Last week, the governor of the Bank of Mexico announced that in three years the Digital Currency (MD) could be ready to operate and that it will be part of the actions that this institution carries out to have greater financial inclusion. This announcement puts Banxico alongside a list of at least 10 central banks that are actively considering DMs as a tool to reduce barriers to access to financial services.
This motivation is not exclusive to Central Banks, financial technology (fintech) companies also widely cite that the adoption of technology and innovation in financial services will make them more accessible to the general public. Certainly, if we want to attract more people to the formal financial system, the possibility of making transactions at low cost, at higher speeds and with limited access to telecommunications infrastructure are highly desirable characteristics.
Mexico is a pioneer in the modernization of the financial system. More than 15 years ago SPEI was adopted, the real-time interbank payment system with no limits on the number or amount of transactions and at a very low cost. Also, with the electronic signature, we have a secure way to identify ourselves that is already in common use. More recently, CoDi, Banxico’s platform, allows electronic transfers to be made between deposit accounts of individuals and corporations using the SPEI infrastructure, free of charge. These systems are robust and have already been in operation long enough to know their scope.
The elements of the electronic payment system in Mexico already have the qualities required for the implementation of a MD. However, there is still a lack of awareness among the population of the benefits of adopting existing technology and services. Additionally, lack of confidence in digital payments and lack of telecommunications infrastructure are obstacles to leveraging existing payment technology.
Promotion and education in the use of CoDi would be a good starting point. The fact that its use has no cost makes it the ideal mechanism for making micropayments, those that are currently made mainly in cash. For example, we could pay at the cafeteria, the store and the bakery using CoDi in a secure way. And if you need to travel miles to the nearest ATM to get cash, the incentive to use and improve CoDi is even greater.
In order for CoDi to be a financial inclusion tool, it is necessary for SPEI participants to include among their products basic, easy-to-enroll, low-cost accounts that can exploit the benefits of CoDi. Additionally, the incorporation of its use in point of sale terminals (POS) and in automated teller machines (ATM) would make the adoption of the system smoother. The combination of these elements would result in universal access to the payment system in a short time and at low cost.
On the other hand, Banxico and other public sector institutions must redouble efforts to encourage the use of digital media and at the same time reduce risks. This must be accompanied by financial and digital education programs, regulation oriented to operational details, including cybersecurity, and policies that encourage technological changes for the benefit of society.
Actuary from UNAM
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Lucía Buenrostro holds a Master’s in Economics from El Colegio de México and a Master’s in Mathematics and Finance from Imperial College (United Kingdom). She has a PhD in Economics from the University of Warwick (UK). She has carried out teaching and research work at UNAM, the University of Warwick and the University of Oxford.
He has extensive and solid experience in the international financial system where he worked for almost 15 years in London as head of risk management areas in investment banking.