 15%) Development of new technologies of information and telecommunication in recent decades (Rate of mobile phone usage estimated at à 38%) - vary between 9 % in Niger and 70% in Senegal Modernpaymentsystems Important mobility of the population within and outside the WAEMU (large flow of funds within as well as in and out the WAEMU) Development of the microfinance sector INTRODUCTION xx

5. In the financially integrated environment of the WAEMU, BCEAO has set a regulatory framework to promote the emergence of banking and non banking actors offering e-money services, such as mobile payment Given the potential of mobile payment for the monetary Union population's financial inclusion : BCEAO is challenged to update its current regulation and is implied along with all stakeholders in the development of mobile payments in and outside the WAEMU Accordingly, the Governor of the BCEAO put the development of financial services based on mobile phone on the top of the institution 2012 agenda INTRODUCTION xx

6. 1.1. Classification of cross-border payments in regards to regional regulations Payments between WAEMU countries : totally free, not subjected to any restrictions under the Treaty of the Union Cross-borders payments (between WAEMU countries and other countries) : - Funds reception : Free, no restrictions - Sending funds : regulated in function of the underlying transaction (whether it is for current transactions or investments) I- FINANCIAL INTEGRATION AND PAYMENTS BETWEEN WAEMU COUNTRIES

7. 1.2. General rules on payments between WAEMU countries Authorized institutions : Banks and authorized intermediaries ; Postal administrations ; Financial payment institutions. I- FINANCIAL INTEGRATION AND PAYMENTS BETWEEN WAEMU COUNTRIES

8. 1.2. General rules on cross-border payments towards non WAEMU countries Compliance with the external financial relations regulation and AML/FT standards, such as : No restrictions on reception of funds from other countries ; Ceilings of remittances to countries outside the WAEMU without proof : 500 000 FCFA ($1 000) per transfer ; Freedom of issuing payments to other countries for common operations with a justification of the fund provenance (imports, remittances from migrants) ; Verification of the identity of the senders and recipients of transfers (KYC) ; Prior approval for investments transactions. I- FINANCIAL INTEGRATION AND PAYMENTS BETWEEN WAEMU COUNTRIES

9. 2.1. Type of mobile payments in the WAEMU Payment services by mobile phone with issuance of e-money (Prepaid / Electronic wallet) Payment services by mobile phone without issuance of e-money and backed by a bank account (mobile banking) II- TYPES OF MOBILE PAYMENTS IN THE WAEMU AND CROSS-BORDER ISSUES

10. 2.1. Types of mobile payments in the WAEMU Payment services with mobile phone with the issuance of e-money : Two models of e-money issuance (9 authorized projects, only 4 are functioning) Bankingmodel (8/9) : a bank in partnershipwith a Mobile NetworkOperateur Non banking model (1/9) : Electronic money issuer institutions with a specific license delivered by the Central bank II- TYPES OF MOBILE PAYMENTS IN THE WAEMU AND CROSS-BORDER ISSUES

11. 2.1.Types of mobile payments in the WAEMU Mobile phone payment services with domestic issuance of e-money (for the time being) : GIM-Mobile within WAEMU/ Orange Money : Côte d'Ivoire/Mali/Sénégal / Yoban'tel in Senegal only. Reloading ; Withdrawals ; Money transfer within WAEMU ; Airtimepurchase. Balance inquiry for prepaid account or electronic wallet. II- TYPES OF MOBILE PAYMENTS IN THE WAEMU AND CROSS-BORDER ISSUES

12. 2.1. Types of payments services offered with mobile phones in the WAEMU Mobile services attached to a bank account for WAEMU countries only (Mobile banking) : All WAEMU banks can offer these services through the GIM-UEMOA (common platform) Withdrawals / Transfers / Airtime purchase ; Bank accounts balance inquiry ; Mini-statement : detail of last five transactions ; Checks : checks order and status inquiry, check opposition ; Cards : association du téléphone à une carte bancaire, statut, opposition ; Exchange rates inquiry. II- TYPOLOGIE ET ENJEUX DES PAIEMENTS TRANSFRONTALIERS PAR TELEPHONE PORTABLE DANS L'UEMOA

13. 2.2. What are the stakes ? Between WAEMU countries No specific regulatory constraints, under the free movement of funds within the monetary Union ; Compliance with the regulation of the fight against money laundering and terrorist financing Operational modalities to be implemented in connection with MNOs in order to reach interoperability between technical platforms II-TYPOLOGIE ET ENJEUX DES PAIEMENTS TRANSFRONTALIERS PAR TELEPHONE PORTABLE DANS L'UEMOA

14. 2.2. What are the stakes ? Between WAEMU countries and others Ensure that transfers are performed by authorized institutions (banks, postal administration, financial payment institutions) Compliance with the governing rules of external financial relations, on the grounds of transfers (preserving the common pool of foreign exchange) ; Compliance with the anti-money laundering and terrorist financing (maintaining the integrity and stability of the financial system of the Union). II- TYPOLOGIE ET ENJEUX DES PAIEMENTS TRANSFRONTALIERS PAR TELEPHONE PORTABLE DANS L'UEMOA

15. 3.1. Current regulation in WAEMU countries Regulation on external financial relations Regulation on payment systems AML (Anti Money Laundering)Directive Directive on measures to promote banking and the use of cashless payments Banking Law Circular on the issuance of electronic money and electronic money issuers III- CURRENT SITUATION AND PROSPECTS OF THE REGULATION OF CROSS-BORDER MOBILE PAYEMENTS

16. 3.1. Current status of the implementation of regulation in the WAEMU Since 2006, no MNO has requested a license to issue e-money in spite of the regulation allowing non bank institutions to issue electronic money and financial services using modern means of payments such as mobile phones; No precise procedures for the reception and the safeguarding of funds received in exchange for the issuance of electronic money Technical security and organizational requirements to issue e-money not specified in the current regulation III - CURRENT SITUATION AND PROSPECTS OF THE REGULATION OF CROSS-BORDER MOBILE PAYEMENTS

17. 3.2. Outlook of the regulation Clarification of the principle of allowing banking and non banking institutions to promote the use of electronic money and to issue modern means of payment Strengthening of the licensing process and supervision of mobile money issuers, in particular through the involvement of telecommunications' regulators Clarification of the categories of actors entitled to distribute payment services by mobile phone and of the process of risks management III- SITUATION AND PROSPECTS OF THE REGULATION OF CROSS-BORDER MOBILE PAYEMENTS

18. 3.2 Outlook of the regulation Consideration of the WAEMU current regulation on external financial relations when looking into the propositions of mobile payments Cross-reading of the external financial relations and the electronic money regulations Definition of a supervision process for MNO offering mobile payments in connection with the Telecom Regulatory Authorities III- SITUATION AND PROSPECTS OF THE REGULATION OF CROSS-BORDER MOBILE PAYEMENTS

19. CONCLUSION Financial services offered through mobile phone increasing Aspects to be considered in regulating cross-border mobile phone payments and balancing the search for financial stability and financial inclusion : Balancing mobile phone payments' requirement and risks control ; Procedures for reception of funds by non banks stakeholders ; Terms of distribution of financial services through mobile phone ; Interoperability of mobile payment regionally and internationally ; Consideration of external financial relations regulation in the operational level : payments localization, implementation of ceilings in the e-money issuers information system

20. CONCLUSION Development of a scheme to supervise issuers and distributors in all organizational, prudential, operational and technical aspects, along with the following stakeholders : Mobile Network Operator and and issuers of means of payments : supervision of distributors ; Regulatory Authority for Telecommunication : definition and verification of quality and safety compliance Banking supervisor : verification of compliance with prudential standards ; Payments overseer : efficiency, technical and organizational security of e-money ecosystem

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