Promoting mobile financial services
With Barbados and most Caribbean countries struggling to experience favourable economic growth, regional governments are being told that the development of a mobile financial service system has the potential to impact positively on their Gross Domestic Product (GDP).
This observation came from Dr Maurice McNaughton, director at the Centre of Excellence for IT-Enabled Innovation at the Mona School of Business, who told participants at a one-day seminar this was based on research carried out in Jamaica about four years ago.
The University of the West Indies, Mona Campus official was speaking at the seminar dubbed ‘Prospects for Mobile Payments in the Caribbean: A Public/Private Partnership Perspective’, held at the 3Ws Oval.
Making reference to a 2011 mobile market research carried out in Jamaica, McNaughton suggested that one of the reasons regional economies were “stuttering” was because people did not have “transactional accounts” whereby they were able to carry out mobile payments and mobile money transfers.
Using government agencies as one example, McNaughton argued that through such a system regional governments would save millions of dollars on administrative costs and also save time, which would ultimately lead to increased productivity.
“It could significantly reduce government operational cost [and] provide a stimulus for financial inclusion . . . it is about using a model of a mobile payment services provider that delivers those payments on behalf of the government. Those payments are made out through this provider and beneficiaries have their mobile wallet or whatever you want to call it, and they get a notification ‘your payment has been made’, and you can go and cash it out at a cash out point or whatever you want to do with it,” McNaughton explained.
“In our economies, government is by far the largest employer, the largest transactor, the largest purchaser, so they exert their due influence on the efficiency of the economy.”
McNaughton said the government therefore had a significant role to play in the establishment of such mobile transaction system.
However, he acknowledged that such a move would require the right mix of regulation, guidelines for competition, policy and consumer protection, as well as establishment of standards.
In addition, McNaughton said there would be a need for a business model, consumer readiness and research.
“And importantly governments can drive volume,” he added.
He noted that for over five years Jamaica has been struggling to implement a system based on a model in Kenya known as the M-PESA. However he said done of the challenges facing the region was “we are just too cautious rather than adaptive”.
McNaughton also suggested that the region learn from mistakes, best practices and guidelines from countries that have either tried or succeeded with similar projects including Mexico, Haiti, Brazil and Kenya.
“I think it is something worth talking about.
“The evidence is clear in other places that mobile financial services can impact development and influence GDP. We won’t get into what the rates are,” he said.
However he insisted that if the region was able to improve commerce by at least 20 per cent that would have a significant impact on economic growth.
According to him a critical part of the decision regarding a mobile transaction system was to determine who would build and operate it.
“Is it the central bank, is it Government, is it private sector? That is the fundamental question. We know it is a good thing to do but how do you do it, how do you make it happen? That is the question that confronts us,” McNaughton said.