The Bank of Jamaica (BOJ) is indicating that its mission to deepen financial inclusion since the launch of a related campaign in 2017 has partially succeeded, but has significant areas of failure which are being addressed partially through financial education and improved products.

The central bank notes that one of the key challenges for financial inclusion is usage of financial services, including digital payments and is therefore anticipating that its digital currency (CBDC) “will provide a suitable product to the market with the value proposition that makes digital payments attractive to both the financially included and the financially excluded.”

However, as outlined by the bank, it is unlikely to reduce remittance costs to Jamaica as it is for local use only.

The Government of Jamaica launched the National Financial Inclusion Strategy (NFIS) in March 2017. Financial inclusion, as defined in the NFIS, is to “create an inclusive financial system in which every adult and enterprise has access to, and is able to make full use of a range of adequate, quality and affordable services”.

Financial inclusion is measured on various dimensions, which include financial access, usage of financial services, consumer protection and financial capability, MSME finance and housing finance.

The BOJ points out that access is not the challenge for financial inclusion.

Instead, the low usage of financial services, driven by low levels of financial literacy, weak consumer protection mechanisms, lack of competition and financial products that are not competitively priced or suitable for consumers remain the key challenges.

To address these issues, the BOJ said it is pursuing improved consumer protection mechanisms and financial literacy/capability programmes in collaboration with other key financial inclusion partners to include government ministries, department and agencies, the Financial Services Commission, the Jamaica Deposit Insurance Corporation, the Planning Institute of Jamaica and the Private Sector Organisation of Jamaica.

More specifically, the financial literacy communication campaign is being conducted across radio and social media, through programmes such as Under the Law and the animated series BOJRealTalk on its social media platforms, it was noted.

In its overall assessment of progress, the central bank said, since 2017, there has been a marked improvement in the indicators which measure financial access.

The indicators which measure the financial access points using (a) bank account ownership, (b) distribution of financial access points on a geographical basis and (c) concentration of financial access points in terms of the population have increased since 2017.

However, low usage of existing services and products remains a challenge.

Digital currency, the BOJ said, will play a role in incentivising higher levels of participation, especially as it will reduce transaction costs and increase transaction speed.

The planned digital currency from the BOJ, the CBDC, will be legal tender and can be accepted and used widely at merchants and will be free to the end users.

At the same time, the BOJ said, the CBDC has the advantage of removing the security risks posed by banknotes and coins while providing anonymity to consumers.

For the unbanked, CBDC can be obtained through ‘Wallet Providers’, which are deposit taking institutions and authorised payment service providers.

The design of the CBDC wallets means that the Wallet Providers can apply the simplified customer due diligence requirements and e-KYC mechanisms to create an efficient on boarding process for customers.

Consumers will be able to download a mobile wallet application, which will allow them to access their CBDC wallets at any time using either of the two telecommunication networks.

The BOJ outlines that consumers will be able to top-up their wallets at all Wallet Providers and smart automated banking machines. Consumers can do business with merchants using their CBDC wallets that will allow for phone-to-phone transfers of funds.

In using CBDC, the central bank outlines, individuals and firms will benefit from a payment device which is “fast, convenient, safe, secure, digital store of value and free to consumers.”

The BOJ states, “All these factors will operate to encourage greater use of digital payments by the unbanked and underbanked, thereby promoting financial inclusion.”

With the World Bank issuing a recent call for digital products as the answer to cheaper remittance transactions, the BOJ commented, “It should be noted that CBDC will not be used for cross border payments and will be used in the domestic market only. Remittances will continue to be transmitted via international networks and will therefore continue to be subject to the costs of the selected remittance provider.

Notably, the central bank said, remittance proceeds can be disbursed by remittance agents and agencies through cash, cheques, direct deposit to bank accounts and applied to a prepaid card. A remittance recipient with a CBDC wallet will also have the option to transfer his remittance monies to that wallet.