By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

“Free” Sand Dollars will be issued to incentivise early adoption of a Central Bank-backed digital currency that remains “on the runway”, its governor said yesterday, despite a 305 percent circulation increase during 2021.

John Rolle, addressing a seminar organised by Royal Bank of Canada (RBC), said the payments regulator plans to drive increased usage by targeting what he described as a “subset” of consumers with no-cost Sand Dollars to encourage them to conduct digital transactions via their cell phones.

“We’re basically still on the runway in terms of the level of use and circulation,” he explained of the Sand Dollar. “What we do around adoption becomes critically important. We do have a programme to pull the commercial banks into that space. We’re working in this space.

“From the Central Bank’s point of view, there’s going to be a deliberate marketing effort to invest in early use by consumers. There will be a sub-set of early adopters the Central Bank will give free Sand Dollars to so they get experience with using their mobile phones and conducting electronic transactions.”

The Central Bank’s 2021 annual report, released earlier this year, admitted that Sand Dollar adoption efforts had “still moderated” with some $300,000 worth of the Bahamian digital currency in circulation at year-end compared to around $80,000 some 12 months prior.

Harry van Schaick, Americas managing editor for the Oxford Business Group, the economic research consultancy, told the same webinar that the amount of Sand Dollar digital currency in circulation had increased by 305 percent during 2021. This compared to a 56 percent surge in the COVID-hit prior year and a 5 percent expansion in the 2022 first quarter.

Mr Rolle, meanwhile, while acknowledging that cash will never be fully eliminated as a means of payment, added that The Bahamas has some way to go in reducing continued consumer reliance on this particular mechanism.

Drawing on the results from recent Central Bank surveys, he said between “20 percent and 30 percent of consumers in The Bahamas are still using cash for all their transactions..... Our estimate is that 30-40 percent of all transactions in our economic space are likely being conducted in cash”.

The Central Bank governor also pointed out that “at least 90 percent” of Bahamians and residents are still employing cash to conduct some payment transactions, while some businesses are still meeting payroll via this mechanism or using a mix with cheques.

The transition to digital payment methods is also designed to enhance financial inclusion and access, especially among remote Family Island communities where commercial banks have long withdrawn from having a physical presence via a branch network.

Mr Rolle said it was vital that there be investment in The Bahamas’ telecommunications networks for financial inclusion to succeed by ensuring all citizens can conduct transactions via their mobile phone wherever they are in the country.

While more than nine out of every ten Bahamians possesses their own cell phone, he added: “We have to address access to data. Data has to be looked at in somewhat the same way we look at breadbasket items, food and other commodities in The Bahamas.”

Recalling Hurricane Dorian’s catastrophic impact on Abaco’s banking and financial services sector, the governor noted: “It took our financial institutions in many cases more than 12 months to get their physical infrastructure back up. In the digital space, the condition is how quickly the telecommunications infrastructure is restored.”

Mr Rolle also called for banks and other institutions to provide “digital kiosks” so that customers who cannot access the Internet and technology at home are not excluded from access to electronic transactions and payment methods.

The Central Bank’s latest annual report has detailed the increased adoption of digital payments among Bahamians, which was aided by COVID-19 lockdowns and other restrictions that forced many persons to work and remain at home.

When it came to large transactions processed by the commercial banking sector’s Real Time Gross Settlement System (RTGS), the report said: “In 2021, the number of transactions cleared through the RTGS system increased by 28.2 percent to 273,115, albeit the corresponding value declined by 20.8 percent to $36bn. In contrast, the previous year recorded a 41.4 percent expansion valued at $45.5bn.”

As for the Automated Clearing House (ACH), which handles smaller transactions, it added: “The volume of these transactions grew by 7.6 percent to 3.4m, while the corresponding value expanded by 39.2 percent to $5.8bn. This extended the prior year’s 13.6 percent growth in value.

Over the review period, cheque usage remained subdued, with the exception of large-value transactions. More specifically, the number of processed cheques declined by 7.6 percent to 1.2m, while the attendant value fell by 6.8 percent to $4.2 bn year-on-year.”

Turning to debit and credit cards, the Central Bank added: “Cemented by changes in consumer behaviour and commercial bank policies as a result of the pandemic, during 2021 the volume and value of debit card activities expanded by 41.5 percent to 17.6m transactions and by 14.3 percent to $2bn, respectively.

“Although the total number of ATMs deployed grew modestly by 1.8 percent to 388 terminals, and usage firmed by 1.8 percent to 8.1m transactions, the corresponding value decreased by 7 percent to $1.9bn year-on-year.”