e-money

ON November 15, 2018, Central Bank Governor, Dr Alvin Hilaire, provided an update to T&T on the role that the regulator of financial institution was playing in providing oversight of the fintech and digital banking developments that have taken most of the world by storm in the last three years.

In the stament, Hilaire said: “Recent developments in financial technology offer immense possibilities for improvement in the efficiency and security of financial transactions, as well as financial inclusion by providing easier, cheaper and more accessible options to the public for engaging in such transactions.”

In the statement issued following the news conference, the Bank said it would “engage with those companies wishing to provide such new financial services, (the specific example cited was digital wallets) in order to understand the products, and to assure that the framework for the conduct of such activities, including governance structure, risk management, recourse measures, financial soundness etc are well established prior to public launch.”

The Central Bank also said it would facilitate the introduction of a testing environment for the new products (called a ‘sandbox’ in some countries) to ensure that all the kinks were worked through and that all stakeholders were comfortable with the technology.

Seventeen months have past since the Governor’s statement.

In that period, T&T experienced long lines outside commercial banks in December 2019, when thousands of people were forced to queue up to exchange their cotton-based $100 notes for the new polymer versions.

And only last week, scores of people lined up outside their commercial banks to encash their Salary Relief Grant cheques and other forms of Government financial assistance as a result of the Covid-19 pandemic.

In an AMCHAM T&T survey published last week, one of the points made was that the Government should allow “small retailers to sell remotely/online and do contactless delivery”.

And the one thing that there is said to be consensus on among the 22-member Road Map committee is that T&T must make more use of digital means of transferring money, documents and Government approvals in the future.

Last week, the Central Bank responded to some questions from Express Business on what the institution has been doing to push the development of fintech since November 2018. Compete agrement now in the middle of the Covid-19 crisis the Central Bank provided an update on Financial Technology (fintech) and virtual currencies.

Q: How many fintech companies “wishing to provide such new financial services” has the Central Bank engaged with since November 15, 2018?

A: Since November 2018, the Central Bank has engaged with approximately 20 entities, seeking guidance on offering fintech related products/services. Most of the business proposals of these entities involve the use of payment instruments such as electronic money (also called e-money) products (such as digital/mobile wallets), payment solutions to facilitate online transactions, as well as those that involve the use of virtual assets.

Q: Since November 15, 2018, has “the framework for the conduct of such activities”—such as governance structure, risk management, recourse measures, financial soundness etc.—been established?

A: There are existing guidelines for entities wishing to be registered to conduct payment service activities such as payment service providers and non-bank payment system operators. These guidelines provide standards of conduct for those persons.

The Bank has since revised these guidelines to reflect international best practices and these will be issued soon for consultation and published on its website. The revised guidelines address more comprehensively standards for governance, risk management, consumer protection and reporting.

In addition to the revision of these guidelines, the Central Bank has developed two fintech-related policies since November 15, 2018, namely an E-money Policy and a Fintech Policy.

The E-money Policy requires the making of a ministerial order which will permit categories of persons, other than those entities licensed under the Financial Institutions Act Chap. 79:09 (“FIA”) to do business of banking and/or business of a financial nature, to issue e-money subject to the approval of the Central Bank.

The policy sets out a robust regulatory framework which includes governance arrangements and comprehensive risk management frameworks that address risks such as operational risk, cyber risk, liquidity risk, safeguarding of customers funds, money laundering and terrorist financing and consumer protection among other measures, which can only be implemented by way of a ministerial order in accordance with section 17(4) of the FIA.

A draft of this policy was issued for stakeholder consultation over the period November 2018 to February 2019 and based on feedback was subsequently finalised. The Central Bank is awaiting the issuance of the ministerial order.

The Bank has also developed a Fintech Policy, which sets out the Central Bank’s approach to treating with entities wishing to conduct fintech activities. A key aspect of this policy is collaboration with other domestic regulators, namely the Trinidad and Tobago Securities and Exchange Commission and the Financial Intelligence Unit of Trinidad and Tobago, to establish a formalised Innovation Hub and in due course, a Regulatory Sandbox. A joint Fintech Steering Committee comprising the three regulators has been established to achieve these objectives and the Committee intends to consult with other relevant stakeholders as necessary.

Q: Is the Central Bank planning a public launch?

A: A public launch of the Joint Fintech Steering Committee’s formalised Innovation Hub will take place when it is finalised.

Q: Has the Central Bank provided a green light to any local or foreign fintech companies since November 15, 2018?

A: Since November 2018, the Central Bank has registered four (4) payment service providers in accordance with the Central Bank Act and Payments System Guideline No. 3. A list of all registered entities is available on the Central Bank’s website. It should be noted that to date, the Bank has not granted approval for any entity to issue e-money.

Q: Has the testing environment for the new products (called a ‘sandbox’ in some countries) been established to facilitate the evaluation of fintech and fintech companies?

A: The regulatory sandbox has not yet been established but discussions are ongoing among the members of the Joint Fintech Steering Committee.

HSF

Q1 I checked the Ministry of Finance website this morning, and the latest HSF quarterly report was as of September 30, 2019. Given this delay in official data, can the Central Bank please provide an update on the asset value of the HSF as of April 24, 2020 (last Friday)?

A1 The Central Bank as agent is unable to provide further information.

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