Friday, July 5, 2019
By NEIL HARTNELL
Tribune Business Editor
The government has been urged by the International Monetary Fund (IMF) to prioritise introducing electronic bus tickets as a means to encourage Bahamians to switch to electronic payments.
The fund, in a just-released assessment of the Bahamian payments system, said this was “a great opportunity” for generating confidence and trust in electronic payments among Bahamians given that bus fares were among the highest-volume forms of cash transactions.
“Given that payments for bus tickets constitute one of the large use cases of retail payments (in terms of volume) in the country, the introduction of a digital ticket presents a great opportunity for advancing the usage of electronic payment instruments,” the IMF argued.
“This could also help users of the public transportation system gain trust in the electronic payment means, and also potentially start using them for other purposes in their daily transactions. The fact that the Ministry of Transport is already considering this option constitutes a first step in the direction of a digital transportation system.”
It continued: “The bus transportation system in The Bahamas functions entirely on cash. Bus tickets constitute one of the use cases with a high potential in the country given that there are approximately 400 buses covering the equivalent number of routes.
“Presently, the Ministry of Transport outsources the different routes to private franchise based on an annual permit. Despite the fact that the different routes are covered by different bus companies, the ticket purchase/collection method is common given that a flat fee ticket charge is collected in cash by a bus conductor from each passenger.
“However, the Ministry of Transport plans to get involved in working together with the bus franchises in order to explore the possibility of a plan that would digitise the ticket system and introduce the infrastructure needed.”
Renward Wells, minister of transport and aviation, seemed to indicate during his recent 2019-2020 budget presentation that while tickets and alternative payment means to cash are options, such a move as recommended by the IMF is not leading proposed reform efforts currently.
Confirming that the Cabinet had agreed in principle to launch a unified public transportation pilot project for route 17, via the United Public Transportation Company, he said: “The public transit service will operate along the fixed route according to a pre-determined schedule. The service will be provided by modern, clean buses, and users will board buses at designated bus stops or at other locations as directed by the ministry along the route.
“A fare will be charged for all trips taken on the transit service. The fare structure is applicable to each one-way trip and applies to all customers. All fares are by exact change, cash, on a ‘pay as you enter’ basis. Fares must be deposited by the customer into a fare-box on the bus. Bus drivers may not handle or deposit fares on behalf of customers except when the customer is unable to do so due to a disability,” Mr Wells added.
“My ministry will reserve the right to alter the fare levels, fare structure, to introduce zones and to offer fare reductions or to introduce alternate fare payment methods (tickets or passes) as it deems appropriate.”
The IMF, meanwhile, also proposed that The Bahamas create a “basic bank account” with lower opening fees and Know Your Customer (KYC) identification requirements as a means of luring the “unbanked” into the formal financial services system.
“Banks charge a fee for opening an account, maintaining an account, as well as for ATM cash withdrawals,” the IMF report said. “According to a Central Bank survey on consumer satisfaction pertaining to banks, the average monthly fees associated with an account vary between $5–$19.21.
“Based on the same survey, 40 percent of the respondents reported that they do not understand the structure of the fees they are charged. Moreover, 78 percent of the respondents find overall fees to be high and somewhat high, with the ATM withdrawal fees being the most commonly viewed as costly.”
As a solution to this and associated barriers, the Fund proposed its “basic bank account” idea. It said: “While the unbanked population in The Bahamas is driven by different reasons, one of them is the fees associated with opening and maintaining a bank account for those under low income.
“As such, The Bahamas could benefit from the introduction of a ‘basic’ bank account with simplified identification requirements that would allow for initiating and receiving payments, at low fees, for those individuals that have never held an account before. This type of account be based on the model introduced in the Payment System Directive 2 (PSD2) in the European Union.
“While the pricing will be up to the banks, in determining the pricing structure for usage and other features of the basic account, banks should bear in mind that their key target population are poor individuals for which a minimum balance requirement is not likely to be a viable option, and which in addition may potentially receive some type of social transfers from the government.
“In any event, these basic accounts will make it possible for the respective target populations to transfer (receive) funds and pay electronically to/from as many parties as possible, but in particular to/from those parties with which these individuals transact regularly for routine issues.”