From cash to digital: Embracing the evolution of the payment system in Seychelles |01 December 2021
On December 1, 1978, the precursor to the Central Bank of Seychelles (CBS) ‒ the Seychelles Monetary Authority ‒ was established, laying the foundation to build the Central Bank as we know it today.
Traditionally, the Central Bank of Seychelles (CBS) finds it fitting around this time every year to engage with its stakeholders and the general public on a topic of particular relevance to the financial sector and the country in general, not only to commemorate its anniversary but also to take stock of some of the challenges that need to be addressed.
For two consecutive years, the Covid-19 pandemic has impeded the hosting of such public gatherings. On the flip side, the pandemic itself has highlighted various topics of importance and relevance, which CBS as an institution finds fitting to bring to the fore as it continues to evolve and adapt to global and domestic developments while delivering on its objectives.
Undoubtedly, one of the topics that Covid-19 has spotlighted is the accelerated use of technology across all sectors, including the financial sector, seeing CBS’ modernisation agenda gaining more momentum. Therefore, as the institution celebrates its 43rd anniversary, it is only fitting that we seize this opportunity to discuss the evolution of cash in Seychelles and the country’s digital transformation journey.
The traditional role and evolving trend of cash
Traditionally, cash has and continues to play an important role in many economies with banknotes and coins being thedominant means of payments in many countries. The prominence of cash is generally linked to its convenience, generalacceptance and reliability.
While the world has witnessed an increase in new trends of payment mix, the demand for and use of cash has remained strong. This is also evident in Seychelles, where cash remains a predominant and reliable alternative mode of payment.
As the sole issuer of notes and coins denominated in Seychelles rupees, CBS has the crucial role of ensuring that as long as there is demand for cash, every effort is invested to guarantee that it is efficient, reliable, secure and modern.
It is in line with these requirements that the series of banknotes and coins currently in circulation was launched under the theme ‘Seychelles’ unique biodiversity – the backbone of our economy’on December 5, 2016, marking its fifth anniversary this year. The family of four banknotes and seven coins denominations showcase an array of flora and fauna endemic to Seychelles, with distinct banknote sizes per denomination, tactile features for the visually impaired, and improved security features to mitigate risks such as counterfeiting being some of the key distinctions between the previous and current series.
Seychelles’ move towards a cash-lite economy
While it is likely that cash will remain an important part of the global economy and the payment system for the foreseeable future, the rapid digitalisation has seen a growth in the emergence and adoption of electronic forms of payment. Seychelles has not been spared from this emerging trend. With the recent pronouncement by CBS to move towards a cash-lite economy, the role of cash in Seychelles is expected to shift towards an alternative to electronic payment facilities ‒ as a form of payment for the segment of the society solely reliant on cash and as an optional mode of payment.
Whilst the plan to modernise the National Payment System has been under discussion forquite a while, the arrival of Covid-19 brought about an urgent need to relook at how technology could help bridge the gap created by the various forms of restrictions. Consequently, notable strides have been made in the implementation of the country’s digital agenda since 2020.
The importance of a digital economy
Scientific breakthroughs and innovation have, throughout history, propelled economic growth and ultimately transformed society. In today’s digital era, being connected has changedlives at arapid pace, making positive impacts on financial inclusion, access to trade and services, job creation and the way we live and work. Digital development is key to ensuring that countries are given the opportunity to participate in the digital revolution.
Seychelles and its accelerating digital journey
In line with the various global initiatives, the government of Seychelles has developed the ‘Digital Economy Agenda’ to emphasise the role of digital technologies and innovation in contributing towards economic diversification and increasing productivity in Seychelles. The strategic action plan focuses on five pillars, namely,digital infrastructure, digital skills and literacy, digital platforms, digital financial services, anddigital entrepreneurship.
In support of the digital economy agenda, CBS, in collaborationwith key stakeholders,is leading the implementation of the National Payment System Modernisation Plan, which promotes a national payment system that is convenient, affordable, reliable, efficient and safe, through the means of mobile-based digital payment platforms. This is complemented by the recently-launched Seychelles Fintech Strategy (SFS),whichaims to modernise and digitalise its financial sector through enabling legal and regulatory frameworks and harnessing Fintech to ensure it better meets the country’s development needs.
Benefits of digitalisation
A digital economy, through innovation and digitalisation,can stimulate job creation and contribute towards addressing poverty reduction, reducing inequality and facilitating the delivery of goods and services for the entire population, thus promoting financial inclusion.It is also an opportunity for the population to access services that would have been unimaginable a decade ago.
The benefits are shared and owned by every citizen.For example, they will be felt by the small business owner who is better able to access financing to thrive and grow; the individual who will be able to conveniently access financial services to effect payments from the comfort of their home; and a government that can better account for its revenue and improve the effectiveness of its services.
Challenges brought by a digital economy
A digital economy does not come without challenges. Therefore, reaping its maximum benefits requiresaddressing the corresponding security risks and threats that continue to grow globally.
Reliance on technological infrastructures and the adoption of new technologies present particularly high risks of cyber-attacks. These need to be managed at all levels – financial institutions must ensure that proper safeguard measures are in place, whilst consumers must also use technology responsibly. Effective regulatory frameworks addressing digital security risks and data protection are essential for ensuring financial stability and integrity. To this end, work is currently ongoing on various regulatory instruments to address the legislative gaps. The National Assembly has just approved the Cybercrimes and Other Related Crimes Bill and is soon expected to consider two other pieces of legislation ‒ the new Data Protection Bill and the Financial Consumer Protection Bill.
Another challenge is financial education and awareness. Empowering the consumer is critical to enhancing their engagement with digital financial services. This allows consumers to better understand the benefits of products and services as well as the associated risks, such that they can maximise their usage in relation to their needs.
The impetus given to the acceleration of the digital transformationby the Covid-19 pandemic should be seized to harness the full potential of this shift in building a more resilient and inclusive economy.CBS remains committed to showcasing and keeping the public abreast of the work being done to bring about the digital transformation in the country’s financial sector. The success of this endeavour will depend on the buy-in and collaborative effort of everyone including the Government, the regulators, the financial institutions and the general public.
Contributed