NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, January 22, 2015

The recently launched GSM Association Code of Conduct for Mobile Money Providers is a welcome initiative. There is increasing recognition of the economic benefits that digital financial services can bring, along with an understanding that achieving ambitious financial inclusion targets may well depend on their rapid rollout. Such targets are being proposed by the World Bank, under the Maya Declaration and in other forums.

At the same time, there is a recognition that consumer protection is a critical element in building trust in the use of such services. See, for example, Principle 4 of the G20 Principles for Innovative Financial Inclusion and the recently held Responsible Finance Forum, as well as the outcomes of the 2014 deliberations of the 2014 Global Partnership on Financial Inclusion.

The code of conduct will apply to “mobile money providers” and to “mobile money.” The former term is not defined (could a bank be a provider?) whilst the latter term has a broad definition, which provides (in summary) that the code applies to “mobile money is a transformational service that uses information and communication technologies (ICTs) and non-bank retail channels to extend the delivery of financial services to clients who cannot be reached profitably with traditional branch-based financial services.” The example given (in summary) is an e-wallet, payments-related service.

The object of the code is expressed as being, in short, to support the continued development of the industry by:

• “Improving [the] quality of services and customer satisfaction;?
• “Facilitating the implementation of trusted partnerships; and
• “Building trust with regulators and encouraging the implementation of appropriate and proportional regulatory standards.”

To support these objectives, there are eight principles dealing with safeguarding client funds; measures to combat money laundering and terrorism financing; monitoring of staff, agents and entities providing outsourced services; reliable service provision; security of the mobile network and channel; the provision of information to customers; complaints and personal data.

But does the code go far enough to protect the consumers of digital financial services?

Whilst there is no doubt that the GSMA Code covers important issues of concern to consumers, there are some aspects that could be clarified as well as additional issues to be considered. Some of them might be clarified by guidelines, others by future amendments. Examples of such issues follow.