The ideas are outlined in a policy paper which details new independent research by economists from Frontier Economics and Groupe d'Economie Mondiale as well as consultants to the World Bank. The suggested changes will have wide spread impact on both the economic development of countries and the financial security of millions of people currently without access to banking services, claim contributors to the paper.

Over the last two years, pilot programmes in Africa and Asia have highlighted the potential for mobile phones to deliver basic financial services in developing countries. For instance Safaricom and Vodafone recently launched M-Pesa, a mobile-based payment service targeting the un-banked, pre-pay mobile subscribers in Kenya.

However, the wireless operators involved in such schemes say existing banking regulation are curbing their growth and potential. They are calling for an overhaul of the regulatory famework that would open up the market for deposit-taking, clearing systems, and know-your-customer rules to incorporate the activities of mobile operators.

"Current regulation of deposit taking is shaped around the needs of banks and at present mobile systems are limited in the size of transaction they can undertake," states the paper. "Deposit taking regulation needs to allow new entry on a larger scale by m-transactions operators."

The firms argue that the development of m-transactions will introduce significant improvements in financial services, such as easier and cheaper international payments especially for remittances home, or reduced risk in domestic payments by near real-time transfers.

Alan Harper, director of Vodafone group strategy, points out that in a country such as Kenya there are 400 bank branches, 600 ATMs and 10 million mobile phones.

"There is clearly the potential to bring access to finance for hundreds of thousands of individuals for the very first time," he says. "However, there is also an increasing need to ensure that current banking regulations do not undermine or limit this growing potential."

Diane Coyle, author of the report, adds: "A regulatory approach that tries to force m-transactions into the existing structure of retail banking regulation and financial supervision could impose high fixed costs and significant compliance problems. Any new framework needs to be risk based, sensitive to practical issues relating to underserved developing markets, and encourage experimentation and innovation."

Read the full paper: