Summary of ECLAC Caribbean DFS outputs (2014-2017) 

Report on ITU/ECLAC/TATT 2016 workshop; Exploring Innovation in Transactions & Financing in Caribbean

 

 

The Economic Commission for Latin America and the Caribbean (ECLAC), subregional headquarters for the Caribbean, is pleased to transmit for your attention, (LC/CAR/2017/11) entitled “REPORT OF THE SEMINAR ON SCIENCE, TECHNOLOGY AND INNOVATION FOR SUSTAINABLE DEVELOPMENT- EXPLORING INNOVATION IN TRANSACTIONS AND FINANCING IN THE CARIBBEAN” from the meeting convened in Port of Spain, 1-3 June 2016.

 

Below is a listing of the various DFS outputs produced by ECLAC from 2014 – 2017

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ECLAC Publications and Resources in “Digital Financial Services”

2014

2015

 

Digital currency and mobile money solutions are components of new industry classifications referred to as Financial Technology (FinTech) and Digital Financial Services (DFS).

2016

 

 

 

 

 

Instagram media by beascycle - UN Economic Commission for Latin America and Caribbean #digitalcurrency study finally publishedThis report examines the usage of digital currency technology in the Caribbean subregion with a view to drawing attention to the opportunities and risks associated with this new phenomenon. It discusses the broader context of an emerging activity at the global level and considers how this technology could address subregional deficiencies in the electronic payment infrastructure.The report also discusses mobile money solutions, and the relationship of that technology to digital currency.

 

The workshop is co-organized by the International Telecommunication Union (ITU) in partnership with the Telecommunications Authority of Trinidad and Tobago (TATT) and the United Nations Economic Commission for Latin America and the Caribbean (UNECLAC).

 

Its primary purpose is to provide Caribbean stakeholders from various sectors with interactive sessions along the theme of utilizing technology innovations towards the goal of improving financial transactions and financing arrangements.

 

 

Report of the seminar on science, technology and innovation for sustainable development – Exploring innovation in transactions and financing in the Caribbean (LC/CAR/2017/11) 

 

 

Event video recording

2017

 

Caribbean countries have been seriously impacted by the trend toward “de-risking” in the global financial system, and this is damaging to their economic security and the ability of Caribbean businesses to innovate. De-risking is the name given to the tendency of banking institutions to turn away from working relationships and lines of business for which the cost of regulatory compliance—and the risk of non-compliance— is deemed to be too high in comparison to the returns.

 

This is a phenomenon that is affecting developing economies around the world, but the small and vulnerable economies of the Caribbean have been hardest hit.

 

 

 

The primary purpose and objective of this workshop is to continue providing Caribbean stakeholders from various sectors with interactive sessions along the theme of utilizing technology innovations towards the goal of improving financial transactions and financing arrangements.

 

 

Programme & Presentations available from link above

 

 

Event video recording 

 

Caribbean Digital Financial Services (DFS), DRM & IoT

Peter Nicholls delivers his opening address on behalf of the UN ECLAC at the DFS workshop. Others; Selby Wilson (CTU; partially visible), Cleveland Thomas (ITU), Hon. Darcy Boyce (Barbados)

Post tropical storm Bret, the non-profit SEWATT partnered with local Subway franchise holders to utilize their merchant payment network across several branches, to facilitate donations which were ultimately distributed to beneficiaries as sandwiches. Reliable mechanisms for donations post disaster is recognized as a key element of disaster relief. and national Disaster Risk Management (DRM)  The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) recently published a report entitled “Strengthening cooperation between telecommunications operators and national disaster offices in Caribbean countries” citing the potential benefit of Mobile Network Operators (MNOs) enabling donations via short codes post disaster.

  

This issue crosses over into other work which ECLAC has been involved in, in partnering with the International Telecommunications Union (ITU) and the Telecommunications Authority of Trinidad and Tobago (TATT) to jointly host the 2nd annual Caribbean Digital Financial Services (DFS) workshop over the period 27th – 28th April 2017.

DFS at its very core is about payments and value transfers via mobile and electronic channels. Several sub-areas are encompassed under this banner, including, but not limited to; mobile money, digital currency,  blockchain, regulation, digital ID, digital credit and donations.  It is recognized as an enabler for financial inclusion, banking the under banked, economic empowerment, economic development, strengthening participation in the digital economy and FinTech. It is an area at the intersection of financial and telecommunications regulation.

The agenda can be found at the link above which includes links to key speeches and presentations (videos coming soon).  This workshop follows on from the 2016 intervention where several key issues to Caribbean DFS were uncovered including:

A channel hosting the videos of presentations and panel discussions for the 2016 workshop has been created by UN ECLAC.

Senator The Hon. Darcy Boyce (Barbados) in his opening remarks outlined some areas of key concern for regulators in consideration of financial innovation and DFS, while continuing from the 2016 workshop, the audience was again presented with an examination of mobile money within the Caribbean. This time the emphasis was moved from Haiti to Jamaica where Dr. Maurice McNaughton (UWI) laid out the process by which interactions between the regulator and potential services providers eventually yielded mobile financial services products being brought to market which could facilitate, amongst other types of transactions, Government to Person (G2P) payments.

Within a panel focused on consumer protect in mobile financial services, Dr Kevin Butler of the University of Florida, provided insights into his research into application security (or lack thereof) within a sample of mobile payments apps from several providers. The audience also learnt of concepts which can be utilized to create an enabling regulatory environment for financial innovation, such as sandboxing as presented by Nikola Tchouparov, who has served within two distinct entities which were part of the two cohorts of the UK’s Financial Conduct Authority regulatory sandbox.  Additionally, some of the essential points derived from the opening and closing panels where this author directly participated are listed below:

  

DFS Session 1:   Mini-case exploration: Encouraging participation in the digital economy

Panelists: Hon. Melford Nicholas (Antigua & Barbuda), Jason Julien (FCB), Robert De Gannes (Entrepreneur), Glynis Alexander Tam (InfoLink) ; Moderator Shiva Bissessar (Pinaka Technology Solutions)

There is an immediate market available to Caribbean entrepreneurs as comprised of 60M strong diaspora desirous of Caribbean goods which includes cultural goods digital or otherwise.  A better response is required to the needs of our entrepreneurs in having access to this market via the ability to receive payments.  We must leverage technology and innovation to provide for our entrepreneurs while taking into consideration international standards for compliance and controls
  
DFS Session 9:  Next Steps
Panelists: Hon. Darcy Boyce (Barbados), Vashti Maharaj (AG Office, GoRTT), Shiva Bissessar (Pinaka Technology Solutions); Moderator;  Kwesi Prescod

The proposal for a think tank initiative to provide further research into identifying problems and examining potential solutions (from multiple perspectives) such as how tech/innovation can assist the correspondent bank / de-risking problem, Caribbean intra-regional settlement (and FX challenges) and payment system deficiencies, must be examined further to identify potential sources for funding to make it a reality.

Next Steps

The efforts of the UN ECLAC in performing DFS research (digital currency in Caribbean report & prospects for blockchain in de-risking paper) and the efforts of the ITU in bringing enlightenment on DFS issues to Caribbean audiences needs to be applauded.

It is hoped that other actors can now match these efforts and play an active role in the research and development of DFS locally and regionally while identifying and utilizing Caribbean expertise, rather than ‘parachuting in’ foreign expertise, as we are often prone to do. Actors which can potentially play a role here includes:

  • Financial regulators (CBTT, TTSEC, FIU)
  • The National Payments Council
  • The Economic Development Advisory Board
  • The Chamber of Commerce

These parties should review their mandates in accordance with the benefits of DFS and create efforts to ensure Trinidad and Tobago is not left out of the opportunities afforded by FinTech and DFS, while simultaneously addressing risks.

Internet of Things (IoT)

Immediately preceding this workshop, these parties were also involved in the hosting of the Internet of Things (IoT) Smarter Living in the Caribbean forum over the period 24th – 26th April 2017.  Below are some of the key points from this event.

Session 8:  IoT Security + Privacy: policy, legislation, regulation and infrastructure

Panelists: Trevor Forrest (Government ICT adviser, Jamaica), Vashti Maharajh (AG Office, GoRTT), Julian Wilkins (CANTO), Bruno Ramos (ITU; remote conf.); Moderator Shiva Bissessar (Pinaka Technology Solutions)

An importation conclusion was formed by the panel which cited that IoT presented a unique challenge given the unique characteristics of having no user interface and lack of user agreement.  This demands re-examination of the policy and regulatory environment and the surrounding legislative context, with respect to user data privacy and societal security.

Light moment shared while discussing the unique challenges which IoT poses to user security and privacy in IoT session 8

IoT Session 9:  IoT Privacy and Information Security: Caribbean requirements and challenges

Panelists: Hon. Catherine Hughes (Guyana), Trevor Forrest (Government ICT adviser, Jamaica), Dr. Kevin Butler (University of Florida), Shiva Bissessar (Pinaka Technology Solutions); Moderator Nigel Cassimire CTU)

Government need to facilitate the development of opportunities which can foster the growth of an ecosystem of cyber security professionals capable of ising to the challenge of IoT cyber security.

 

Definitely one of the more memorable moments from IoT forum was the participation of several youth ICT innovators and entrepreneurs who showed off their wares in the area of IoT; in particular the audience appreciated the contributions from Cottage IT via Theo Boomsma and one of his proteges Julie Sundar, both hailing from Suriname.

OTT VoIP in the Caribbean: A Vexing Policy Issue

tatt open forum

The Telecommunications Authority of Trinidad & Tobago (TATT) held their 21st ICT open forum on 18th June 2015 posing the question “Should Over The Top Services Be Regulated” to the three regulatory heads of the regional mobile providers Digicel, TSTT and LIME Caribbean, and the audience, no doubt, 100% comprised of mobile customers.

TATT’s representatives presented a summary of their consultative document “Towards the Treatment of Over-The-Top (OTT) Services” which remains open for public comment through till Monday July 6th 2015.  While the consultative document starts off speaking to Over The Top (OTT) services in general and mentions that OTT services includes other services including  video; within this forum (as within their document) there was a clear focus on OTT Voice over Internet Protocol (VoIP) services.  The focus on OTT VoIP was subsequently brought up in the Q&A portion of the proceedings with audience member, Mr Simon Fraser of UWI, posing comments around the future ‘can of worms’ scenario of which OTT services should be regulated or not.   In defining OTT VoIP, three categories were mentioned:

OTT VoIP Category Example
App to App Viber to Viber call
App to PSTN Viber to call terminating on mobile provider network
PSTN to App Call from mobile provider network terminating on Viber

 

In making a determination on regulation of OTT VoIP, TATT has to take into consideration the Authorised Service Providers’ (ASPs’) perspective and the threat posed by this innovation to their; (i) potential loss in revenues (ii) utilization of network resources (iii) having to compete with an unregulated service i.e. uneven playing field.  TATT also has an obligation to ensure that consumers are protected in this tango between ASPs and OTT services and indeed within their consultative document they note:

With the increase in demand for OTT services by the public, there may be a negative impact on the market if such services are removed

TATT offered few possible scenarios for resolution, including.

Solution Explanation
Aggressive Blocking of OTT VoIP services as was done by Digicel in Jamaica and Haiti
Collaborative Partnering with select OTT VoIP players to develop a mutually beneficial relationship
Opportunistic Creation of premium data packages which allow for OTT VoIP

 

Positioning to Block or Collaborate

In presenting Digicel’s case for possible regulation of OTT VoIP, Mr Kieran Meskell, Head – Regulatory Affairs, stated that OTT VoIP service providers had an unfair competitive advantage over ASPs as they had no cost to build and maintain networks neither did they have any obligations to fulfil as regulated ASP. They painted a bleak future scenario of Caribbean mobile network operator insolvency due to drastic loss of revenue from their mobile voice calls business and increased cost of upgrades and maintenance of mobile networks.  They highlighted that they had a contract in place with Viber to provide OTT services over their network, which Viber chose not to honour. This is what led to their action of seeking to block the service which TATT previously negotiated to stave off pending further investigation.

TSTT, who previously communicated the position that they will not block OTT VoIP services, took a more restrained approach, but stated none the less that they were concerned with OTT services which are in direct competition with licensed communication services.  Ms Christa Leith, Head – Regulatory & Policy Affairs,  noted OTT services as bypassing traditional distribution systems within their network and indicated their desired for a symbiotic relationship rather than a parasitic relationship.  While citing several regulatory imbalances in comparing ASPs against OTT service providers along several dimensions (including licenses, quality of service, fees and interconnection), they acknowledged that traditional business models in the telecoms sector needed to be re-examined.  TSTT expressed a position of “refining their OTT strategy” and stated they were open to collaborating with OTT services providers via “appropriate business models”.

 

“Vexing issue at the policy level…”

Head – Regulatory Affairs & Policy, LIME Caribbean / Columbus Communication Trinidad Limited, Mr David Cox came to the podium without a power point presentation but articulated the most thought provoking delivery of the evening.  Coming from a telecoms regulator background he had a perspective on the problem from both sides of the table and he chose to convey his thoughts as a conundrum facing the nation, and indeed the Caribbean, via a series of exploratory questions.  Grounding his delivery with a statement that his organisation has adopted an open internet policy (no blocking, no throttling), Mr Cox spoke less of OTT services and more about information and the differentiation between networks and information.  He acknowledged the need for proper regulatory balance in the telecoms sector agreed that money for the maintenance and upgrade of network will evaporate if this balance is not achieved.  However, he went on to question whether regulation of networks implied regulation of information and suggested at times, a light-handed approach to regulation is beneficial.

Some of his question included:

  • Are ASPs the best agents to manage access to information? Should this be left to consumers?
  • Is there a role for self-regulation? What if companies make their decisions to block and let market forces prevail (i.e. let customers express their dissatisfaction by moving to another provider)?
  • What regulatory approach best promotes competition in the market place?
  • Can premium rate charges for OTT services and market forces solve this problem?

Citing a deficiency of in-market data presented by TATT, he suggested the use of foreign data on usage of OTT services may not paint an accurate picture within the local market usage of OTT services.  He also posed a final question to Digicel querying if Viber had not reneged on their agreement, would such an agreement be considered as a solution to the OTT problem or would that have been a temporary fix until a regulated solution was gotten from TATT.   It would seem that this is the question which should have kicked off the proceedings, or any future proceeding on this topic, for that matter.

 

From the Floor

In taking to the microphone, consumers spoke of their reliance upon these services to overcome international rates and burdensome data roaming charges and questioned the network providers’ claims of delivering a level of Quality of Service, citing recent outages and call quality concerns. Other notable concerns included:

  • Mr Lassana Murray, Quenk Technologies, noted that the blocking of OTT services would lead to a lost market opportunity for local software developers to create applications in that space.
  • Ms Tamara Ragoonath of DirtecTV questioned why TATT was playing such a leading role in the OTT VoIP debate when they had an outstanding issue with respect to local subscription television services providers carrying international channels which they did not have the rights to broadcast, thereby placing DirectTV on an unlevelled playing field with these providers (…in response TATT stated that a final resolution on this matter, possibly in the form of cessation notices to offending service providers was coming soon).

 

 

Conclusion

There is no doubt the OTT VoIP has the potential to erode mobile operator’s revenues, but with two out of three mobile operators willing to at least explore non-regulated solutions, one is left wondering if the future is as bleak as Digiciel made it out to be.  Additionally, they all seemed to all agree that Telco business models need to be re-examined.  Hence possible solution scenarios include a light-handed regulatory approach plus collaborative mechanisms between ASPs and OTT services (as advocated by TSTT) or some combination of opportunistic measures via the use of premium rate charges and aggressive measures of allowing ASPs to block what they want and let market forces to prevail (as raised by Mr. Cox).

OTT services are but one innovation we are currently experiencing locally and in the Caribbean, but globally mobile operators are emerging from their traditional business models and immersing themselves into mobile money, payment systems and financial transactions. In fact, the International Telecommunications Union (ITU) currently has a focus group examining Digital Financial Services which is seeking to standardize mobile money technology and solutions.  Hence mobile operators have the ability to derive revenues from new streams such as these and even begin competing with financial institutions.  One can only speculate the kickback local and regional Telcos will experience from traditional financial institutions once this round of innovation and perceived encroachment comes around.