PEOPLE in Samoa, Solomon Islands and Vanuatu will soon be able to make and receive payments digitally, rather than relying on cash or cheques, in a major step forward for payment systems, paving the way for more people to have access to financial services.
Work will begin this year, starting in Samoa, to modernize payments systems in the three countries, which will see banks connected with their central banks in country, allowing for the electronic transfer of payments.
“The planned moves will bring greater security to the financial sector, spur innovation and hopefully bring new players into the market,” said Governor Enari of the Central Bank of Samoa. “By upgrading the systems, banks will no longer need to manually check their balances. With a digital system, they will be able to operate in real time, a move essential to preventing potential liquidity crises in the system.”
Under the Pacific Payments Project, by the International Finance Corporation, IFC, and its sister organization, the World Bank, an Automated Transfer System (ATS) will be set up allowing banks to be connected with their respective central bank and with each other, for the electronic transfer of payments. The ATS system will be hosted and managed in each country by the central bank.
The introduction of an ATS will bring Samoa, Solomon Islands and Vanuatu into line with other countries in the region, including Papua New Guinea and Timor Leste, which already have or are establishing similar systems.
“Samoa, Vanuatu and Solomon Islands are virtually among the last remaining countries in the world where the central banks and the financial entities are not linked across an infrastructure of digital payment systems,” said Michel Kerf, World Bank Country Director for Papua New Guinea and the Pacific Islands.
“All this modern infrastructure helps make the financial sector more efficient and secure, and also more inclusive, as it allows for innovations such as cashless electronic payments,” said Thomas Jacobs, IFC Country Manager for the Pacific Region. “With remittances so important in the Pacific, the new system will also help increase efficiencies in the remittance market, as money transfer operators will be able to transfer monies within countries in a less complex way.”
A key part of the ATS system, the Real Time Gross Settlement, allows the clearing and settlement of large systemically important payments by banks in a real time, designed to prevent liquidity crises in the banking system.
The second key part of the system, the Automated Clearing House, will help with retail payments from people, companies and from the government via electronic means. The system will also be open to non-bank service providers to offer e-wallets and other cashless solutions, while opening the possibility of governments being able to progressively make all payments digitally.
A separate Central Securities Depository system for all securities in the three countries will also be established, which will enable government-issued bonds or bills to be dealt with electronically and connected to the ATS system for settlement.
The work by IFC and the World Bank will help business and people harness the benefits of digital financial services and promote greater financial inclusion. Supporting responsible and inclusive digital financial services is a key part of IFC’s strategy in the Pacific.
The project, funded by the governments of Australia and New Zealand, is part of the joint IFC-World Bank Finance Competitiveness and Innovation Global Practice work.