While making it “abundantly clear” that the Eastern Caribbean Central Bank (ECCB) does not intend to eliminate the use of cash, the Governor of the institution has committed the bank to reducing the use of cash and cheques.
Doctor Timothy Antoine says cash has its convenience and will continue to play an important role in the region’s economy for the foreseeable future.
He was addressing the media on the launch of a FinTech pilot on blockchain technology in the ECCB member countries.
The pilot will include the issuance of a digital EC currency which will operate alongside physical EC currency.
The ECCB Governor noted that in the Eastern Caribbean Currency Union (ECCU), about 80.0 per cent of all payments are effected using cash or cheques.
“When we survey our current payments landscape, we cannot help but conclude that payments are still too slow and too expensive. Many of us know only too well, the high costs associated with certain banking services,” he said.
According to the ECCB Governor, although a full-scale analysis of the social cost of physical cash in the ECCU has not been carried out, it is indisputable that the costs of cash services, inclusive of transporting, storing and securing, are extremely high.
“Invariably, these high costs (not fully recognised by many businesses) are passed on to consumers. Within the informal sector, cash tends to be the dominant payment channel. This reality means that the actors in the informal sector bear a significant burden of the cost inefficiencies of cash transactions,” he explained.
“Lest, we become too critical of our small businesses, we should also acknowledge that they too face real constraints,” the ECCB governor stated.
He noted for example, that some are required to pay as much as 3.5 per cent on every credit card sale.
He described it as an exorbitant charge which reduces and, in some instances, removes the incentive for small businesses to offer their customers electronic options such as credit and debit cards.
“It also reduces the ability of these businesses to offer their customers discounts. These experiences are sometimes referred to as “financial frictions”,” Antoine disclosed.
He explained that it was against this backdrop that the ECCB seeks to help remove some of the current “financial frictions”.
“Indeed, it is practical issues such as these that that led the ECCB and Bitt Inc. to reach an agreement to develop and pilot the digital EC currency, with a supporting digital payments and transfers infrastructure,” the ECCB official stated.
“Ultimately, we wish to see our people spend less of their money on payment services and more on the goods and services they wish to consume, “ Antoine said.