Nadine Maitland | Is Jamaica ready for mobile payment systems?

As Jamaica seeks to take advantage of the opportunities in the digital economy, the use of a mobile payment gateway is a huge part of the process. Mobile payment (m-payment) can be defined as any type of payment that is processed using a mobile device to initiate, confirm, and authorise an exchange for goods or services. Using these virtual/digital currencies is convenient as it takes the hassle out of transacting businesses and facilitates payments on the go.

Today, most countries associated with the international monetary fund (IMF) are considering the implementation of digital currencies, with a focus on resilience and financial inclusion. Digital currencies can be centralised or decentralised. The decentralised currency value is determined by the people who use it and does not depend on any third party to function or operate. Cryptocurrencies are great examples of decentralised currencies.

The centralised currencies derive their value from an issuing authority. Centralised currencies are backed by a government or central bank, classified as a legal tender. Many countries, including Jamaica, have implemented centralised bank digital currencies (CBDCs) for various reasons. A fintech article titled ‘Behind the Scenes of Central Bank Digital Currency Emerging Trends, Insights, and Policy Lessons’ by Gabriel Soderberg lists some of the main reasons for the implementation of CBDCs. These are greater financial inclusion focused on facilitating and promoting appropriate and affordable financial services, poverty reduction, more efficient payment processes, improved resilience of the local payment systems (considering things such as natural disasters), and a reduction in the illicit use of money.

FINANCIAL INCLUSION

For the most part, the introduction of mobile money is aimed at financial inclusion and targets the unbanked population since the main tool for this transaction is a cellular phone. However, research indicates that most early adopters of this technology are educated and are bank account holders. Locally, the unbanked, those in remote places, and those unable to afford data remain excluded.

A CAPRI 2022 report indicates that 45 per cent of wage-earners receive payment by cash or cheque, and 72 per cent of this population prefers cash as it facilitates ease of payment. The report noted that the need for reliable Internet was a great concern for individuals and companies that prefer using cash when doing business or making payments. Digital currencies can revolutionise the way we do business and reduce the need for cash transactions requiring large sums for both individuals and businesses. However, its success depends heavily on reliable Internet services. Internet service providers must step up their game.

Although the Internet penetration rate is said to be at 68.2 per cent, the quality of the service is substandard. The COVID-19 pandemic was testimony to the inadequacy of our Internet resources. There were days when it took several minutes to get an internet connection. Since resuming face-to-face business for the most part, connectivity issues persist, though to a lesser degree.

A Jamaica Digital 22 report indicates that at the beginning of 2022, Jamaica’s total Internet penetration rate was 68.2 per cent. This means that 31.8 per cent of the population remains offline. The rural parishes are the most affected by the lack of connectivity. Even though 43 per cent of the population lives in these areas, they remain severely underserved digitally. Persons living in areas that are hard to reach and in which it is unprofitable for private companies to invest capital are excluded. With the current infrastructure, it can take up to 15 minutes to complete a transaction using digital currency in certain geographical locations. Long delays in completing transactions can result in security issues, which increases reluctance to adopt digital transactions. Digital inclusion cannot be ignored unless Jamaica is only concerned with urban communities.

DIRECT RELATIONSHIP

Since there is a direct relationship between dependable and stable Internet and the success of the mobile payment systems and digital currencies, improved Internet and data service are key to the expansion and effectiveness of this offering. If we are serious about becoming a cashless society, addressing the internet connectivity level should be a top priority for the Government.

The use of digital currencies does not necessarily require Internet connectivity. It will, however, need some form of technological communication channel such as mobile data service to complete these transactions. The COVID-19 pandemic revealed the dismal state of Internet connectivity. The service providers were “on the ropes” as the demand for bandwidth increased. The quality of service was often mediocre, especially when online classes were in session and persons were working. These are the busiest times for most merchants.

Being offline from the Internet raises the need for connectivity via local networks such as a Bluetooth connection. Some early adopters of CBDCs emphasise the need to facilitate offline payments in areas where there is patchy Internet service. The Bahamas and Sweden have experimented with offline transactions.

The Bahamas, in their early adoption of CBDCs, encountered challenges in achieving offline transaction goals due to the required introduction of local redundancies to the main communication system. A Swedish team is developing and testing a proof-of concept to address some of the prevailing offline issues. At this time, offline transactions do not appear viable.

Recent announcements regarding a new provider give a glimmer of hope. We seem to be great at making announcements, but implementation of these projects is usually woefully inadequate. The Government’s recent announcements to invest in improvement of Internet infrastructure is ambitious. However, Internet connectivity for everyone will take a very long time and will require strategic planning and thinking outside of the box. My hope is that we will address these issues with intentionality and that this is not another pipe dream.

Nadine Barrett-Maitland, PhD, is senior lecturer at the School of Computing and Information Technology, University of Technology, Jamaica. Send feedback to columns@gleanerjm.com.