PPD training discusses challenges with digital payments in the Pacific
The Alliance for Financial Inclusion (AFI) and its Public-Private Dialogue (PPD) partner, Visa, organized a member training on Accelerating Digital Payment Systems in the Pacific on 8 June, 2018 in Apia, Samoa.
Held as part of the AFI Pacific Islands Regional Initiative (PIRI), the PPD training gathered more than 40 members from over nine Pacific and small island nations in Apia, Samoa. The objective of the training was to come up with best practices from a policy and market standpoint to increase the adoption of electronic payments in the Pacific, and small island countries and nations.
Amina Tirana, Visa’s Senior Director for Governments and Partnerships, opened the training with a global outlook on the progress of financial inclusion, and the fact that cash usage is still predominant — especially in developing and underdeveloped economies. For example, the proportion of cash payments is 99 percent in Africa, 91 percent in Latin America and 98 percent in the Asia Pacific. Usage of cash is also expensive; it is estimated that the cost of cash is as much as 1.1 percent of GDP.
The sessions that followed focused on merchant payments in the Pacific. Tourism is the main revenue for the Pacific region with around 3 million arrivals and an annual tourism spend of around USD3 billion — presenting a huge opportunity to digitize domestic and the volume of tourism payments over the next five years.
The PPD training revealed that the digital payment ecosystem in the Pacific aims to increase domestic and cross-border usage, security, innovation, small business enablement and acceptance expansion that will contribute to the advancement of financial inclusion. However, the Pacific region faces the following pain points:
- Travelers and users who perform electronic payments are concerned about security, fraud, and merchants not accepting payments or imposing a surcharge. In many cases, hotels and large merchants charge 2.5 to 3 percent surcharge on transactions within the Pacific.
- Having previously faced a card skimming scam in 2016, users are faced with limited security on local magnetic stripe cards.
- Multiple small markets along with the high costs of implementation, can lead to low return on capital for industry stakeholders.
Retail & e-commerce acceptance
Participants in the PPD training also discussed the enablers for increased adoption of digital payments in the Pacific. Payment aggregators can play a significant role in onboarding small merchants, and extending payment solutions to customers, both online and offline. For example, from a tourism perspective, a payment aggregator can onboard tourist operators and agents who offer services such as car rental, diving, fishing or homestays. As a result of partnership with banks, aggregators can offer online payment services for tourists (both domestic and foreign).
Merchant and cardholder education is critical as merchants are often unable to get clear visibility of the value proposition in driving digital payments out of fear that they may be exposed to the tax authorities.
Cross functional and multi-stakeholder strategies is also an important step toward digital ecosystem. Visa has collaborated with Reserve Bank of Fiji to run a financial literacy campaign to promote digital payments, aiming to collaborate with the rest of the Pacific region.
Security & innovation
The PPD training highlighted that there should be increased focus on security and innovation of the digital payment ecosystem. To build a secure digital payment ecosystem within the Pacific, Visa has set up a South Pacific Risk Council. The council initiates a periodic conference call among Pacific financial sector stakeholders chaired by ANZ. All stakeholders join the call (including Mastercard) to address the issue of fraud in the Pacific.
Digital payment innovations including contactless and QR technology are already paving the way in the Pacific; many EFTPOS terminals in the region are already contactless-enabled.