BRIDGETOWN, Barbados, CMC – The senior financial sector specialist at the World Bank, Nicholas Smith, said Tuesday that Caribbean countries are lacking in the implementation of fast payment mechanisms that have proven to be a breakthrough in business transactions globally.
“Fast payments, as they are also known, are everywhere now…roughly in 120 countries, but in the Caribbean we are not there yet,” Smith said at the launch of the Central Bank of Barbados (CBB) national instant payment system, named “BimPay”.
He mentioned that a couple of jurisdictions have some form of the payment system, and the reason this matters is not to keep up with the Joneses…because not having the system makes life more difficult.
“Think about everybody’s life, your grandma, the taxis, sending money to your family. It’s a bit of an inconvenience, and it is great to see the Caribbean starting to take action on this, with Barbados leading the way in these reforms.
‘We are encouraged to see that because there are so many benefits that we are seeing. Look at what’s happening in Brazil, Paraguay is doing a lot, El Salvador has done a lot, Costa Rica has done a lot, and it is making everyone’s life better”.
Smith said that in Brazil, nine out of 10 businesses use instant payments, and “we are talking from the fruit vendor to the car repair man.
“And so this is something for everyone. This is not just for the select few; what we have seen in successful reforms is that central banks are increasingly leading the way, providing the public good and then allowing financial institutions to plug in and use it.
“It is not like the central bank, in one way, is providing a public service but then giving this platform so that so much market development can be driven by the financial institutions tailored to the needs of their consumers”.
He said another positive effect of the system, as identified in the countries where it is in operation, is the public and private engagement dialogue, including the consultative process, bringing together the key stakeholders, and “so everybody is part of this process of driving the digitalizing payments in the economy”.
He noted that the system’s implementation also fosters competition. “In all the cases where it is taking off because you’ve got now all financial institutions that can offer the same services as the big banks with this market development.”
The CBB said that the launch provided it to introduce the system’s name and logo, and outline plans for a comprehensive public education programme to prepare Barbadians for its introduction.
It said that the IPS will allow individuals, businesses, and government to send and receive payments within 10 seconds, with the recipient being able to access the funds immediately upon receipt.
The CBB said that the system will also be fully interoperable, removing barriers that previously limited such transactions to between individuals who banked with the same financial institution.
Central Bank Governor, Dr. Kevin Greenidge, told the ceremony that the new payment system will give consumers a choice.
“First, from the financial institutions’ perspective…the cost of doing it on your own is expensive as a financial institution. There are a lot of things to consider when setting up a payment system as a financial institution.
“But the central bank taking on that role, providing the infrastructure and putting that in place, allows a financial institution, any fintech, and innovative person to set up a financial services…,” Greenidge said.
He noted that, for example, a credit union could collaborate to establish its payment system. By reducing the cost of the technology that the financial institution would need to implement, it could pass those savings on to its customers.
“What we have also seen…it is choice. The idea that we are looking to eliminate cash is not correct. We are giving you a choice. You can either walk with $ 500 to the supermarket or use your app to pay for your goods – that’s your choice.
“But what we have seen in countries that have done this is that over time the amount of cash people use falls automatically because you don’t have to worry about putting money in your pocket, and once you have your mobile device, you are safe”.
Greenidge said that the financial institutions are involved in “counting cash and somehow you will have to pay for it, so by reducing that amount, you could see the savings passed on to the customers.
“Just the digital revolution that this will bring will, in itself, reduce costs across the board, and so we expect to see those savings passed on, and it allows more players to enter …and more players will mean competition, and you will have to be more creative in the products they offer”.
Greenidge said that the CBB has taken the necessary measures to ensure the safety of BimPay, which will transform how payments are made in Barbados through its speed, inclusivity, and 24/7 availability.
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