Charting the Course to a Cashless Society

Global phenomena such as climate change and the pandemic have compounded the sense of urgency for digital transformation across public and private sectors. Digital finance and financial inclusion are no longer important but essential for  building economic resilience, reducing crime, and promoting Sustainable Development Goals (SDGs).

Financial services delivered over mobile phones are a key driver of financial inclusion, not only because they enable anyone with a mobile phone to receive, store and transfer funds without fear for personal safety, but also because they provide access to basic financial services such as saving, credit, e-commerce, and insurance which are generally reserved to a small portion of the population. Moreover, the digitalisation of government-to-person payments can facilitate distribution of social benefits that reach most vulnerable groups while improving efficiency, transparency, and security, thus reducing the possibilities for corruption and crime.

In Trinidad and Tobago, the journey towards a cashless society is gaining momentum thanks to its progressive policy environment and strong mobile and internet infrastructure. With high 3G and 4G coverage, and well-developed telecommunications systems, 85% of the population have access to internet. This widespread connectivity has been instrumental in enabling 57% of SMEs to utilize online banking services, further integrating digital finance into the local economy. Despite such advancement, the country's payment landscape is characterized by cash usage.

To improve financial inclusion, recent efforts have led to significant strides in modernizing policies and stimulating the deployment of digital payment products. The nation's Minister of Finance, Honourable Colm Imbert, MP, emphasized the commitment to the digital finance agenda during the EU-UNCDF "Advancing Digital Payments and Financial Inclusion" Technical Workshop series, showcasing a range of achievements as milestones in Trinidad and Tobago's digital transformation journey.

The legal and regulatory landscape improved with the introduction of policies such as the: (i) DRAFT E-Money Policy (2018) (finalized policy not yet published online); (ii) FinTech Policy (2019); (iii) E-Money Issuer Order (2020); (iv) Draft guidelines for Non-Bank Non-Financial Institutions in Retail Payments (2020); and (v) Simplified Due Diligence Requirements (2021) with its companion guidance to apply simplified due diligence requirements for basic bank accounts.

Meanwhile in 2020, three key institutions in Trinidad & Tobago’s financial ecosystem – the Central Bank, the Security Exchange Commission, and the Financial Intelligence Unit – joined forces to establish a Regulatory Innovation Hub (The Hub) which serves as a central point of contact for FinTechs. Given the complexity involved in regulating emerging technologies that transcend multiple authorities, new coordination mechanisms and expertise were necessary to facilitate progress in licensing, especially for E-Money Issuers (EMIs) which can accelerate financial inclusion exponentially.

The Trinidad and Tobago International Financial Centre (TTIFC), which expanded its mandate with additional support from the Ministry of Finance, plays a crucial role in driving the transition to a cashless society by focusing on three key pillars: advancing financial inclusion, accelerating digital payments across public entities, and stimulating FinTech innovation. Under the umbrella of the TTIFC, a regionally focused Hub “One FinTech Avenue” is being established to empower FinTech companies to develop, test, and scale innovative solutions that promote economic growth and inclusion. To that end, the TTIFC has been instrumental in fostering partnerships and building capacity of a wide variety of stakeholders not only in Trinidad & Tobago but also around the region. The UNCDF was proud to launch the EU-UNCDF Caribbean FinTech Sprint for Financial Inclusion with the TTIFC this year, a collaborative effort aimed to scale innovative solutions that address digital financial inclusion challenges.

Owing to the collective impact of these diverse national efforts, Trinidad and Tobago's public sector has begun to embrace cashless transactions through various methods, such as bank transfers, credit/debit cards, Automated Clearing House (ACH), and Real Time Gross Settlement (RTGS). In addition, three e-money issuance applicants have been granted provisional registration and one bank was approved to issue e-money under the Financial Institutions Act (FIA) 2008. This shift towards digital payments can create a safer and more inclusive financial environment, and can directly benefit the nation's financially excluded and underserved communities. Furthermore, the government has enabled electronic payment systems within the judiciary system and is working on strengthening consumer protection legislation.

The upcoming payments proposal among other legislative amendments identified in the CBTT’s strategic work plan can strengthen oversight of the payment system and modernize key infrastructures to drive financial inclusion and minimize threats to cybersecurity.

The progress made in the digital finance ecosystem is encouraging. To strengthen these efforts, reach more underserved groups at scale, and expedite digital financial inclusion, the United Nations Capital Development Fund (UNCDF) identified opportunities for Trinidad & Tobago to further strengthen the enabling environment for inclusive digital finance:

• The Government of Trinidad and Tobago (GORTT) can build on the progress made through the FinTech Policy (2019), E-Money Policy (2018), and the E-Money Issuer Order (2020) to add flexibilities for innovation in digital wallets using risk-based approaches. Together, flexibility and risk mitigation during the licensing process of financial technologies hold promise for financial inclusion while ensuring stability of the financial system.  

• Trinidad and Tobago can designate a Secretariat for drafting digital finance strategies, coordinating the agenda, and supporting research and analysis. Typically, such agencies also house National Digital Financial Inclusion Surveys and establish Financial Inclusion Roadmaps on behalf of the nation with clear goals and targets. The TTIFC may be well positioned for such role and has committed to assess the current level of financial inclusion among citizens, as well as the remaining barriers that hinder access to digital financial services. This information is critical for the establishment of a National Financial Inclusion Roadmap for the country.

• Non-bank institutions, such as credit unions and e-money issuers, do not yet have direct access to certain payment infrastructures. To foster inclusion in the digital economy, the government can take a leading role in facilitating open payment systems and infrastructures which can increase efficiency of payment transactions and lower transaction costs. Faster payment systems, e-payment gateways and open-source software’s that facilitate interoperability of digital payment systems make financial services more affordable. Cheaper services are critical for digital financial inclusion and can be achieved by streamlining revenue realization and cash balance recognition. Such open payment systems also facilitate easy integration of innovative e-services that can reach the last mile more effectively.

• A review of the current financial consumer protection framework can identify risks posed by emerging digital finance business models. Once analyzed, the risks can be prevented or mitigated by adapting existing rules, reporting requirements, or processes. In addition, collaboration mechanisms between the financial sector and telecom regulators must be formalized to increase the cyber resilience of digital finance. Such collaboration must also be expanded to the private sector to embrace a holistic security assurance framework.

By establishing relevant strategies, building adequate data infrastructures, and strengthening stakeholder engagement, the country will foster cooperation, boost the economy, and improve access to digital financial services for everyone.

The EU-UNCDF-OACPS partnership for digital financial inclusion, is pleased to have the opportunity to support policymakers to achieve their digital finance and financial inclusion goals and looks forward to continued engagement.

This article was made possible by the European Union (EU), Organization of African, Caribbean and Pacific States (OACPS) and the United Nations Capital Development Fund (UNCDF) partnership to accelerate digital financial inclusion across selected Eastern Caribbean Islands. The program also benefits from the United Nations Development Programme (UNDP), with the UNDP Trinidad and Tobago Multi-Country Office hosting UNCDF’s Caribbean office.

The Digital Financial Inclusion Programme is a four-year joint initiative signed by the OACPS, funded by the EU and implemented by the UNCDF, with Trinidad and Tobago as well as the Eastern Caribbean Currency Union (ECCU) states eligible for services.