Financial inclusion recognises that a significant number of our citizens who desire access to financial services are systematically locked out of the formal financial ecosystem. Financial Inclusion initiatives aim to improve and increase the prospects of unbanked citizens and informal businesses who engage in legitimate activities.
Jamaica has had a Financial Inclusion Secretariat for over five years now, and it has made valiant efforts to sensitise government agencies, the private sector, and the general public to the gaps in the financial ecosystem. However, to a large degree, the targeted outcome of these efforts has been disappointing.
However, all is not lost, as there are still financial inclusion initiatives that need not await legislative and regulatory action on matters such as the national identification system (NIDS), the Data Protection Act 2020, the Proceeds of Crime Act, or even declarations by the Bank of Jamaica or the Financial Services Commission. But public-private partnerships can be motivated to act by a profit motive that meets a national need and at the same time provide a social good. Here are some ideas:
1) Create a local version of Zelle, perhaps with a trade name JamZelle
For starters, if one of the larger banks would partner with one of the smaller banks or another regulated financial institution to allow for near frictionless payment transfers of funds within the banking ecosystem this would be a positive mark on the country's journey to expanded financial inclusion.
Even if such a move does not immediately have an impact on the most left-out citizens, it would have an immediate impact on all citizens who have access to and use a cellphone, and who have e-mail addresses or access to WhatsApp. We may be surprised to find out how many elderly or even illiterate and innumerate citizens can effectively access and manoeuvre platforms such as WhatsApp and the other popular services.
This effort could single-handedly and dramatically reduce the time that citizens waste each week waiting in line, at banks and remittance services for example, especially now in the time of the novel coronavirus pandemic, to execute their various cash-dependent transactions. If big Pharma, such as Merck and Johnson & Johnson, can partner for COVID-19 vaccine production, certainly there can be mutually beneficial partnerships in the national interest within our local regulated financial services sector.
2) Require all new employees to have a bank account
Without the need for new laws or mandates, all government agencies — and as many private sector operators as possible — should require all new employees to have a bank account as a term of their employment. This mandate can be gradually rolled out to existing employees. The benefit of this action would provide an option for a significant number of unbanked citizens to, at least, find a pathway to the beginnings of financial inclusion. This would dramatically reduce the demand and need for wages and other payments to be made in cash, thereby reducing the opportunistic risk of cash robberies, for instance, at construction sites and other settings in which people congregate to receive or make cash payments.
3) Banks can expand their use of exiting banking regulations to meet Know Your Customer (KYC) obligations
The COVID-19 situation has already provided a gift within a perfect storm in that the government authorities arranged for the COVID-19 Allocation of Resources for Employees (CARE) Programme grants to be widely distributed via channels other than banks. This prompted some banks to offer basic banking services to a wide swath of individuals who heretofore would be challenged to meet the KYC standards as practised by the banks.
For accounts that on a risk basis could be operated primarily for the receipt and payment of funds, the banks could apply a simplified due diligence (SDD) standard, which requires an unexpired Jamaican driver's licence only, or a tax registration number (TRN) and a national ID. Even though not all unbanked people have a driver's licence, all citizens qualify for a TRN, for which there is no charge, and for at least one form of a national ID for which there is no charge. It is understood that some individuals may either have no interest in acquiring a passport or may be daunted by the steps and cost to acquire a passport.
A benefit to banks leveraging the SDD standard is that, coupled with the ongoing financial inclusion initiatives by the MSME Alliance and the Private Sector Organisation of Jamaica (PSOJ), there is a prospect that people who enter the banking system with the opening of these basic banking accounts can be mentored to regularising their private affairs and can graduate to additional banking products and services; thereby, deepening financial inclusion outcomes.
4) Non-cash payments in certain scenarios
Both public and private sectors should articulate a near-term to medium-term strategy to mandate non-cash payments in certain scenarios. Some of the reasonable and do-able actions and outcomes include setting targets for the reduction of tax payments in cash. This could be effected by more aggressively marketing the current online Tax Administration Jamaica (TAJ) payment options, and even expanding payment options, for example by allowing for JamZelle payments. Benefits to the tax offices include less operating costs and reduced operational risks related to bulk cash, less human traffic at the locations, and the redeployment of staff away from clerical work to more meaningful administrative and knowledge work.
Additionally, with more citizens having access to basic banking services, which could include a debit card linked to the SDD accounts, tax payments in cash can be eschewed in favour of card payments. Of course, card payment options could be executed online or even at kiosks at the tax offices or even in the regular cashier lines.
5) Support efforts in a digital economy to reduce financial crime
Societies have had good reason to create currency, and cash currency in particular, to facilitate exchange as a measure of value and, hence, currency or values of exchange will forever remain essential to support commerce. However, our present reliance and appetite for cash needs to be transitioned to a digital financial ecosystem. The supporting reasons for this transition are many and are almost universally accepted. Transitioning from the anonymity attribution of a cash-based economy to a digital financial ecosystem provides new and innovative opportunities to combat money laundering, fraud, and other financial crimes.
A digital economy is not free of the existential threat posed by organised crime syndicates and local criminal operators. For the full benefits of a digital economy to be derived, money laundering, fraud and other financial crimes must be combated. A national and political commitment to institute effective anti-cybercrime measures and to adequately fund an independent law enforcement apparatus is essential.
So-called big business and the well-heeled in society have already logged on to the benefits of the digital economy and have been comfortably transacting via non-cash modalities. It is an indisputable truth that a few initial steps well taken to expand financial inclusion in Jamaica can advance the cause of social equity and generally improve the 'livity' of the masses. Public-private partnerships have the wherewithal to make a move to make Jamaica a more financially inclusive society.