This English version of the blog is a translation of the original text written in Spanish. Click here here to read the Spanish version. (Esta versión en inglés del blog es una traducción del texto original escrito en español. Haga clic aquí para leer la versión original en español.)
By Carlos Herrera, Payment Systems Senior Analyst, and Roberto Arteaga, Head of Payment Systems at the Central Reserve Bank of El Salvador (BCR)
The Central Reserve Bank of El Salvador (BCR) has led and promoted pivotal projects aimed at modernizing the country’s payment systems with the incorporation of innovative, efficient, and safe digital financial services, on par with international standards and to the benefit of all Salvadorans. A major milestone in BCR’s ambitions for modernization has been the birth of Transfer365 – a national payment system developed by BCR in 2021 as part of its Institutional Strategic Plan. By optimizing the latest in financial technology, Transfer365 has provided El Salvador’s central government with a wealth of digital solutions to advance financial inclusion and boost overall economic growth in all sectors of the economy.
Evolution of the number of financial institutions registered with Transfer365
The evolution of Transfer365
Following its inception in 2013, the country’s national payment system (also known as the “mass payment system”) was limited exclusively to processing government transactions, including supplier payments, subsidies, and payroll processing. These transactions were made in batches and settled on a deferred basis.
Almost a decade later, in 2021, BCR set out to revamp the national payment system with the goal of expanding it to deliver easy-to-use, accessible financial services to the whole population while advancing financial inclusion and boosting economic growth in the process. As the brainchild of this quest for modernization, Transfer365 was born that same year following the BRC’s acquisition of an Automated Clearing House (ACH) – a system that enables commission-free fund transfers, credit card payments and loans to be processed through the country’s national payment system. Accessible 24/7 and with immediate settlement for both customers and participating institutions, Transfer365 allowed payments to be processed fast, flexibly, and free of charge through digital channels and financial entity agents. Additionally, it extended the national payment system’s capacity beyond just government payments, to accommodate transactions made by the entire Salvadoran population.
Figure 1. Operation Flow of the Transfer365 System
Transfer365 as a champion of inclusive finance
El Salvador’s mass payment system (Transfer365) has been one of the country’s most emblematic with regard to progress and innovation in recent decades. Its digitalization of financial services has set El Salvador apart from its Central American neighbors as a pioneer in payment system development. The system particularly benefitted unbanked Salvadorans, who were traditionally unable to access basic interbank payment services. Previously, these services were reserved for clients of El Salvador’s largest banks, with high commission fees and for a limited number of hours on business days. Now, financial entities of all shapes and sizes have considered equipping their customers with Transfer365, bringing digital financial services to their doorstep, at just the click of a button – 24/7, 365 days per year, and free of charge.
In terms of governance, BCR has gone the extra mile to integrate all banks, cooperatives, savings and credit societies, financial federations, and the Ministry of Finance into the Transfer365 network. It is also accessible to public and financial entities under the supervision of El Salvador’s Superintendency of the Financial System. In addition, to ensure the system’s smooth operation, BCR continues to collaborate with network participants across the board on adequate risk management, operations strategies, and modernization initiatives, among others.
Graph 1. Evolution and impact of “Transfer365”
June 2021 to December 2022 (Amounts expressed in USD millions, transaction in thousands)
In 2022, a total of 7.79 million transfers and interbank payments – to the value of US$9,715.31 million – were settled through the BCR’s Transfer365 system (see graph 1). This represents over half of the total national deposits, making Transfer365 the most utilized payment network and interbank transfer service in the whole of El Salvador, with a 2022 participation rate of 45.96% (immediate settlement retail payments), peaking at 55.71% in the fourth quarter.
Transfer365 has benefitted the population by providing it with more efficient and secure digital financial services that are safe and easily accessible via mobile phones and through various institutional online banking platforms. Moreover, the system has advanced financial inclusion by providing traditionally excluded sectors of the country’s economy with affordable, readily available, and indiscriminate payment services.
Looking ahead, BCR continues to work on developing new digital financial products and services, with the highly-anticipated Transfer365 CA-RD expected to be implemented in 2023. Transfer365 CA-RD is a one-of-a-kind cross-border payment system that is forecast to serve Central America and the Dominican Republic through the optimization of transnational digital channels by financial agencies of entities region-wide.