By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank is aiming to implement initial regulations that will enable it by mid-2017 to license non-bank electronic payments solutions providers, as it bids to cause “a significant shift” from Bahamians’ reliance on cash.

John Rolle, the Central Bank’s governor, expressed understanding for Royal Bank of Canada (RBC) and Scotiabank’s decisions to exit certain Family Islands, as the Bahamas’ relatively small population size meant it was impossible to generate sufficient economies of scale and efficiencies from branch banking.

In e-mailed replies to Tribune Business questions, Mr Rolle confirmed that the Central Bank was looking towards electronic banking solutions, such as the Internet and mobile apps, to fill the void left by the loss of all commercial bank branches on islands such as Bimini and Spanish Wells.

Explaining the likely reasons driving RBC’s latest four-branch consolidation, he said: “In an archipelagic setting of less than half a million total population, provision of physical branch services will not achieve the level of efficiency that can be realised in larger, more contiguous market spaces.

“Electronic technology has to feature more in the cost effective provision of our financial services. In the case of the Family Islands, this means making it more cost effective to access e-payments related services for both consumers and businesses.”

Detailing the regulator’s plans for achieving this, Mr Rolle told Tribune Business: “The Central Bank’s emphasis is therefore now on facilitating expansion of e-payments services, which may also be provided through non-bank providers.

“We intend, before the end of the second quarter of 2017, to put preliminary regulations in place so that we can begin licensing such solutions providers. Considerable interest is being already being expressed by local firms to enter such markets.”

Mr Rolle’s response likely explains why Sebas Bastian, Island Luck’s chief executive, was so effusive in his praise of the Central Bank governor last week, describing him as “a very progressive thinker”.

He even alluded to the regulator issuing licenses to non-banks to provide electronic payments solutions, especially in the Family Islands.

For newly-legalised web shops are among the leading contenders to obtain such licenses, especially since they already have a physical presence throughout the Bahamas, especially in the Family Islands.

This, combined with the sophisticated gaming technology they employ, makes them a ‘natural fit’ to provide electronic payments solutions through affiliates, especially since they are already effectively in the money transmission business.

Other contenders for the licenses referred to by Mr Rolle are more conventional payments solutions providers, such as Cash N’ Go and Omni Financial Services, provider of the Mango card.

The Central Bank governor, meanwhile, said targets had been set to reduce Bahamians’ dependency on cash as their primary means of payment, arguing that this would help combat crime and improve personal and business security.

“The Central Bank has set a target of reducing domestic dependence on the use of cash over the medium-term. This is for all parts of the country,” Mr Rolle said.

“The infrastructures that permit this are likely to have the greatest positive impact in the Family Islands and among households, even in New Providence, where access to banking services might already be constrained.”

He added: “We have not set numerical targets for cash reduction yet. However we would like to see significant shifts, particularly in the Family Island communities.

“First, it will it will help to suppress criminal activities that thrive on the anonymity of cash. Indeed, electronic payments systems permit more traceability of financial flows.

“This is important in reducing the financial system’s exposure to money laundering. It aligns with a Caribbean-wide strategy to strengthen anti-money-laundering (AML) safeguards, and to portray our countries in a more favourable, low-risk light internationally.”

Mr Rolle continued: “Second, e-payments solutions are expected to reduce the cost of over-the-counter business transactions, and improve the record keeping process within businesses.

“Third, business can expect to better protect themselves against theft, as opposed to operating with cash.

“Fourth, the consumer users of non-cash services can employ safeguards that better limit their losses from theft as compared to porting or storing cash.”

The Central Bank governor emphasised that the regulator saw improved Bahamian access to financial services “as most achievable through non-traditional delivery channels”.

“A key focus in encouraging persons to make use of electronic banking platforms is to increase their comfort in the safety and security of the platforms,” Mr Rolle said. “As part of the Central Bank’s financial literacy campaign, we will be developing targeted messaging around how consumers can protect themselves against cyber fraud; the kind of precautions they should take to monitor their financial accounts on a real-time basis; and the practices they can adopt to avoid being victims of phishing.

“We already monitor our licensees to ensure that they adequately manage technology risks. This also speaks to a perspective from which confidence must be upheld in the system. The current supervisory framework, therefore, monitors how commercial banks and other licensees manage technology risks, including the security that licensees place around sensitive systems and data.”