How Mobile Money is Set to Increase Financial Inclusion in Jamaica

January 5, 2021
The presence of financial services improves the economic condition of a country. Financial institutions in Jamaica have explored ways of introducing mobile money and increasing financial inclusions in Jamaica.

Globalization, internet connectivity, and a proliferation of cheap bandwidth, have brought outstanding changes in the world. The continuous changes in digital technology and digitization have brought new opportunities for individuals, groups and organizations. It has brought to bear a better way of interacting and behaving with one another. For mobile phones which are now the backbone of access to the digital world, the prevailing theme in their evolution has been a shift away from availability to affordability and adaptability.The smartphone has become the means to connect to the world, gone are the days when telex, snail mail, and even telegrams were part of the connectivity value chain. 

A recent research piece made mention of this fact-

"Two billion people from poverty-stricken areas, who make up 40% of the world's population, have a mobile phone, but they lack a basic necessity: a bank account."

Why is this the case? It’s a resource constraint issue, people don't have enough resources to open or maintain bank accounts and/or banks don't get decent margins by operating in such locations or targeting a particular group of people.

The signalling effect of bank’s unwillingness to serve vast populations in their territories solely because they are unprofitable, acts as a brake on prosperity, preventing people classified as poverty-stricken or below the poverty line to improve their lifestyles. The growing wealth gap between the banked and unbanked and exclusion from the formal financial system limits the chances of attaining middle-class prosperity. We need to increase the inclusion of these people in our societies, and understand the factors behind this wealth gap, we have highlighted a couple: 

  • Reliance on the banking network for funds transfer
  • The stringent rule in opening a bank account and requirements
  • Limited money to open and maintain a bank account
  • Less requirement of bank account for banking facilities

Financial inclusion improves and bridges the gap created by formal financial systems. It is a key factor to reducing poverty and accelerating the transition from developing to developed country.

Financial services play a vital role in that transition, and access to it ensures that households and businesses can improve the quality of their life, regardless of their income. Upcoming models and innovative trends have given access to the poor to use financial services. We see two industries most ripe for disruption by modern technologies: telecommunications and banks. 

Financial services through mobile phones have aided the individual to strive to be present in a financially connected world, and it also helped in overcoming barriers to financial inclusion, which have been constantly increasing, due to factors already mentioned in this post. A metric which we now obsess on that captures the geometric decline in financial inclusion, is mobile penetration in developed countries. The higher the rate of mobile penetration the higher the rate of financial inclusion.

Adoption of digital payments in Jamaica

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Suppose if you are in Jamaica, and you want to receive payments through popular service providers like PayPal or Stripe, you need to set up a US bank account, and perhaps you have to set up a wire transfer to send money to your local account. Well, this is neither convenient nor efficient. We will discuss the issues and let's study how we can adopt digital payments in Jamaica. 

In 2016, the Jamaica national financial inclusion system (NFIS) came up with a four-pillar strategy, namely; financial access and usage, financial resilience, financing for growth and responsible finance. Our main focus is on the first one "financial access and usage". This supports payment being digitized, electronic transactions, and innovative techniques that foster such payments.

With a 2020 vision, the NFIS was created to achieve an inclusive financial system where every adult can access a full range of adequate, quality and affordable financial services. Much work has been done in the past few years, but still a few challenges remain, and out of it the one constant is continuous low usage of accounts and electronic transaction instruments. Experts contend that the reason might be the high cost of putting up infrastructure on the island. 

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How mobile technology makes financial inclusion possible

As per a recent survey, over 95 per cent of Jamaicans use data-enabled mobile phones, and out of them, many don't have bank accounts. Well, they are not alone, according to the World Bank there are 2.5 billion people who are mobile phone subscribers but are unbanked.

Mobile phones represent the solution to financial exclusion as they eliminate the need for a physical presence to conduct a transaction, gives instant connectivity and enable data to be stored safely in an encrypted format. What more can a user demand? Jamaica is an ideal example of an early stage adopter of national mobile money transfer.

Let's learn what mobile money is and how it plays an important role in the life of Jamaicans.

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Mobile money means a mobile payment or mobile money transfers and mobile wallet, which keeps money in electronic accounts associated with the unique mobile number of telecom subscribers. As the reach of telecom operators is more extensive and constantly increasing beyond the established boundaries set by the formal banking sector, mobile money offers low-cost solutions to financial sectors.

N2Xpress offers digital payment and money transfer options to users who have limited or restricted access to traditional banking and have limited or zero financial transfer knowledge. Easy access to mobile financial services enables users to benefit from mobile money.

The presence of financial services improves the economic condition of a country. Financial institutions in Jamaica have explored ways of introducing mobile money in Jamaica. Let's see what constitutes a mobile money service and attendant benefits: 

  •  Mobile money brings convenience for cashless transactions. It allows users to do transactions using their cell phones.
  • It is operated under strict guidelines and financial regulations. It would be best if you never shared or reveal personal information like PIN or Password to anyone.

Benefits of mobile money;

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  • It is not just limited to a subscriber holding an account but comes with a payment and e-commerce solution. 
  • It facilitates bill payments, whilst making payments to merchandisers anywhere, anytime using stored value accounts.
  • It also allows for peer-to-peer transfers (P2P). A user or subscriber can carry out monetary transfers between two account holders; it can be Agent-to-Agent, User-to-User or Agent-to-User.
  • P2P transfer requires strict compliance rules, comprehensive KYC, user traceability and transparency.

State of mobile payment in Jamaica

In recent research by the Jamaica Observer, "The National Commercial Bank (NCB) Jamaica Limited Quisk mobile money product is the only mobile wallet operational in Jamaica authorized in 2016.

March 2020 the BOJ released new updates in its Fintech Regulatory Sandbox Guidelines. Electronic retail payment is fostered and regulated by BOJ.

Final thoughts

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New solutions will emerge especially as the COVID-19 pandemic has forced Jamaica to become more digitized. However, this will not happen in one go. It will take several iterations to implement technologies like PayPal for online checkouts, Stripe for the Pppayment gateway and N2Xpress for instant money transfer platform which allows peer-to-peer payment using mobile devices.

There is a lot of hope and development expected in mobile money in Jamaica as more users are expecting to be able to send money domestically and internationally, quickly, cheaper and more securely than ever before. Let us know what you think about the development of mobile money and how mobile money is promoting financial inclusion in Jamaica.

Send more than money.