serve as a good lesson where innovation significantly outpaced the capacity of the regulatory environment to exercise prudential oversight, and prevent distress to the financial system. the environment within which branchless banking will flourish requires a great deal of innovation in terms of executing transactions, maintaining proper audit controls and ensuring fraudsters do not take advantage of unsuspecting customers. as regulators we are particularly concerned where deposits are accepted by non - bank entities, acting in the capacity of an agent to a financial institution. this is because while financial institutions need to comply with minimum prudential regulations, such as capital, liquidity and submission of financial data on a regular basis to the supervisory authorities, non - bank financial service providers are typically not subject to such requirements, and in the event of financial distress, depositors may be at risk. in order to address this concern, the regulators need to ensure a sound regulatory regime which is sufficiently accommodative to balance prudence and innovation. this not a simple issue, and this forum has been designed to explore critical aspects of achieving this fine balance. a second key policy concern relates to undermining confidence in the payment systems. as different intermediaries get involved, there is an increase in the risk of losing transaction integrity, corruption of data or breach of payment settlement terms. the loss of faith in the safety and security of transactions, in particular payment transactions, can result in widespread loss of consumer confidence. another area relates to policies governing competition as different players position themselves in the branchless banking arena? issues such as licensing, pricing, alliances with different financial institutions and compliance with prudential regulations need to be considered carefully. the public and consumers may lose confidence if there is no sense of order in how the payment system is evolving, or there is wide disparity in charges and fess. there is a need for the major stakeholders to align with some form of regulatory approach or framework which would provide a basis for assessing risks, and to implement regulations that are proportionate to the risks identified. in this forum, some of the key elements of such a regulatory framework will be dealt with, such as know your customer, compliance with anti - money laundering regulations, consumer protection and achieving greater levels of system interoperability amongst service providers. as such, branchless banking will require an inter - disciplinary approach given the different types of expertise needed to drive this important agenda. the third area of policy concern i would like to touch on relates to the issue of

of payment systems technology, principally the use of mobile phone as a banking channel and payment device. the pervasive availability and use of mobile phone around the globe and familiarity amongst its users makes it a very cost - effective distribution channel to improve accessibility to financial services to the unbanked and underserved segment of the population. this is further complemented by the proliferation of payment cards, particularly electronic money, which enables banking and payment services to be conducted without a bank account or visits to traditional bank branches. according to data from the consultative group to assist the poor, or cgap, there will be more than 120 mobile money schemes in developing countries by the end of 2009, more than double the number in 2008. cgap estimates that by 2012 some 1. 7 billion people will have mobile phones but no bank account, and 20 percent will be using mobile money. a key challenge, to implement a commercially viable and workable mobile banking solution, especially where population density is low, is to achieve a critical mass of users required to reap economies of scale to keep transaction cost low. this is even more relevant if the aim is also to promote financial inclusion as financial services would have to be offered at affordable costs. thus, a requirement for an open and interoperable mobile platform that facilitates the participation of many service providers and that offers a broad range of services is critical in developing a sustainable and efficient solution for both providers and users. the other type of branchless banking is the use of non - bank financial service providers, also referred to as business correspondents in certain jurisdictions. this approach combines mobile banking solutions with person - to - person contact, except that the customer is not engaging with a bank, but rather with a supermarket counter staff, grocery shop owner, post office or village headman. the elements of trust, know your customer and value - added advisory services can be more effectively met using this approach, without the corresponding high investment cost of establishing physical banking branches. today's forum provides an excellent opportunity for all of us here to exchange ideas and experiences in these areas. policy and regulatory concerns pertaining to branchless banking let me now turn to my second point, which is about the policy concerns of regulators in relation to branchless banking services. the first concern is related to the need to continuously balance between prudential controls and allowing innovation to flourish within the financial sector. to site a recent well known example, the events in the us sub - prime markets and derivative products