Setting the Regulatory Landscape for the Provision of Electronic Money in Peru

Abstract

Although there is much evidence that access to financial services correlates positively with economic development, basic convenient transfer and payment services are still unavailable for low-income segments of the Peruvian population. The experience of Kenya, the Philippines, and other countries has shown that electronic money (e-money) products can be effective in extending payment services. However, in Peru, the absence of regulation for the provision of schemes based on e-money prevents good investments and at the same time encourages fraudulent activities. This policy memo discusses the main elements of establishing a regulatory framework for e-money. It recommends that policymakers first define e-money, taking into account the laws and regulations of a particular country. If e-money is not defined as a deposit, then it follows that financial institutions may provide e-money products, along with telecommunications companies and similar operators. This will provide contestability in the market and more efficiency in the provision of e-money-based products for the benefit of consumers, particularly the poor.