Source: finder
Undoubtedly, COVID-19 has significantly hastened the adoption of digital payment systems to an unprecedented extent. For example, the World Health Organization (WHO) recommended using contactless payment methods over cash transactions to minimize human interaction and reduce the risk of viral transmission through potentially contaminated surfaces. This directive from the WHO prompted financial institutions and payment service providers to introduce innovative strategies to adapt to the evolving circumstances. Concurrently, regulatory bodies and government agencies have responded to the public health threat by implementing measures to decrease the circulation of physical currency and isolate banknotes. Additionally, they actively promoted digital payment alternatives by implementing policies such as raising the limit on contactless transactions in numerous countries worldwide.
According to a report by McKinsey, implementing the WHO recommendation in Africa not only promotes safer, cashless transactions to enable social distancing during the pandemic but also signifies a broader transition towards financial inclusion. This shift has the potential to expedite economic recovery post-crisis. Similarly, in Mauritius, there has been a noticeable trend towards digital payments amid the COVID-19 outbreak. This is evidenced by the increased usage of online and mobile banking platforms, alongside the growing popularity of mobile money wallets. Banks have responded by raising the threshold for contactless payments, and new payment platforms like MCB JuicePro, SBM Easy Pay, and my.t bill pay have been introduced to meet the evolving needs of consumers.
Taking into account these developments, MAFH organized its third webinar aiming to delve into the opportunities and challenges facing FinTech in post-COVID Mauritius, with a particular focus on ‘The future of digital payments‘. (For insights into the previous webinars, refer to the first webinar on e-commerce and the second webinar, which explored the impact of COVID-19 on FinTech in Mauritius and Africa, in collaboration with the Africa FinTech Network.)
Lisa Doosoye, Head of Skills at MAFH, introduced the session’s theme and welcomed Darren Franks, Founder and CEO of TalentintheCloud International, Africa’s sole executive search firm dedicated exclusively to the FinTech sector, as the moderator. The panel comprised four esteemed experts:
Aswin Ramduny – Chief of Payments Systems, Bank of Mauritius;
Sebastien LeBlanc – Founder & Director, MIPS;
Tilotma Jhurry – Head of the Payments Systems Division, Bank of Mauritius; and
Vincent Chatard – Chief Operations Officer, MCB.
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How are digital payments doing in Mauritius after the COVID-19 pandemic?
Vincent highlighted the suddenness of the lockdown, which led to an overnight closure of markets, and expressed his belief that the COVID-19 crisis significantly propelled digital payments forward. He noted a substantial surge in card usage, particularly in e-commerce, with a remarkable influx of 14,000 new e-commerce customers and a staggering 373% increase in new e-commerce merchants. The surge in consumer activity, particularly in essential items like food, resulted in a remarkable 400% increase in the value of e-commerce transactions. To meet this demand, investments were made in tap-and-go technology and POS upgrades, alongside raising the contactless transaction limit to MUR 2,500. This resulted in nearly quadrupling contactless transactions and a remarkable 50% growth during the pandemic. Additionally, mobile channels witnessed significant usage, with a notable 200% increase in Juice payments during the lockdown period. Interestingly, internet banking saw a 20% decrease, and cash withdrawals at ATMs dropped by 50% during the same period.
Looking towards the post-COVID scenario, Vincent observed that transaction levels remained sustained at the levels achieved during the lockdown, indicating a growing comfort with e-commerce among consumers. Moreover, he highlighted a substantial 20% increase in mobile payments in terms of value post-lockdown.
On the other hand, Sebastien underscored that COVID-19 has effectively answered the longstanding question of Mauritian readiness for e-commerce and digital payments. He likened this shift to historical transitions such as moving from horses to cars, emphasizing a resounding “yes” to the readiness for such advancements. However, he cautioned that the more pertinent question lies in whether the market is prepared to offer digital payment solutions, which he deemed a more complex challenge.
How is the Central Bank working to facilitate FinTech in Mauritius?
At the outset, Aswin highlighted the core purpose of FinTech, which is to streamline finance and enhance convenience for customers.
“FinTech simplifies payments and transforms our perspective of the financial landscape. Since my tenure at the BoM began, there has been a dedicated effort to streamline the payment system in Mauritius, aiming to simplify finance for end customers,” he stressed. Aswin pointed out that one of the primary challenges he encountered upon joining the central bank was the lack of interoperability in cards and mobile payments.
He elaborated, “Previously, if you visited an e-commerce website, it wasn’t guaranteed that they would accept Juice payments. To address this issue, the Instant Payment System (IPS) was established, drawing inspiration from European markets to facilitate instant settlement between any two bank accounts or digital wallets, ultimately benefiting the end customer.”
Aswin also outlined ongoing efforts to bolster infrastructure to support merchants, such as the implementation of the National Payment Switch (NPS). This initiative aims to expedite and streamline card payments, making them more efficient and cost-effective. Moreover, the NPS enables payments via QR codes, ensuring universal acceptance across the ecosystem.¹
“We are also fostering collaboration with developers, facilitating the integration of new APIs across participants,” Aswin added. “Furthermore, recognizing the significant volume of government payments made in cash, we are actively supporting authorities in digitizing these processes.”
What legal framework does the current digital payment system operate under?
Tilotma underscored the significant progress made by the Bank of Mauritius (BoM) from facilitating traditional payments in the 1990s to establishing an innovative and interoperable digital payments platform in the past year.
“The establishment of the National Payment System, branded as MauCAS (the Mauritius Central Automated Switch), necessitated a robust legal framework. The operationalization of the NPS Act in 2019 enabled the supervision of all potential players in the payments ecosystem. Consequently, it fosters an environment that ensures fair competition for FinTech firms as well,” she emphasized.
However, Tilotma cautioned that while the NPS Act creates opportunities for new entrants, it also incorporates provisions to safeguard consumer interests. “The Act mandates that FIAT money be held in a trust account in a commercial bank. In the event of insolvency, the BoM will issue rules on redistributing funds to users. Moreover, provisions are made for abandoned funds (electronic money inactive for over 7 years) to be transferred to the BoM, allowing users to reclaim their funds,” she stressed.
Regarding the process for new entrants, Tilotma outlined that any service provider intending to offer digital payment services to the public must apply for a license from the BoM. “We assess applicants based on various criteria and require detailed information to ensure their legitimacy. We evaluate their business plans and governance arrangements to mitigate associated risks. Additionally, applicants must implement consumer protection measures, such as dispute resolution and complaint procedures, along with a robust data protection policy. They must also adhere to relevant laws, including the Data Protection Act and the Financial Intelligence and Anti-money Laundering Act (FIAMLA). Finally, applicants undergo a pilot phase to ensure compliance with all requirements, allowing identification and rectification of any shortcomings,” she elaborated.
Tilotma added that any applicant must hold a Payment Intermediary Services license to be eligible to participate in the IPS. Aswin joined in to say that when such payment providers apply for integration to the IPS, “they must go through certification, testing and only then would they receive the green signal to enter production – at this stage too we can identify any remaining shortcomings.”
What new developments are we going to see in SME-focused digital payments?
Vincent highlighted MCB’s strategic advantage in harnessing the ecosystem facilitated by the central bank. Specifically, he mentioned plans to capitalize on the National Payment System (NPS), enabling them to route payments through the central bank and bypass international card networks like Visa and Mastercard. However, he stressed that a primary focus area for MCB is mobile payments tailored for SMEs.
“We’ve recently introduced JuicePro, designed to assist SMEs in managing their finances, with additional payment functionalities in the pipeline. On the customer side, our aim is to integrate the Juice app with the IPS and establish an interoperable QR code on JuicePro, empowering customers to utilize the Juice app for all transactions,” he explained.
Fundamentals that will drive the way forward
- Banks are now waiving fees for digital payments and cash withdrawals from third-party ATMs.
- Central Banks are implementing loan and credit card dues moratoriums.
- Governments are swiftly providing financial aid through Direct Benefit Transfer (DBT) programs.
- With the economic slowdown, more transactions are being converted into Equated Monthly Installments (EMIs).
- There’s a notable uptick in contactless payments, SMS link-based payments, and wearable technology for transactions.
- Customers are being educated about anti-money laundering and fraud prevention measures.
- The issuance and utilization of virtual cards are on the rise.
- Small and medium businesses are increasingly establishing their online presence.
- Financial institutions are streamlining loan processing and credit card issuance through contactless methods.
- The adoption of digital payments is reshaping consumer behavior.
- Banks and financial institutions are offering omnichannel banking solutions to cater to diverse customer needs. ²
Reference;
[1] “Opportunities and challenges for FinTech post-COVID in Mauritius: The future of digital payments.” Mauritius Africa FinTech Hub, Accessed 16 March 2024.[2] “The future of digital payments in post-COVID Mauritius.” Nelito, Accessed 16 March 2024.