RAWALPINDI, May 21: The federal government has decided to simplify financial and telecom sector regulations to introduce mobile banking which also include mobile money transfer and remittances, official sources told Dawn.

The information technology ministry has issued policy guidelines to the Pakistan Telecommunication Authority (PTA) to implement the framework for telecommunications sector development for reaching out with m-banking (mobile-banking) services through regulations to be framed by the PTA.

These regulations would govern technical implementation of m-banking systems, through mobile infrastructure of cellular operators, facilitating transfers and remittances, the sources said.

The State Bank of Pakistan had recently issued “Branchless Banking Regulations” based on “Bank-led model” for financial institutions for operation of m-banking, using wireless/cellular technology options.

Sources said that the IT ministry was defining relevant telecom sector policy framework to compliment the SBP regulations.

As per the branchless banking rules, financial institutions involved in m-banking services would carry the responsibility of fraud protection and other associated risk.

These institutions would be highly dependent on reliable relay of user transactions over networks of wireless/cellular mobile operators.

The redefining of telecom sector policy framework would take into account the important role and strength of wireless telecom networks in completion of different kinds of permissible financial transactions; and at a future point of time “Non- bank/telecom operator led” model framework may also be acceptable to the SBP and it may allow operators and other license-holders, with valid licenses, to take on the banking part of the m-banking activity on their own under SBP’s financial regulations.

Following the issuance of policy guidelines, the sources said all existing cellular and other relevant wireless operators, with valid licences, would be eligible to offer m-banking services.

These operators who consent to regulatory framework would be eligible and obligated to offer m-banking either with direct collaboration with the SBP-designated financial institutions or also in accordance with the SBP regulations, based on “Bank-led” model.

Cellular operators will ensure that appropriate security / encryption arrangements are in place in their networks to ensure integrity of transaction data during transport in the network and delivery to end-user terminal.

Similarly, appropriate actions should be taken to ensure confidentiality or user authentication and transaction-related data during the transit caching operations, as well as for stored data within the operators’ servers as the case may be.

Penetration of banking and financial services outreach in Pakistan has improved gradually.

However, it can still be termed as low for demographic difficulties and per capita income levels.

The banks are still in the mindset that it is not cost-effective to establish branch infrastructure in far-flung and low-income areas.

The government has set itself the agenda for improvement of access to financial services through alternative mechanisms.

Recent widespread proliferation of wireless communications has opened up new avenues of possibility of bringing the un-banked communities into banking net through mobile banking (m-banking).

The m-banking access through wireless enabled phones and infrastructure can enable benefits of a diverse range of financial services, like cash-in, cash-out, micro-payments, utility bill payments, etc., which can easily be accessed at any time without the need of visiting bank branches.

Several models of m-banking have been successfully implemented around the world.

It has been an active area of study by the IT Ministry-SBP joint committee which was set up for working out suitable models for Pakistan.