The high-profile Cambodian conglomerate Royal Group may be accustomed to getting what it wants—it owns MobiTel, Cambodia’s largest mobile telephone company and has a stake in ANZ Royal, one of the country’s largest banks.
But not adhering to central bank regulations in order to do business is surely a step too far. Or is it?
In late September CamGSM, which does business as MobiTel, launched its mobile banking service known as Cellcard Cash, which allows customers to store money in their telephone accounts and use it to make transactions and pay bills. The National Bank of Cambodia reacted by pointing out that CamGSM did not have an appropriate banking license to run such an operation.
Experts say MobiTel is not only flouting the central bank’s regulations but is also undermining its authority.
“Cambodia’s regulations and its enforcement are lax. This is one such example where [the] entity can start banking operations without [a] proper license from the central bank,” said Deepali Seth-Chhabria, an associate with Standard & Poor’s in Mumbai.
According to an NBC proclamation signed in August, or roughly a month before MobiTel launched Cellcard Cash, an entity that is not a bank may not engage in the business of payment transactions unless the person “is entrusted by agreement by a bank to act as its third-party processor and is licensed by the National Bank of Cambodia.”
Meanwhile, MobiTel’s Cellcard Cash service is still in operation.
Unlike similar mobile banking operations such as Acleda Bank’s Unity and Australia and New Zealand Banking Group’s Wing, customers of Cellcard Cash do not have bank accounts with oversight from the central bank.
“The problem with pure mobile operations…is your asking people to keep their money somewhere that isn’t a bank,” said John Brinsden, vice chairman of Acleda Bank. “If the phone company isn’t regulated with the central bank, you don’t know where that money is or how safe it is.”
Unlike Cellcard Cash, which takes money from customers at agents around the country, Unity is merely “a more convenient way, if you happen to be an expert mobile phone user, to carry out your banking,” Mr Brinsden said.
David Kleiman, managing director for Wing, said his company had implemented a “wide range of standard banking practices related to risk, compliance and customer protection,” including customer identification, anti-money-laundering, account management and dispute resolution processes.
“Prior to launch, WING and ANZ Royal worked closely with the National Bank of Cambodia and prepared detailed briefings on this innovative technology and how it could promote financial inclusion in Cambodia,” he said.
All Wing customer funds are held on deposit at ANZ Royal Bank in a single specially designated account, and Wing carries out the transactions, he added.
Still, MobiTel is not alone in its flouting of the rules. In a report released in January, the Organization for Economic Cooperation and Development said many mobile banking operations in emerging markets were outside the scope of financial regulation.
“This has naturally led to concern among regulators, and, for good or bad, threatens to disrupt the regulation of the financial sector in many of these countries,” the report said.
Experts say the issue is particularly important for the central bank to get to grips with as its job is to control the supply of money in the economy.
If funds are flowing through the economy that are not regulated by the central bank, then it limits the central bank’s ability to control matters such as inflation.
Last week, the backlash from MobiTel’s decision to go ahead with its mobile banking operations took a further step for the worse.
On Friday, the GSM Association, whose Mobile Money for the Unbanked, or MMU fund is specifically aimed at customers with little access to financial services, announced it would suspend payments to CamGSM until it was rendered legal by the central bank.
“GSMA is supporting CamGSM to work through the regulatory issues that they are facing,” the association said in a statement Friday.
In May, GSMA awarded CamGSM a $5 million grant under its MMU fund, which enjoys financial backing by the Bill & Melinda Gates Foundation.
Royal Group CEO Kith Meng yesterday referred questions concerning MobiTel’s mobile banking program to company management. MobiTel General Manager David Spriggs said that his company remained “in discussions with the National Bank of Cambodia” but declined to give any further information.
National Bank Director General Tal Nay Im declined to comment.
“I don’t have anything to reply,” she said.
It is still unclear why MobiTel moved ahead so hastily in mounting its mobile banking service without a license.
Banking industry sources consulted for this article said that MobiTel went out on its own rather than enter into an agreement with ANZ Royal Bank to run Wing because the two partners could not agree on how much equity each party would own.
For Scott Lewis, a managing partner at the private equity fund Leopard Capital, whose firm provided CamGSM with $5 million as part of a $421 million acquisition loan last year, the complications over MobiTel’s mobile banking operations are due to a lack of clarity over the regulations.
“Technology is changing fast. It’s not clear to the company how to do these things,” he said. “Commercial banking moving to phones is certainly a gray area.”
(Additional reporting by Andrew Burmon)