1. E-Money: What it means for Mobile Money Andrew Zerzan Regulatory Projects Director

2. Quote from a Regulator “ E-moneyis an important way to increase financial inclusion. Customer funds need to be safe. We have made this happen with MNOsin our country. ” - East African Central Banker

3. Overview Defining e-money How e-money actually works in mobile money Why is it so popular amongst MNOs? Regulation – what regulators want to see Funds protection Financial system stability Crime prevention 5 Questions to ask yourself for regulatory engagement

4. What is e-money? Gift cards, gift certificates, pre-paid cards Electronic form of cash – different than airtime 1:1 relationship e-money to cash stored Different than a bank account – bank deposits become loans

5. How e-money actually works in mobile e-money e-money Bank (holds pooled account) e-money MNO (e-money issuer) Customer Cash Cash Agent

6. How e-money actually works in mobile – agent side Agent puts cash in pooled bank account Bank tells MNO of agent deposit so e-money system is always equal to amount in the bank. MNO credits the agent’s m-wallet 2. Info sharing MNO (manages e-money) Bank (holds pooled account) 3. e-money 1. Cash Agent

7. How e-money actually works in mobile - customer Customer hands cash to an agent Agent tells provider to transfer equivalent amount of e-money to customer Provider credits customer m-wallet e-money e-money MNO (e-money issuer) Customer 1. Cash Agent

8. Why is it so popular among MNOs? MNO maintains ownership of the customer relationship. Direct management of customer accounts and activities Simplifies customer experience, no need for customer to be lost for support or resolutions Can enable direct license to give MNO better footing in the relationship with the partner bank Has greater potential to reduce regulatory burden Avoids costly a bank license Helps avoid regulatory compliance “baggage” that often arises when a partner bank’s license is used E-money E-money E-money E-money

10. The financial system’s stability measures

12. Financial System Stability Regulators’ Views Concentration risk concerns One MM customer with too big of a withdrawal: localised liquidity crisis? If the pooled account is huge, a bank could be too reliant on it as a base. A large exodus of’ cash in a short period could crash the bank – U.S. financial crisis! Solutions Limit customer account size Reduces exposure the activity of a single customer Split pooled account as it grows to multiple banks Ensures no bank is overly exposed to the MM system

14. Have systems in place to monitor, detect and report suspicions

16. Q&A GSMA Tool: E:Money a Guide for MNOs now in draft for your comment. Will be available on MMU Blog website www.mmublog.org later this month Thank you Andrew Zerzan azerzan@gsm.org

17. Q&A Unanswered questions? Send them to: e-mail mmu@gsm.org SMS +60123211275 (include your name) or