Review CBK law to protect mobile cash customers

The dynamics unfolding in Kenya’s emerging telecoms sector are hard to process.?For instance, it will soon be possible for individuals to settle all their bills on the mobile phone through a new mobile cash service at the touch of a button.

Equity Bank’s entry into the mobile cash space is not only a game changer but also cutting edge technology that links a bank and mobile phone on the same platform for the first time in Kenya.?Interestingly, while the mobile cash space has attracted more players and highly differentiated products and services, the Central Bank of Kenya (CBK) – the oversight authority here – appears to be in deep slumber. ?

In the beginning, mobile cash was the preserve of telecom companies. Today, this segment has attracted all manner of partnerships, from media houses to major banks, all riding on existing mobile service provider networks.?While a draft Central Bank of Kenya Bill 2014 has already been published, Treasury is still collecting comments from the public and stakeholders to be received by April 30, 2014. This is a case of the law following on innovation, a dangerous precedent to the uninformed consumers of the products.

Consumers continue to suffer in silence each time a mobile phone operator network experiences downtime, losing cash and time in the process. There appears to be no legal redress for these network disruptions. This is why we urge for a speedy review of the CBK Act to strengthen its oversight role in all payment systems, including mobile money.

At present, the law is silent on what CBK can do in the mobile cash space, leaving consumers vulnerable.?CBK should also be given the exclusive responsibility for the regulation and oversight of payment, clearing and settlement systems as specified in the National Payment System Act, 2011.?CBK would authorise any payment service provider, any payment and settlement system or the operator of such systems to observe such conditions and requirements as may be established by CBK.?

At present, CBK is not able to adequately regulate or oversee the issuance and quality of mobile payments. Ideally, it should conduct audits and inspections of payment, clearing and settlement systems, and their participants, to examine such accounts, books, documents and other records. CBK may also ask for information and records from any payment, clearing and settlement systems, and their operators and participants. ?

While the law is lagging behind, those in the mobile space have been innovating and growing in sophistication.?The latest product involves banks linking with mobile phone operators for purposes of effecting retail payments. All payments are credited into a customer bank account on demand.?While Equity Bank will be competing directly with existing players in the mobile cash space, authorities should ensure customers benefit through reduced charges and faster transaction times.

Lurking in the background is a cartel of financial fraudsters keen to cash in on the not so techno savvy customers.?More players are making an entry into the mobile money space at a time when CBK is steps behind in reviewing its laws to strengthen the monetary authority’s oversight in as far as the mobile cash market is concerned.

We need assurances that financial innovation will not be sacrificed on the altar of safety and security.