NEAT Mobile Financial Services Summit Report

The summit aimed to introduce local stakeholders to best practices in mobile financial services from around the world. Although some financial institutions, such as Laxmi, Siddhartha, and Mega banks, have introduced branchless and mobile banking services, these deployments have been limited due to regulatory and market uncertainty. The summit provided a much-needed impetus to accelerate developments in the mobile financial services sector. The completion of the E-Banking Directive by Nepal Rastra Bank was finalized and posted on the bank's website during the conference. The directive leaves much to be desired, but its formalization was a critical step in regulating the sector. Additionally, FinAccess signed a memorandum of understanding with five financial institutions, including Laxmi Bank, Bank of Kathmandu, Siddartha Bank, Commerce & Trust Bank, and the International Leasing & Finance Company, to develop and deploy e-banking services. Regulatory issues were a major topic of discussion during the summit. The e-money directive released during the summit continues to have areas of significant ambiguity, reflecting a regulatory approach that is unfamiliar with mobile financial services and cautious in regard to customer protection. Nepal Rastra Bank claims to be open to comments and inputs from market players, but the level of influence from mobile financial service providers, donors, or other stakeholders is questionable. Customer demand was also a key focus of the summit. Research conducted by NEAT highlighted the need for products that respond to the needs of a population with irregular incomes. Banking as usual will not work for the mass market, and products need to be designed to meet the nuances inherent in the financial behaviors and aspirations of this group. Suggestions were made about products such as short-term liquid savings, savings plans, line of credit, tailored products for agriculture, and tailored products for small and medium enterprises (SMEs). Interoperability was another major topic of discussion during the summit. A robust conversation took place about the potential of interoperability in a market like Nepal, with suggestions that the overall pie could be increased by 600% when siloed solutions are replaced by interoperable financial services. Collaboration enables joint technology, agent networks, and customer awareness campaigns, which can be extremely expensive for any one institution alone. Transaction volume drivers were also discussed during the summit, with presenters speaking about the need for innovation and the fact that MFS are a game changer. If financial institutions consider MFS as an add-on to their existing business, they are not likely to be successful. Market segments, product requirements, delivery channels, messaging, operations – all of these aspects are different. From an operations perspective, leadership was identified as the most important element for MFS success. Without strong and consistent leadership from the very top of the organization, the venture is unlikely to succeed. Other key operational considerations include finding a balance between risk and innovation, ensuring appropriate agent compensation, applying a disciplined approach to agent build-out and management, and creating partnerships. Donor opportunities were also discussed during the summit. The IFC and the World Bank are planning to work broadly with the regulators, and ideas about other regulatory interventions were discussed with market players. However, it does not seem that additional regulatory support would be beneficial, and funds so spent might not result in a high degree of influence or change. The IFC is undertaking an assessment of potential distribution partners and opportunities in the market, and combined with NEAT's customer market research, these efforts will deliver the baseline information regarded by the market.