E-money seen as viable savings instrument

E-money seen as viable savings instrument

WHILE the Philippines faired “relatively well in future readiness for mobile financial services,” regulators should consider e-money as an alternative for consumers to earn interest, the World Economic Forum (WEF) said.

In a latest report entitled “The Mobile Financial Services Development”, the WEF said the Philippines’ readiness was partly attributed to the mature nature of the country’s mobile financial services deployments.

“The Philippines has explored the implementation of mobile financial services for a relatively long time and has realized high levels of adoption and a wide array of available services. An important role is played by the government, which has shown leadership by using mobile financial services to distribute social payments and collect taxes,” the WEF said.

“Countries such as Kenya and the Philippines that have achieved high levels of adoption certainly have provided an inspiration in their demonstration of commercial viability and scale,” it added.

The WEF said that Manila’s robust performance in the other pillars within the institutional and market environment has indicated a high level of “readiness” to continue this leadership.

“The Philippines has managed to build a dense agent network which may be a key asset for the provision of an even broader range of services in the future. The relatively large volume of incoming remittances that are sent home by Filipinos abroad can potentially be a driver to achieve further scale,” the WEF said.

With the growing belief that poor people need a full array of financial services, financial inclusion advocates are now focusing on how to responsibly provide low-income individuals with financial services beyond microcredit—services such as savings, payments and insurance.

The report further notes that a primary obstacle to the provision of such services, particularly low-value payments and savings, has historically been high transaction costs.

“It has been too expensive to develop the infrastructure required to profitably reach underserved population segments. Branchless banking, however, is changing the economics of providing financial services by leveraging existing and widespread retail outlets and technology, particularly mobile telephones, to provide more services to more people at lower cost,” the WEF said.

In an effort to distinguish such products from savings accounts, regulators around the world have regulated them as “payments” services, denying e-money accounts the benefit of interest payments and deposit insurance.

In some cases, these prohibitions extend to e-money issued by banks, particularly in countries such as the Philippines and Malaysia where e-money is regulated as a product regardless of whether the issuer is a bank or non-bank, the report said.

“In regulating e-money as a payments product, regulators may be missing an opportunity to make great progress in financial inclusion. E-money can safely and efficiently be used as a savings vehicle. Regulators should allow e-money to offer the full benefit of savings accounts—interest and deposit insurance—to the millions of low-income e-money users,” the WEF said.
LAILANY P. GOMEZ

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