The mobile phone has evolved from its basic telecommunications utility to take on a new enhanced role as a ubiquitous payment and value transfer instrument in the economies of developing countries. These facilities, now mostly known as Digital Financial Services (DFS), involve complex interplays of telecommunications, financial services and related components, necessitating reassessment by a range of affected national regulators on whether and how to apply or adapt their sector-specific regulatory precepts to DFS and its providers.
For telecommunications regulators in particular - which we call National Telecommunications Authorities (NTA) – the introduction of DFS may require reassessment and even expansion beyond their traditional remit over telecommunications-type services.
Overall, the purpose of the paper is to provide a fresh perspective on the role of the NTA in relation to the success and growth of DFS and to systemize the understanding of the role of NTAs within the context of DFS. Due to the multi-sectoral and cross-cutting nature and increasing complexity of DFS, we argue for increased cooperation between implicated regulators and agencies as well as increased capacity building for NTAs.
This study examines then the specific and evolving roles the NTA may have in regulating DFS and similar value transfer and payment mechanisms, whilst ensuring stability of national telecommunications infrastructure and service provision. This study is part of a series on the role of the primary regulators in the DFS ecosystem, intended to simply systemize each of their roles. 3 For NTAs, there are a number of direct impacts on DFS provision that the NTA have remit over, inter alia, security of mobile networks; access to critical gateways and pricing thereof; agent exclusivity; service quality; mobile coverage; handset fraud and in some cases, licensing of DFS providers. It is also important for NTAs to find internal capacity to understand DFS markets so as to to ensure telecommunication services can effectively serve provision of DFS. Similarly, to determine how telecommunications services markets are affected by DFS since lock-in feedback loop network effects can have an impact on this market.
With this tight nexus, NTA’s role must constantly evolve to keep pace with rapid innovations introduced by DFS, placing pressure on the NTA’s capacity to respond as needed whilst fulfilling commitments to national goals of financial inclusion. The NTA’s role may include responses to emerging security and fraud challenges; application of regulatory tools to ensure market stability, quality of services, fair competition, and service expansion; their assessment on ubiquitous provision of DFS from the effect of their policies on mobile coverage and mobile technologies; and the need for the NTA to ensure regulatory coordination with other authorities. An important component of properly regulating the DFS ecosystem is the importance of collaboration between central banks, NTAs and competition authorities for them to understand each other’s markets and their feedback loop effects which should include exchanges of data and analysis where allowed.