By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian payment providers could join forces to submit one combined bid on a Central Bank contract that promises to “revolutionise the payment system” in this nation while generating improved financial access and inclusion.

Nicholas Rees, Kanoo Pays' chairman and co-founder, told Tribune Business that the Central Bank’s release of a request for proposal (RFP) seeking solutions for a Fast Payment System (FPS) can “put The Bahamas back in the lead in the digital payments space globally” by providing a way to integrate the traditional banking system with all other payment methods - including the Sand Dollar, the country’s digital currency.

The Central Bank, in the bidding documents, reaffirmed it is seeking an electronic solution that “enables real time payments” in the Bahamian domestic economy linking the commercial banks’ automated clearing house (ACH) and real time gross settlement system (RTGSS) with the Sand Dollar for full inter-operability.

“This will further revolutionise the payments system and enable greater access for Fintech (financial technology) and evolved solutions to connect with traditional financial infrastructure,” Mr Rees told this newspaper. “It’s going to enable further innovation and, in future, a more efficient payments system inclusive of the existing Sand Dollar infrastructure.

“It’s an opportunity and I’m going to look into it now. It just came out today [Friday], but from what I understand it’s an opportunity similar to other jurisdictions. It’s a more efficient way to pay and settle among institutions. It’s designed to transform the payments infrastructure. We’re excited about it and I hope to participate in it.”

Mr Rees disclosed that he and Kanoo are open to partnering with other, rival Bahamian payment providers to submit a joint consolidated bid to the Central Bank in a bid to ensure the Fast Pay System solutions is designed and installed locally with the financial benefits and intellectual property remaining in this nation.

“Our position is that we wish to see an amalgamation or partnership among the payment services providers,” he told this newspaper. “I hope we come together and submit a response to the RFP. That’s the goal we have at Kanoo.

“We see ourselves as a Bahamian institution and entrepreneurial innovators in the industry, and with other stakeholders in the industry we see ourselves best position to foster inclusion, foster innovation and drive lower costs. We can do it as well as any international conglomerate. With this competitive bidding process, hopefully we can put together a solid solution. That’s where we are at. We see a lot of opportunity. It’s an exciting time for us in the payment industry.”

Other sources, speaking on condition of anonymity, told Tribune Business that much would depend on the Central Bank’s reaction to a combined bid by the Bahamian payment providers given that - if their solution was chosen - the Fast Pay system will be built and maintained by the same entities that use it as operators. They suggested there could be a potential conflict between being an operator and owner of the very same payment infrastructure used in their businesses.

However, Mr Rees added of Fast Pay’s benefits for Bahamian consumers and businesses: “It should enable quicker, faster settlement of payments at lower cost, and lead to greater inter-operability between the Sand Dollar and the banks’ real time gross settlement system (RTGSS).

“I see even in the future possible international connection with international networks. With the technology that exists, and an innovative approach, we are capable of designing to fit the regulations. We can put ourselves back in the lead in the digital payments space globally.

“We welcome this and look forward to offering ourselves as a collective with some of our industry competitors to design and put our best foot forward. For the payments industry it’s going to further enhance our inter-operability and ability to interact with financial institutions in making the ease of moving money, let’s say, smoother, more efficient and at lower cost.”

Mr Rees said the Fast Pay System will also assist in “solving the Family Island challenges, connecting Sand Dollar wallets through authorised financial institutions (AFIs) to bank accounts and extending the tentacles of the banks to the Family Islands without having to have physical infrastructure.

“This is all in line with driving financial inclusion, and putting a more efficient industry in place supported by evolving technology,” he added. “We’ve been looking forward to this and and have been having some interesting conversations.

“It gives us an opportunity to come together as a payment industry in the country, as regulated operators in the same area, and gives us an opportunity to collaborate as Bahamians and put together a Bahamian solution for a Bahamian problem and work together. We are confident we can put together a strong position and response, and we look forward to assessing the RFP.”

One payments industry source, speaking on condition of anonymity, said the Central Bank appears to be seeking a Bahamian version of Zelle, which is the system employed by US banks and credit unions to ensure swifter, faster payments and settlement for small transactions at lower costs.

They suggested that the Bahamian banking regulator is also seeking a Fast Payment Systems solution because it is dissatisfied with the pace of adoption of the Sand Dollar, the Bahamian digital dollar that is backed by the Central Bank. They added that commercial banks viewed it as a competitive threat and, as a result, were slow to integrate it and reluctant to invest in modernising their systems and building the necessary apps. The new proposed solution will now integrate Sand Dollars and electronic wallets with commercial bank accounts.

The Central Bank, in the tender documents, said bidders “must ensure that the implemented solution supports real-time or near real-time payment transmission, and on as near to a 24-hour and seven-day (24x7) basis as possible”.

And they must also “guarantee interoperability with existing payments and settlements platforms in The Bahamas, namely the ACH, Bahamas Interbank Settlement System/Real Time Gross Settlement System (BISS/RTGS) and the Bahamian Dollar Central Bank Digital Currency (BDCBDC), the Sand Dollar”. The solution has to “facilitate both direct and indirect participation from commercial banks, credit unions and other payment services institutions operating in the domestic payments space”.

Explaining the rationale for the bid’s launch, the Central Bank added: “A key component of a stable and sound financial system is to promote an efficient, accessible and modern payments ecosystem. To augment its efforts toward a durable and effective payments space, the Bank launched The Bahamas Payments System Modernisation Initiative (PSMI) in the early 2000s.

“The PSMI aims to promote financial inclusion by enhancing the efficiency of the domestic payments landscape and target non-discriminatory access to financial services in The Bahamas. In line with this objective, the Bank has progressed a number of initiatives to drive increased payments efficiency. This includes the establishment of the Real Time Gross Settlement System (RTGS) and the local Automated Clearing House (ACH), the introduction of legislation to licence and oversee non-bank providers of electronic payment instruments, the simplification of requirements for account opening and, most recently, the launch of a Central Bank Digital Currency (CBDC) to increase access to financial services.

“In addition, given the increased adoption of digital payment alternatives over the last five years, the Central Bank, through its steering committee on cheque reduction, has made steady progress towards a strategy for further reducing the usage of cheques in The Bahamas by 2026. This runs parallel to the broader objectives of the PSMI,” the Central Bank said.

“Therefore, the imminent FPS is intended to further support the Bank’s efforts to increase payments efficiency in The Bahamas by allowing for real-time payments, thereby, supporting commerce, the adoption of digital financial services and - to a broader extent - financial inclusion.”

The bidding documents also reveal that the Central Bank is seeking a Fast Payment Solution that has bene successfully implemented already for another central bank or jurisdiction within the past 18 months. “The Bank seeks a bidder with a proven track record of delivering the services and solutions outlined herein, a demonstrated awareness of the spectrum of solutions available in the market, and the capacity to manage timelines, deliverables and implementation risks,” it said.

“Other factors that shall contribute to the selection of a bidder include, but are not limited to, total cost, service and support, ease of use of the proposed solution, and interoperability with existing platforms and third-party applications.”