By Kimberly Ramkhalawan
December 2, 2022
(Excerpts taken from the Working Paper put forward by the Eastern Caribbean Central Bank)
The Eastern Caribbean Central Bank (ECCB) is inviting citizens and residents to provide comments on the draft Payment System Strategy for the ECCU.
This Payment System Strategy for the ECCU, is a working paper, that was developed by Consultant and payments expert, Mr Massimo Cirasino, in collaboration with the ECCB, under the Caribbean Digital Transformation Project, and input from stakeholders throughout the ECCU. The Strategy explores the various components of the payment system and features specific Lines of Actions and corresponding Sub-Actions.
Over the last few years, authorities in the Eastern Caribbean Currency Union e(ECCU) have been working hard to strengthen the efficiency, safety and inclusiveness of payment systems and services, with a focus on users’ needs and a view of ultimately improving the lives of individuals and businesses.
The Payments System Strategy for the ECCU takes into account all the components of the NPS and focuses on the safety and efficiency of the ecosystem and on users’ needs. In particular, it is organized around five main NPS pillars which reflect some of the strategic themes already identified by the ECCB in previous documents, however, the revised version of the ECCB strategic themes seeks to Strengthen Legislative Framework, Enhance Payment and Settlement Infrastructures, Leverage Payments as a Gateway for Financial Access and Inclusion, Connect appropriately the ECCUPS to the Global Payments System, Systematize the ECCB Oversight and Development Functions.
Following international and regional standards as well as good practices includes necessary stocktaking and subsequent elaboration of the ECCUPS strategy have guided by an elaborated series of international institutions. These include the work of the standard setters in this area, namely the Committee of Payments and Market Infrastructures (CPMI), and the CPMI together with the International Organization of Securities Commissions (IOSCO), as well as the World Bank, International Monetary Fund, CEMLA, etc. Of particular relevance, the CPMI-IOSCO Principles for Financial Market Infrastructures (PFMIs). Regional work in Latin America and the Caribbean (LAC) made through the LAC Working Group on Payment Systems (LAC-WGPS) and individual country experiences – in particular in Caribbean countries – will also be taken into account, also via direct conversations with relevant global or regional institutions.
At the request of the Eastern Caribbean Central Bank (ECCB), a comprehensive assessment of ECCUPS was conducted by a World Bank Team in 2017. A new Payment System Act is under preparation and supporting regulations would need to be produced, as appropriate. Among other things, the new act should better define and disclose the specific criteria for the designation of financial market infrastructures, on the basis of which the authorities can subsequently establish the technical standards and the access regime, and exercise oversight powers. Also, the legal framework should enable an increased role of non-banks, which is now constrained under a money transmission license. The full range of non-bank provision of payment services should be accommodated in the legal framework going forward,
Much of the Act ideally wants to showcase an aspect of financial inclusion as its often viewed as an aspect of financial development, influenced heavily by the way people make payments. Financial inclusion exists when people have effective access to a wide range of financial products and services at affordable cost. The first step of financial inclusion is access of each individual and business to a transaction account and to payment services. Increasing access to financial services is a powerful tool for poverty reduction. Achieving broader financial inclusion builds on the development of efficient, affordable, accessible and convenient retail payment services and payment instruments.
For the ECCU, its members comprises eight member states that share a common currency (Eastern Caribbean dollar / XCD) under the authority of the Eastern Caribbean Central Bank (ECCB), and with its National Payments System (NPS) a core asset in every country and is exposed to significant and evolving risks, as well as to innovation which can significantly improve its efficiency and in the working paper will be called the ECCU Payments System (ECCUPS).
The ECCB, as ECCUPS Overseer, has taken the lead in these efforts and has consulted with several international and national stakeholders. In doing so, it has concluded that, notwithstanding several notable accomplishments, there are opportunities to further advance developments in the payment and settlement system in order to not only maximise the impact on the economic development agenda of the Eastern Caribbean Currency Union (ECCU), but to deliver value to the people of the Currency Union.
The Eastern Caribbean is home to a population of approximately six hundred and fifty thousand, with tourism considered as the main income earner. Its currency, the EC dollar is pegged to the United States dollar at 2.70 to 1.00, with the ECCB is responsible for monetary policy, regulation and supervision of licensed financial institutions and the maintenance of a safe and efficient payments system.
At the moment, ECCU payments system relies heavily on cash, payment cards and cheques transactions. Over the years, there has been an improvement in the retail and large value payment systems.