Ebook Branchless Banking Guidelines
Branchless banking (BB) represents a significantly cheaper alternative to conventional branch-based banking that allows financial institutions and other commercial actors to offer financial services outside traditional bank premises by using delivery channels like retail agents, mobile phone etc. BB can be used to substantially increase the financial services outreach to the unbanked communities.
Provision of enabling regulatory environment by careful risk reward balancing is necessary to use such models. In line with its responsibility to promote financial inclusion without risking the safety and soundness of banking system, SBP issued a policy paper on regulatory framework for mobile banking in Pakistan which clearly stipulated SBP’s strategy for promoting branchless banking in Pakistan.
These guidelines are being issued as part of the broader strategy to create enabling regulatory environment to promote Bank-led Model of branchless banking. The primary audiences of these guidelines are obviously financial institutions (Commercial Banks, Islamic Banks, Microfinance Banks and Development Finance Institutions) desirous to undertake branchless banking. However, as financial institutions cannot take on BB without the help of other market players like telecom companies, technology service providers, agents etc., these guidelines are also helpful for other parties to understand their roles and responsibilities.
Contents
1 Introduction
- 1.1 Background
1.2 Objectives
1.3 Scope
2 Definitions
3 Permissible Branchless Banking Models and Activities
- 3.1Permissible Models
3.2Permissible Activities
4 Key Roles & Responsibility
4.1 Board of Directors
4.2 Senior Management
4.3 Compliance Officer
4.4 Internal Auditors
5 Agents assisted Banking
- 5.1 Role of Agents
5.2 Agent Structure
5.3 Agent Due Diligence
5.4 Agency Agreement
5.5 Agent Development
6 Use of Third-Party Service Providers
7 Risk Based Customer Due Diligence
8 Data & Network Security
8.1 GSM Networks Risks
8.2 End to End Secure Communication
- 8.2.1 User and Financial Institution Authentication
8.2.2 User PIN and Message Confidentialit
8.2.3 User's Financial Transaction Message Integrity
8.3 Additional Techniques for Risk Mitigation
- 8.3.1 Client Accountability and Non-Repudiation
8.3.2 Error Messaging and Exception Handling
8.3.3 Physical Security of MNO's and FI's Facilities
8.3.4 Client Profiling
8.3.5 Encrypted PIN and Client data storage
8.3.6 Availability of Services.
8.3.7 Anti Virus software for Client Mobile Station
8.4 Actors and Relevant Concerns
9 Risk Management Program
9.1 Agents Related Risks
- 9.1.1 Risk Implications of Use of Agents
9.1.2 Risk Management for Agent Related Risks
9.2 Wireless/ e-Banking Risks
9.2.1 Wireless/ e-Banking Risk Implications
9.2.2 Wireless/ e-Banking Risk Management
10 Customer Protection and Awareness
- 10.1 Customer Protection
10.2 Customer Awareness
10.3 Complaint Redressal
11 Branchless Banking Procedures
- 11.1 Preparation
11.2 Permission Seeking
Appendices
Appendix A – Risk Management Principles for Electronic Banking
- Legal and Reputational Risk Management (Principles 11 to 14)
Appendix B – Some Risk Management Considerations for Wireless Banking
- B. 1. Message Encryption
B. 2. Password Security
B. 3. Standards and Interoperability
B. 4. Wireless Vendors
B. 5. product and Service Availability
B. 6. Disclosure and Message Limitations
Appendix C –Electronic Banking Customer Awareness Program
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