Start-ups want mobile money now
Published:Wednesday | May 8, 2013 | 12:00 AM
Local online start-ups want the Bank of Jamaica (BOJ) to move with alacrity and implement mobile money in Jamaica, arguing that weak regulation and heavy bureaucracy have continued to hinder the viability of their businesses.
The appeal came as deputy governor of the BOJ, Livingston Morrison addressed a group of entrepreneurs about regulating mobile remittances, and even as one participant revealed that he had transferred funds even as the central bank official discussed the issue.
"Whilst you spoke I transferred funds using PayPal," the participant told Morrison while looking at his mobile phone, in reference to transactions made through the global e-commerce business which allows payments and money transfers to be made through the Internet.
"Did I do anything illegal?" he asked.
"No you did not," Morrison responded, indicating that PayPal comes under strict US regulation which could inform the local model going forward.
He was addressing the bimonthly Kingston Beta meeting at the Jamaica Promotions head office in New Kingston last week.
Mobile money is a booming industry that could result in the diversion of some remittances - Jamaica's largest foreign exchange earner at US$2 billion annually - away from traditional remittance services or wire transfers.
Currently, local online start-ups use overseas-owned payment services, including PayPal, Bitcoin and Skrill to send and receive funds. The cost for these services are relatively cheap and the funds are mostly informally circulated between users, issued as cheques or deposited into US bank accounts.
However, the informality makes it attractive for the large unbanked population, experts at the meeting say. The service allows a paperless method of buying or selling anything locally or overseas.
Unbanked Jamaicans
The BOJ wants to regulate the activity locally in order to ensure that the up to one million unbanked Jamaicans are somewhat formalised and served by banks rather than proxy start-ups.
"There are some who say 35 to 65 per cent of the population is unbanked, yet penetration for mobile is at over 100 per cent, so there are opportunities there," Morrison said. "However, the unbanked can only be served by the banks," he added.
Kingston Beta is the brainchild of entrepreneur Ingrid Riley, who began hosting meetings in 2007 and to date provides support to over 70 start-ups.
"That is not to say there are not opportunities for (start-ups) to provide payment services," Morrison said.
These services could transfer funds into local banks for clients in order to obviate costly wire transfers and slow withdrawals in the form of cheques. One local start-up interested in providing such a service, however, complained of the regulatory uncertainty.
"Do I start rolling out the service and then hear, 'ohh you can't do that because of whatever legislation'," asked Lloyd Laing, founder of JL Mobile.
Laing asked for a clear definition of the geographic and or virtual space to be regulated by the BOJ. He also wanted to know whether setting up a company overseas and marketing its services locally would prevent strict BOJ regulation.
Morrison asked Laing to discuss the matter in greater details with the BOJ.
The BOJ has since February released its guidelines for electronic retail payment services as a framework through which to evaluate applications from various institutions to provide such services. The Bank started reviewing applications on April 2 for prospective service providers.
"The guidelines are intended to foster the design, development and implementation of electronic retail payment systems and instruments which take advantage of available technology to provide more efficient payment services in a safe, secure and competitive environment," the BOJ has indicated.
Currently, a number of institutions are conducting pilot projects on the matter.
Another participant, Wayne Jones, an application developer, argued that government should do things a lot faster to implement local mobile money and fix the mistakes retroactively.
Local start-ups want the pending regulations to pave the way for direct transfer of funds from US services to local bank accounts via the click of a mobile phone.
"As I understand it Paypal doesn't allow transfers to Jamaican bank accounts," said Morrison. "Whenever there is ineffieciency someone benefits. Not necessarily you or me but someone."
Laing and other panellist, Khary Sharpe, founder of Bakari Digital, argued that weak regulation and heavy bureaucracy continues to hinder the viability of start-ups.
Last month, the Global Information Technology Report published by the World Economic Forum, an annual global survey, ranked Jamaica 11 spots lower year on year to 85. The report cited the dearth of e-commerce, venture funding and Internet penetration as the main factors.
Laing also asked whether the regulations would include the informal bartering of phone credit in exchange for goods and whether it would capture overseas relatives sending credit to locals.
"It's virtually remittances," indicated Laing.
Responded Morrison: "Is it remittances? I think that is stretching it but we will look at that. But it's not a big deal at this point".