Going bankless: How will cashless system help the unbanked

For many countries, going cashless is the way of the future, where all people can be included in the benefits of the technology and infrastructure. Countries such as India can boast of having a high financial inclusivity, as programmes such as unified payment interface (UPI) apps enable people without access to a traditional banking infrastructure to do digital transactions simply by using a smartphone.

For many other places, such as TT, the cashless drive works differently. Companies such as Pesh Money Ltd have the infrastructure to make transactions without the direct use of an official banking service and are looking for more ways to expand, to complement the banking service and broaden the network of financial inclusivity in TT.

But because TT is still a heavily cash-based society, one can only experience the full benefits of going cashless through a bank. This leaves one central group – the unbanked – behind.

The new financial wave

Pesh Money founder Simon Fortune, in a conversation with the Business Day, said he believed cashless transactions, even ones outside the bank, will be the way most people in TT will do business in the coming future.

“Programmes like Pesh Money allow you to pay anyone in TT instantly,” Fortune said. “About 25 per cent of TT is unbanked, but everyone has a mobile phone. So growth in digital wallets such as Pesh, it crosses all socio-economic groups. You could be the richest person in the country or the poorest: more than likely you have a cellphone.

"Pesh is designed to meet the needs of everyone. We have users from their early 20s to their 60s.”

Since the app launched just over a year ago, a lot has changed. The app’s cash limit for transfers increased from $5,000 to $20,000.

“When we first launched a year ago, the law was that you could have only done $1,000 per transaction. It was a little difficult for some of our users, where they would have to do multiple transactions.

"Since then the law has changed, so you can pay someone a full $20,000 in one go. We have seen users transact up to $7,000 in one shot, and that is a real benefit.”

He said in many instances people use multiple banks as a source to transfer funds into the account, but for peer-to-peer transactions, there is little to no interaction with the bank

“If you have two Pesh users and you transfer $100 in Pesh, that money stays in the digital wallet. You then have that $100 in a digital form. If you have another friend that you want to pay $20, you can send that instantly to their Pesh wallet.

"At no point in that transaction is a bank account involved.”

He said Pesh users can connect multiple bank accounts to their Pesh account or have no accounts connected at all.

Mohammed Danish, a vendor who sells perfumes on Frederick Street, who is originally from India, told Business Day he still uses his own peer-to-peer cashless transaction service, Indian-based Phone Pe, to transfer funds wirelessly and instantly to his family back home.

Phone Pe can make any form of payment: paying your electricity bill, car and house insurance, ordering food and groceries. He told Business Day his grandmother uses it to get her pension.

“You can even buy items. India has an online transaction app where if you want to purchase something at any shop, you can scan the item with your phone and that will link directly with your bank. So you won’t have to use a bank card or cash.”

He said his app is also connected to his banking account.

Fortune also said while the benefits of cashless transactions are many, for people in TT to get the best experience, they will have to get a bank account. He said otherwise, the money will only be available in the Pesh ecosystem.

The unbanked

According to the national Financial Inclusion Survey, as of 2023, about 75 per cent of TT’s citizens reported having a bank account, meaning about 25 per cent of the population does not.

The survey said while the vast majority of people with banking accounts have either a joint account or a personal account with a recognised banking institution, a smaller portion of the population is served by credit unions.

However, the IMF said there has been a six per cent decline in account ownerships from 2017, when the figure stood at 81 per cent.

The survey also revealed that more than 77 per cent of medium, small and micro-enterprises (MSMEs) do not have a business account. The report said the inability to meet the requirements to open an account and a complicated application process were some reasons why they didn’t have one.

One vendor on Frederick Street, who didn’t want to be named, told Newsday he uses two personal bank accounts to do his personal and business transactions.

“I never really thought of getting a business account. I already have two accounts, and I can get to do the things I need to for my business through those accounts.”

He added that his business was mostly cash-based. He said he would offer people cashless transactions, but he felt they were not ready for it just yet.

“Some people don’t even want to buy a smartphone to figure out how to use it, so a few people would not pay the cashless transactions any mind.”

A Port of Spain doubles vendor whose business had just got its registration said it is now in the process of getting a business account, although the business is mostly cash-based.

“The boss wants to get a vehicle and other things for the business, so we are looking at getting the account as an option. Having a business account would be good for getting loans.”

President of the Couva Chamber of Commerce Mukesh Ramsingh said a majority of micro-businesses such as roadside vendors would not have sufficient paperwork to apply for a bank account.

“Quite a lot, maybe more than half, are not compliant with NIS, in VAT and have up-to-date financial statements by members of the Institute of Chartered Accountants of TT,” he said. “It is not dishonesty in any way. A lot of them would probably do the profit and loss and submit it to a financial institution. It may just be that the smaller vendors may not have the funds to go to a chartered accountant or to go to an auditor to do audited financial statements.

"So when they go to the banks or they go to any government institution, they don’t have enough documentation.”

Ramsingh said changes to requirements such as the KYC methods for businesses came about because of international accounting standards such as IFRS9, a financial reporting standard issued in 2014 that outlines how to classify and measure financial assets, liabilities and contracts to buy or sell non-financial items.

He said other methods such as financial statements may be more applicable for loans, but in that event, banks also accept cashflow projections.

“When you've just started a business, obviously you don’t have a cashflow. Most people do a customer projection.”

Building the cashless infrastructure

Despite the significant strides in cashless transactions in India, the World Bank’s data from 2021 says close to 22 per cent of India is still unbanked. The Indian government was able to achieve greater financial inclusion for the unbanked through the use of the UPI, which enabled seamless peer-to-peer transactions with just a few clicks.

In September the Ministry of Digital Transformation partnered with the National Payments Corporation of India (NPCI) to implement a similar real-time payment platform.

The TT Financial Centre (TTIFC), the state agency charged with the development of the financial services sector, in order to further the agenda of financial inclusion, has developed a customer portal for the Environmental Management Authority (EMA) for certificates of environmental clearance, which would allow people to make digital payments to the authority.

The Ministry of National Security also launched an e-portal platform which digitises the process for e-visa and student permit applications and payments. Finance Minister Colm Imbert said the platform successfully processed more half a million dollars' worth of transactions up to June.

The Licensing Division also created a citizen-focused kiosk programme in collaboration with the TTIFC, which allows people to pay for provisional permits.

The TTIFC was also instrumental in creating other initiatives, including the Housing Development Corporation (HDC)'s ePay platform, the Judiciary's updated Court Pay system, and the Single Electronic Window and TT Bizlink platforms for trade-related services across several ministries, departments and agencies.

Imbert, in the 2024/2025 budget, said a national strategy for financial inclusion is being developed through a collaboration between the TTIFC and the government. He said the roadmap will act as a guide to ensure that everyone, regardless of socio-economic background, will have access to essential financial services.