By Adadzewa Otoo, E-Money Policy Specialist, AFI

At the 2019 AFI Annual General Meeting (AGM), member institutions unanimously ratified the network’s first policy model on electronic money (e-money), designed to support the development of an enabling environment for e-money.

The policy model is essentially a codification of various approaches, key lessons and best practices from across AFI’s diverse network. It provides critical considerations to guide key regulatory and policy reforms targeted at enabling the development of e-money in-country. Its launch is timely. Over the last decade, e-money products and services have expanded significantly within the AFI network as policymakers, regulators and development partners promoted the transition from a cash-based to cash-lite economy.

Globally, similar trends have resulted in a slump in cash-based transactions to 77 percent from 89 percent over the past five years[1], with further declines predicted within the coming five years.

E-money’s appeal lies in its ability to fast-track financial inclusion for the unbanked driven by rapid developments in FinTech innovations and continued growth of e-commerce. As a result, e-money products and services are becoming increasingly affordable, providing instant, reliable, savings, credit, remittance, insurance, pension, investment and secure payment opportunities to consumers.

Regulators have taken note. Since 2011, 27 AFI member countries have made 40 policy interventions in digital financial services, of which 32 relate to legal and regulatory reforms on e-money issuance. Among the most recent are revisions to existing e-money regulations by Bangko Sentral Ng Pilipinas (2019) and Bank of Zambia (2018) as well as Banco Central del Timor-Leste’s (2018) approval of an e-wallet system service trial.

Nonetheless, progress across the network remains uneven and more needs to be done.

It is hoped that AFI’s new e-money policy model will provide a benchmark to encourage further regulatory reforms, an expectation that is anchored in not just the content of the policy model, but also the rigorous design processes that have shaped it. Both are worth highlighting.

Two pillars, nine frameworks

The e-money policy model is built around two key pillars: (a) promoting an enabling policy environment and; (b) supporting adoption at scale. It provides the following nine key frameworks:

1. Policies that support the adoption of e-money products and services
2. E money regulatory considerations
3. Prudential regulation and supervision
4. Agent regulation and supervision
5. Consumer protection measures
6. Technology and infrastructure considerations
7. E-money market development considerations
8. Cross cutting considerations
9. Gender considerations

Perhaps its most innovative aspect lies in the incorporation of gender considerations, reflecting AFI’s push to mobilize regulators towards bridging the financial inclusion gender gap. For members and non-members with existing policies, it serves as a lens to benchmark against global standards, while for those without, it provides a standardized template to guide design and implementation.

From rigor to ratification: putting policies through the mill

AFI’s e-money policy model is unique not only for its member-led and relevant content but also in the rigorous processes used to design it. While AFI has always relied on extensive member and industry consultations in its work, the e-money policy model was the first to benefit from AFI’s newly overhauled structures on the design of policy frameworks for member use. Here, the validation process goes beyond industry consultations and through stringent technical validation within the network’s specialized technical and administrative structures.

Ensuring that a policy model present an authentic globally benchmarked and financial inclusion focused template for use by members, the member-developed draft framework goes through extensive peer reviews by relevant specialized working groups of the Network,  industry stakeholders, AFI’s Global Standards Committee[2] and AFI’s Board of Directors before being presented to the entire membership for ratification at the AGM. This represents the network’s most rigorous process in the development of knowledge products, making a policy model the leading knowledge product for member use.

Over the course of its own journey, the e-money policy model also yielded insight and lessons that will continue to guide how future policy models will be shaped. Through in-country technical assistance, knowledge products and capacity building, AFI will continue to support its members’ use of the policy model to reform and develop e-money regulations.

Led by AFI’s Digital Financial Services Working Group, with significant input and leadership from Bank of Tanzania and Banco de Moçambique, the development of the model was guided by the Sochi Accord which leverages digital financial services and financial technology (FinTech) for financial inclusion.