Wednesday 25 November, 2020

Coronavirus highlights need for digital money alternatives

From left to right: Managing Director  of HA3VENTURES Ltd, Heston Hutton and GraceKennedy Group CEO Don Wehby.

From left to right: Managing Director of HA3VENTURES Ltd, Heston Hutton and GraceKennedy Group CEO Don Wehby.

The coronavirus (COVID-19) pandemic has seen merchants and customers alike shy away from cash. Even so, under lockdown conditions, it is much easier to order goods, pay bills and transfer funds online.

Still, thousands of unbanked Jamaicans rely on cash in hand.

The Bank of Jamaica (BOJ) has launched several initiatives to deepen financial inclusion, seeking to convert more Jamaicans to holding accounts.

However, financier Heston Hutton gives the reminder that the push to financial inclusion, begun by the local credit union movement a decade ago, was given short thrift by the authorities when it tried to introduce CONEC, a mobile money product.

CONEC, he said, would have captured almost everyone in the transactional space, if supported by the authorities.

Hutton, a strategic advisor and financial specialist and a former credit union executive, is currently Managing Director HA3VENTURES Ltd.

“There still remains over 60 per cent of our population who do not have a banking relationship. There still remain more than 75 per cent of our population who does not have a debit card and there are more than 80 per cent of our population does not have a credit card,” Hutton told Loop News.

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The trend to digital transfers, in contrast, is making headway in other areas of the globe.

In its 2019 report on the industry, GSMA (an industry organisation that represents the interests of mobile network operators) estimates that there are mobile money services in 96 per cent of countries where less than a third of the population have registered account with formal financial institutions.

There are now nearly 300 live mobile money services across 95 countries globally.  Other digital money options are pre-paid cards.

To further see the impact of digital trends under the influence of COVID-19, one can look to Africa where mobile money providers have reduced or waived transaction fees and governments are encouraging digital payments to reduce person-to-person contact and potentially slow the spread of the coronavirus.

Heston Hutton, Managing Director  of HA3VENTURES Limited

One example of a central bank response using digital platforms is that of Kenya, where the African state announced a set of directives in March to curb the spread of COVID-19. However, it is also noted that the directives have significantly impacted the banks and mobile money agencies, reducing income.

The main services provided by mobile money and bank agents are cash-in (deposits) and cash-out (withdrawals) also referred to as CICO.

Here in Jamaica, there is currently two approved electronic retail payment service (ERPS) providers, with others including GraceKennedy reporting themselves to be revising product model under new regulations issued by the BOJ.

Approved ERPS providers are Alliance Payment Service Limited which offers ePay, a student card and NCB which operates mobile money product Quisk, which offers person to person funds transfer and cash in and cash out options in branch.

Sagicor Bank offers MyCash Jamaica, described as a physical and digital prepaid, is in collaboration with Digicel.  The card can be used to collect remittances, pay at point-of-sale terminals, and shop online.

Don Wehby, Group CEO of GraceKennedy Group Limited on Monday, told Loop News that his company is working on delivering an improved product.

“GK MPay was previously licensed under Bank of Jamaica’s Electronic Retail Payment System 2 (“ERPS 2”) Guidelines. We decided to improve and re-launch the product and were working towards resubmitting our application under ERPS 2,” the group CEO outlined.  

He said also that he expects the next product to be launched, subject to regulatory approval, will be a pre-paid debit card “which will facilitate the electronic transfer of funds and support our drive to facilitate financial inclusion for all Jamaicans.”

“I am very optimistic that consumers will benefit from this pre-paid card solution, especially as we continue to operate in under COVID-19 conditions,” Wehby stated.

As of March 16, 2020 BOJ replaced the ERPS 2 guidelines with the Fintech Regulatory Sandbox Guidelines.  

“We are now in the process of completing our application under the new Sandbox guidelines for submission in 2020,” Wehby said.

The company head told Loop News that digital funds transfer is expected to increase in the transactional space.

“I have for some time been of the opinion that digital transactions are the future of the financial services sector. In support of this view, I have challenged the leadership of the GraceKennedy Financial Group to develop digital solutions that will make it easier for our customers to do business with us,” Webhy said.

GraceKennedy Group CEO Don Wehby

The BOJ was contacted by Loop News for an update, and one was promised. The central bank has been moving towards opening up the electronic payments space.

Early in 2020, the bank started recruitment of a tech firm to develop a new  ‘switch’, which the requests for proposals says is intended to “consolidate all electronic transactions and channel these transactions to one or more payment processors for authorisation and settlement”.

There some reports of an increase in mobile money fraud under COVID-19, with mobile account holders being tricked into sharing their pin numbers.

But, professionals in the transactional space remain bullish about how mobile money can not only aid social distancing but also grow the economy.

Hutton asserts that the digital solution will widen participants in the real economy, allowing people who are now without accounts to enter the national transactional space.

He recalled that CONEC, the first central bank approved Mobile Wallet Platform when it was introduced.  The mobile wallet offered P2P - person to person transfers, Merchant Payments, Bill Payments, Top-up services and remittances.

All features, he notes, would have been very useful today, with the advent of the COVID 19 pandemic.

Hutton stated, “How much easier it would be for people to receive money, even that being offered via whatever stimulus packages, PATH, etc. Within minutes customers could receive their digital cash to ease their current burdens without having to leave their homes.”

“There would be no lines at remittance agencies, post offices and financial institutions as deposited could be placed directly to individual's mobile wallet giving them access to funds and markets 24/7.”

Hutton said, “Cash presents the single most highly contagious carrier of germs, it's costly to manage and is by far the major stimulus for criminal activities.”

He concluded that has CONEC been adopted, “we could by now truly identify as being a digital economy.”

The finance specialist pointed to the recent amendment of BOJ regulatory frameworks as a promising development for payments innovation.

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