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Title: The regulation of mobile money
Author: Greenacre, Jonathan
ISNI:       0000 0004 6499 5924
Awarding Body: University of Oxford
Current Institution: University of Oxford
Date of Award: 2017
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This thesis examines the regulation of 'mobile money'. This is an electronic payment and storage service provided by phone companies ('mobile money firms' or 'MM firms'). The first mobile money service, M-Pesa, was launched in Kenya in 2007. Since then, mobile money has spread rapidly throughout the developing world, particularly across Africa. A novel feature of mobile money is its ability to serve large numbers of people who do not have bank accounts, commonly labelled 'the unbanked'. The thesis offers a framework, based on a functional approach, to analyse the key regulatory and policy issues that arise when customers’ funds are stored and transferred within mobile money platforms. The objectives of this framework are drawn from traditional financial regulation, such as financial stability and consumer protection, and 'financial inclusion', which involves connecting the unbanked to formal, electronic payment and storage functions. The thesis makes three main claims. First, mobile money operates as a shadow retail deposit system. Mobile money is 'shadow' because a customer contracts with a non-banking firm. It is 'retail' because the system meets the payment needs of individuals for ordinary transactions. And the service is a 'deposit' system because a mobile money account provides payment and storage functions which are functionally equivalent to a bank deposit. Second, mobile money provides these payment and storage functions, functionally equivalent to a bank deposit, through a different legal structure to that used by a bank to provide deposit account services. This structure, which is established through private ordering, comprises a set of mechanisms by which the MM firm (the 'agent' in the service) and its associates credibly commit to safeguard the funds of the mobile money customers (the 'principals') for the purposes of providing payment and storage functions. Collectively, these commitments require the MM firm to maintain a 1:1 relationship between cash received from customers, which is stored within the system as highly liquid assets, and 'e-money' which customers use in the mobile money service. As a result, mobile money customers face primarily operational risks, usually without the credit and liquidity risks associated with banking. Third, public ordering can increase the efficiency of MM firms' commitments in addressing risks in mobile money platforms through adopting an 'active' approach to regulation. In this approach, the policymaker monitors a greater range of risks and more closely than what might be expected in other comparable principal-agent relationships, such as retail investors and financial intermediaries, and depositors and banks. This approach is appropriate because unbanked customers are likely to face significant information asymmetries with MM firms and coordination problems amongst themselves. This means they are unlikely to effectively monitor a range of risks to the service caused by the MM firm and its associates.
Supervisor: Armour, John Sponsor: University of Oxford
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Africa ; Mobile money ; Payments ; Financial Regulation