Supervising Nonbank E-Money Issuers

This Brief addresses the supervision of e-money issuing activities of nonbank e-money issuers (NEMIs). It presents findings from CGAP research on the current supervisory practice in ten countries that permit NEMIs. The study finds that few countries have a clear supervisory approach, while all engage in minimal post-licensing supervision. The Brief states that NEMIs can play an important role in providing financial services for those who are currently excluded from the formal financial system. Policy maker concerns over the lack of a clear supervisory framework for this relatively new category of financial institution have hindered private sector interest in establishing NEMI operations in some countries. The Brief highlights the primary risks presented by NEMIs. Study findings reveal that regulators focus on the key risks of loss or unavailability of customer funds, limiting supervision to licensing, and review of standard report. It concludes that the minimal supervision undertaken in the researched countries reflects two current realities:

• NEMIs are engaged in limited activities and they do not present a systemic risk given the limited funds involved;
• Supervisors minimal approach is consistent with the proportionality principle endorsed by international standard-setting bodies relevant to the supervision of NEMIs.