A note on macro-financial implications of mobile money schemes

Across the world mobile money schemes are being launched. In such schemes financial service providers interact with clients via mobile phones or other mobile devices such as tablets. Service offerings include payments and saving as well as basic insurance products and sometimes credit based on scoring methods that use information about the client’s payment history. The world of mobile money is still in the experimental stage. Some schemes like M-PESA in Kenya have, at least initially, been run-away successes. Some three quarters of all adults in Kenya signed up within little over four years after M-PESA was launched. Other schemes in Kenya and elsewhere have produced more modest results. Yet the promise of mobile financial services is sufficiently strong for currently over 200 mobile deployments counting just the cellphone based ones. Much experimentation is still needed to find the best business models. Hence room for such experimentation is desirable. At the same time policymakers and regulators need to be clear about possible ramifications of the mobile revolution for the design of financial regulation and its implementation. This note discusses several systemic issues that arise from mobile payment schemes: The impact of “e-money” on money supply, problems posed by financial distress of mobile money schemes, and the impact of mobile money schemes on money-laundering and illicit finance