New national plan paves the way for cashless payments |11 September 2020

Deputy Governor Edmond (Photo: Thomas Meriton)

By Elsie Pointe

With cash remaining the most popular mode of payment in Seychelles, the Central Bank of Seychelles (CBS) is spearheading the implementation of a roadmap to transform the country’s payment landscape.

The National Payment System (NPS) Modernisation Plan compliments the efforts being led by the government to enable and support digital financial services locally.

Approved by the cabinet of ministers on August 12, the plan is nudging customers towards opting for cashless payments while ensuring that the country’s digital payment system is convenient, reliable, efficient and safe.

It is anticipated that the NPS modernisation plan will be implemented within the next three years, and given the dynamic nature of the digital world, the plan will be open to revisions.

Even as the country has sought to transition to a mobile-based and digitalised financial system with the establishment of a NPS council and task force, the majority of transactions are still being undertaken using cash.

In2018, CBS recorded a total of 2.64 million ATM withdrawals by locals with the average value per transaction being R1,358 while only 1.60 million transactions were recorded on point-of-sale (POS) machines by local cards, at an average value of R730 per transaction.

The amount of POS transactions increased significantly in 2019 with 2.23 million transactions on POS devices, at an average value of R999, although ATM transactions still topped it with 2.71 million withdrawals at an average value of R1,979.

There has also been a noticeable increase in other forms of online payments over the last two years catapulted by the ease and convenience of apps and digital platforms such as Mauritius Commercial Bank’s Juice, Absa’s banking app and so forth.

“People are already using some of these digital payment facilities but we feel that they are not being used enough. We observe that cash payments are still elevated, cheque payments are also high and we want to move away from these manual payments to electronic payments,” said first deputy Governor of CBS, Christophe Edmond.

“Electronic payments are faster and more secure, and it allows for better record keeping of payments made. The objective is to have the majority of payments done electronically.”

The NPS plan sets out targeted actions that will be implemented in the short term (within 6 months), medium term (within 12 months and within 24 months) and long term (within 36 months).

The action plan will look to:

• Reduce fees on the use of digital payment channels: card transactions , Seychelles Electronic Funds Transfer (SEFT) etc.
• Promote digital financial literacy
• Promote clear and strategised marketing campaigns
• Engage with government to reassess policies to support the modernisation plan
• Undertake and conclude discussion with necessary stakeholders for establishment of a body to manage payment platforms locally (including SEFT)
• Implement international standards
• Hold discussions with relevant entities for the introduction of PayPal pay, WhatsApp pay, Android pay etc.
• Improve interoperability (the ability of computer systems or software to exchange and make use of information)
• Amend, review, and draft the necessary legal and regulatory framework
• Implement a new core banking system
• Encourage local payments to be effected via current cost effective and convenient electronic means of payments
• Undertake studies and make recommendations on key areas (reliability, affordability etc..) of internet and network connection
• Ensure provision of disaster recovery measures
• National digital ID system and e-KYC requirements
• Incentivising digital payments
• Create the necessary environment to allow Fintechs and Payment Service Providers to have involvement to payment systems platforms

Vouching for cashless transactions, head of the financial inclusion and market conduct division, James Jean, stated that transitioning to mainly electronic payments is however not without its challenges.

He explained that some traders and business owners distrust electronic payments over cash because they have to pay a service charge to the bank that processes the payment, part of which goes to card issuers like Visa or Mastercard.

“This is why we are working with commercial banks, Visa and other key partners to lower the costs of these fees borne by traders,” he said.

According to Mr Jean, the service charge in the country ranges from 1 to 3.5%.

“A 3.5% charge on a large volume of payment is a lot. An entity like the government, for instance, that needs to collect taxes cannot afford to be charged this high and this fact is not helping drive digital payments,” explained Mr Jean.

The elderly generation’s preference for cash withdrawals and payments over technology also factors into the slow progress of digitisation of payments; although it has been observed that some segments of the senior citizens are becoming more technology inclined.

Also a spoke in the wheel of digital payments is the significantly high cost of internet and network access in the country.

A modernised and digital financial system expects to bring about many benefits including advancing the financial inclusion agenda, promoting competition and innovation, minimising cost and fraud, increasing efficiency in tax collection as well as payment transparency.

Meanwhile critics of the cashless society have warned against the hidden danger of electronic payments, noting that card and electronic payments generally generate much higher fees than cash and ATMs, and disadvantages the poor.