If done correctly, digital payments systems could be a major lifesaver for Barbados’ dwindling foreign reserves, a respected economist has told Barbados TODAY.
The former head of the Barbados Economic Society (BES) Jeremy Stephen said that should Government’s pilot project for a digital payment system go as planned, it could ease substantial pressure on the country’s scarce foreign reserves.
If the platform was to be extended across the region, there would be no need to use US currency to facilitate payments between Caribbean businesses, he argued.
“It definitely will save foreign because it allows for more cross-border transactions. With the exception of EC [East Caribbean] jurisdiction, in order to do a bank transfer to another Caribbean country we currently have convert local dollars to US dollars first, then to the currency of the destination country. With these types of platforms you could easily exchange Barbados dollars directly for let’s say Jamaican,” Stephen said in an interview with Barbados TODAY this morning.
On Tuesday, the Prime Minister disclosed a planned Barbados mobile wallet pilot project, to be known as mMoney, between local fintech firm Bitt, the Central Bank and the Financial Services Commission, at Bitt’s second annual blockchain conference. This project would see Government providing a network for digital payments for Barbadians, the first of its kind for the Caribbean.
At the conference, Bitt CEO Senator Rawdon Adams complained of the reluctance of some unnamed commercial banks to embrace Bitt’s proposal to partner with them in introducing this form of artificial intelligence in moving money between clients.
Insisting that the mMoney was not a competitor but a complement to the financial services industry, Adams said there was a mixed reaction from commercial banks with some being “sympathetic”, others not knowing what to make of the mobile wallet and others being “hostile”.
“We are seeking to demonstrate what hundreds of merchants and now thousands of users know already, that digital currency is ready to be used as a complement to existing payment methods both in Barbados and across the region,” he said.
At least one banker had referred to the mMoney wallet as a “potential danger to the financial system”, Senator Adams said, which represented a anti-competitive stance.
But Stephen pointed out that for such a platform to expand, there would be opportunities for banks to get their share of the facilitation fees. The economist and University of the West Indies lecturer also argued that the platform has the potential to cut the transactional cost for commercial banks as well as help them to better manage their foreign exchange.
“Similarly to Carifs [the Barbados-based banking machine network provider], the commercial banks complained that they had no control over this thing but over time they realised that it allowed them to drop transactional cost between themselves for a number of reason.
“The same can happen with Bitt where you build a network, which allows them via the central banks to talk to each other directly. It therefore allows these commercial banks to reserve their foreign exchange for businesses that are importing from the United States,” Stephen explained.