By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Central Bank is aiming to roll-out a 'test' digital Bahamian currency by 2021, the Deputy Prime Minister disclosed yesterday, while slamming the banks for "forcing" electronic banking.

K P Turnquest, in an address to the ComplianceAid Caribbean Anti-Money Laundering Conference, accused the commercial banks of pushing Bahamians to 'run before they can walk' on the adoption of digital/mobile banking.

While acknowledging that Bahamians "have to bite the bullet as a culture", and embrace such technology as the future of financial services, Mr Turnquest said the commercial banking sector had done too little to address customer concerns and ease the digital banking transition.

He suggested that the industry's actions were based on data showing the Bahamas enjoyed 84 per cent mobile penetration, arguing that this was misleading given problems with consumer financial literacy and "mistrust" of both the banks and electronic banking channels.

Pledging that the Government and Central Bank were taking the lead in moving the Bahamas to electronic banking, the Deputy Prime Minister pointed to the regulator's plan to introduce a digital Bahamian dollar as part of its strategy for an "accelerated shift" to reduce cash-based transactions.

"Within 24 to 30 months, the Central Bank plans to roll out a piloted version of a digital domestic currency in several underserved rural communities that will likely be serving as case studies," Mr Turnquest said. "The new digital identification system, an essential precursor, will be piloted for use within the financial services sector as part of this initiative."

Suggesting that the Government's facilitation of online tax payments and permit applications would also aid this process, Mr Turnquest added that commercial bank branch closures in the Family Islands had driven home the urgency for the Bahamas to move to digital banking channels such as mobile and the Internet.

Royal Bank of Canada's (RBC) impending exit from both North Andros and Long Island threatens to leave those locations without a full-service physical bank presence, but the Deputy Prime Minister acknowledged the bank's rationale for making such decisions.

Acknowledging that this was based on "cold economic calculations", Mr Turnquest nevertheless said Bahamas-based commercial banks had not done enough to prepare Bahamians for the digital banking future they must now embrace.

"Some banks are not just signalling the future of banking," he argued. "They are moving full steam ahead on that trajectory, forcing their customers to get on board or get left behind, and feeling justified, based on the level of Internet and mobile penetration in the Bahamas.

"We understand this position. But in our view, the banks could be more progressive and socially engaged to help facilitate the cultural adoption of technology. In the Bahamas we still have challenges with financial literacy, public mistrust of financial institutions and phobia about using electronic transactions.

"Indeed, in 2013, mobile penetration was at 84 per cent, but this implies a level of technological adoption and comfort that is not the cultural reality," the Deputy Prime Minster added.

"Bahamians might be well accustomed to mobile usage for social and entertainment purposes, but the leap to digital banking is exactly that: It is still a leap for a population that still has large segments without access to basic deposit accounts."

Mr Turnquest, though, warned Bahamians that they will not succeed in holding back the tide, and must embrace digital banking as a means of improving efficiency in commercial transactions, reducing associated time and costs - especially in the more remote Family Islands.

"We do have to bite the bullet as a culture to realise the promise of technology," he said. "And that promise has always been allowing a person with a phone, and access to the Internet, the ability to use their phone as a digital wallet to securely conduct transactions in a relatively secure and traceable manner. This would really set the table for a different kind of Bahamas in so many ways."

Bahamian e-payment providers, such as Omni Financial Group and its competitors, already offer such products and services, and have made no secret of their desire to fill the vacuum left by commercial bank pull-outs from the Family Islands.

"Across the Bahamas, the branch network for commercial banks is decreasing. And, if we are really looking to the future with open eyes, we should expect that to continue," Mr Turnquest warned. "Globally, the banking strategy is digitisation, and banks are moving at breakneck speed.

"The Bahamas, in particular, has set a target of moving substantially toward a digital cashless economy, so that our most vulnerable communities in the Family Islands and our low income populations, in particular, are guaranteed access to financial services. As a government we are fully mobilised to achieve a digital populace and a digital economy."

Mr Turnquest cited Acklins as an example of one Bahamian island where economic and social development were held back by its "unbanked" status, with no financial services provider supplying a physical presence. This, he added, resulted in problems of financial inclusion and the uneven distribution of wealth throughout the Bahamas.

"This island has a small population with limited economic opportunities. However, there is a micro tourism industry in Acklins with tremendous potential," the Deputy Prime Minister said.

"The Bahamas is the largest fishing area for bonefish in the world, with nearly 20,000 acres of bonefishing flats. Some estimates value the local industry at $500 million. Acklins is home to the country's second largest bonefishing flats, but it is unable to maximise its participation in the industry.

"The fact that the island is unbanked is only one factor, but it is an important one. The inability to access even the most basic financial services stifles the growth of this high-value micro sector, and overall investment and development on the island."

With some 30 per cent of the Bahamas' population living in the Family Islands, Mr Turnquest said these persons "need to feel the benefits of financial inclusion".

"How many people remember a time when money was stored in a jar that you buried in the backyard? Coming from societies that fashion ourselves modern, it sounds like a practice from our ancient past," the Deputy Prime Minister said.

"For residents of Cat Island, a population centre in the Bahamas' southern region, access to cash deposits is no laughing matter. It has only been 10 years since Cat Island got its first commercial bank. One local business owner remembers his father's practice of keeping money under the mattress.

"While the business owner uses the local bank to operate his gas station today, his father, when he was a farmer some 20 years ago, had to find creative ways to store his cash. Some on the island resorted to burying their cash in the backyard. It was not so long ago that Cat Island operated bankless, and the residents haven't forgotten."