THE INTRODUCTION of the central bank digital currency (CBDC), JAM-DEX, into the financial ecosystem will give more Jamaicans access to financial services, according to Ricardo Dystant, JN Bank’s chief of digital transformation and special projects.
As a result, Dystant said JN Bank will be introducing its own digital wallet very soon.
A phased roll-out of JAM-DEX is currently under way. One local commercial bank has already launched its digital wallet to enable Jamaicans to utilise the digital currency.
He noted that while CBDCs are not a magic bullet, they will provide opportunities for financial inclusion among unbanked and underbanked Jamaicans. Dystant noted that innovative public payment infrastructures, such as CBDCs, assist with lowering financial access barriers and forging new pathways for upward mobility.
According to the World Bank, over 1.7 billion adults worldwide are excluded from the formal financial system. This means that nearly a third of all adults, eight per cent of people within advanced economies, lack access to traditional banking services, including savings accounts, credit, loans, and insurance.
In Jamaica, the National Financial Inclusion Strategy (NFIS) notes that although 78 per cent of Jamaicans have bank accounts, most are not active users of the system, with 23 per cent not making lodgements or withdrawals during a 12-month period. This level of inactivity was 11 per cent higher than recorded in the Latin America and Caribbean region. Additionally, only 30 per cent of Jamaicans save through a regulated financial institution.
The NFIS noted that those trapped outside the financial system are forced to operate within the confines of the cash economy, becoming overreliant on physical assets, susceptible to financial shocks and stressors, and cut off from means of wealth creation.
JN Bank’s digital transformation chief is optimistic that the increased access to financial products and services, such as saving and investment tools, that is to come from greater use of CBDCs and digital wallets among the population will result in more Jamaicans gaining upward mobility.
“It is hoped that this expansion in access to financial services can drive down poverty and increase economic growth,” he stated.
“For example, there are some banking requirements that can be considered prohibitive for some people such as having multiple IDs or even a formal address. Opening a CBDC or wallet account would be much simpler and would take away some of the rigid requirements involved in the formal banking system,” he explained.
The JN Bank executive also noted that CBDCs have the potential to create better equity in the society. “The man in the Cockpit Country or in any remote area can easily and seamlessly do his banking and pay for goods at the touch of a button on his cellular phone,” he said.
“It brings the service right to his fingertips, and he can send a text to make a bill payment or pay for a service or product with ease and convenience. Even in his own community, instead of walking with cash down to the corner shop, he can order a bun and cheese and simply transfer the money to the shopkeeper’s digital wallet.”
Dystant noted that wallet accounts can, therefore, serve as entry points for developing a personal financial footprint, which will be integral when accessing credit and accessing integrated digital financial services.
Importantly, he said CBDCs can help lower transaction costs by up to 50 per cent, including for cross-border transactions and remittances, and increase transaction speeds from days to seconds.
“For households and local economies like Jamaica that are reliant on remittance inflows, this helps [to] strengthen economic livelihoods and resilience,” he said.
Source : From the Web