Raphael John-Lall

While T&T’s Cen­tral Bank is get­ting ready to roll out a pi­lot pro­gramme in 2025 for the Uni­fied Pay­ments In­ter­face (UPI) re­al time pay­ment sys­tem de­vel­oped in In­dia, there could be se­cu­ri­ty risks in­volved in launch­ing this in­no­v­a­tive pay­ment sys­tem.

In a note in its pub­lic ed­u­ca­tion se­ries in No­vem­ber where it warned of pos­si­ble risks in set­ting up and us­ing the UPI, T&T’s Cen­tral bank said, “More­over, like any oth­er dig­i­tal in­ter­ac­tion, one must be pre­pared to use cy­ber­se­cu­ri­ty de­fences (pass­word man­age­ment, care re­gard­ing on­line scams etc.). In this re­gard, a pub­lic ed­u­ca­tion pro­gramme will be launched to ex­plain these mat­ters.”

Ri­car­do Fras­er man­ag­ing di­rec­tor, ACE Strate­gic So­lu­tions told the Busi­ness Guardian that there are pos­si­ble dan­gers when im­ple­ment­ing this new sys­tem.

“Some dan­gers in­clude pri­va­cy con­cerns, where the iden­ti­ty of per­sons in­volved in the trans­ac­tion may be ex­posed to unau­tho­rised or un­de­sired dis­clo­sure. Ro­bust pri­va­cy reg­u­la­tions and laws must be adopt­ed and en­forced.

“An­oth­er con­cern is whether some per­sons may be un­able to avail them­selves of de­vices and in­ter­net ac­cess, putting them at a dis­ad­van­tage. It will be im­por­tant to main­tain cur­rent pay­ment chan­nels while work is done to es­tab­lish the in­fra­struc­ture. Fraud and scams may rise; thus aware­ness and ed­u­ca­tion pro­grammes are im­por­tant.

“While the coun­try’s pow­er sup­ply and tele­coms ser­vices are fair­ly re­li­able, hav­ing no oth­er means to trans­act busi­ness, es­pe­cial­ly dur­ing times of cri­sis, will be dis­con­cert­ing for a tru­ly cash­less so­ci­ety,” said Fras­er.

On the sur­face, while many would wel­come an al­ter­na­tive to car­ry­ing cash in crime-rid­dled T&T, Fras­er said crim­i­nals have been cre­ative in evad­ing the law.

“Phys­i­cal cash-re­lat­ed crime, mon­ey laun­der­ing and pro­ceeds of crime may re­duce due to less cash in cir­cu­la­tion and en­hanced trans­ac­tion mon­i­tor­ing and busi­ness in­tel­li­gence ca­pa­bil­i­ties, which such plat­forms of­fer au­thor­i­ties. How­ev­er, over time crim­i­nals may adapt tac­tics to­wards non-cash valu­ables, cy­ber­crime and ex­tor­tion.”

In No­vem­ber, an ar­ti­cle pub­lished on the web­site of Ba­jaj Fin­serv, which is a large In­di­an fi­nan­cial ser­vices com­pa­ny, fo­cussed on as­set man­age­ment and in­sur­ance port­fo­lios, not­ing that there are se­cu­ri­ty lim­i­ta­tions in the UPI and dig­i­tal pay­ment sys­tems.

De­spite ro­bust se­cu­ri­ty mea­sures like two-fac­tor au­then­ti­ca­tion and en­cryp­tion, UPI faces sig­nif­i­cant se­cu­ri­ty chal­lenges.

“Cy­ber crim­i­nals of­ten ex­ploit vul­ner­a­bil­i­ties through phish­ing at­tacks and mal­ware in­fil­tra­tion. Users may in­ad­ver­tent­ly share sen­si­tive in­for­ma­tion, lead­ing to unau­tho­rised trans­ac­tions. Ad­di­tion­al­ly, the rapid growth of dig­i­tal pay­ments has out­paced reg­u­la­to­ry frame­works com­pli­ment­ing en­force­ment against cy­ber­at­tacks. Con­tin­u­ous up­dates to se­cu­ri­ty-to-se­cu­ri­ty pro­to­cols and user ed­u­ca­tion are im­por­tant are es­sen­tial to mit­i­gate these risks. Col­lab­o­ra­tive ef­forts among banks, ser­vice providers and users are cru­cial for en­hanc­ing the over­all se­cu­ri­ty of the UPI ecosys­tem,” Ba­jaj Fin­serv’s web­site stat­ed.

While Fras­er ac­knowl­edged set­ting up this dig­i­tal pay­ment plat­form is an im­por­tant step in mov­ing to­wards a cash­less so­ci­ety, he said there are many oth­er sup­port sys­tems that are need­ed to en­sure the suc­cess of UPI.

“Sig­nif­i­cant mo­bile in­ter­net pen­e­tra­tion, se­cure ‘free’ WiFi, low fees, low bar­ri­ers to on­board­ing, quick set­tle­ment of trans­fers and da­ta se­cu­ri­ty are nec­es­sary for so­ci­ety to trust dig­i­tal pay­ments and catal­yse its over­whelm­ing adop­tion as a pri­ma­ry pay­ment chan­nel, on the way to a cash­less so­ci­ety.”

De­spite these po­ten­tial chal­lenges, Fras­er spoke about the pos­i­tive out­comes from this new elec­tron­ic pay­ment sys­tem.

“The ben­e­fits of elec­tron­ic pay­ment plat­forms such as UPI in­clude im­me­di­ate pay­ments and set­tle­ment of funds for mi­cro and small busi­ness own­ers, who may not now meet the trans­ac­tion vol­ume for card mer­chant ac­counts at com­mer­cial banks. Oth­er ben­e­fits are fi­nan­cial in­clu­sion since, for buy­ers, it is an ad­di­tion­al chan­nel to cred­it cards. There is the sig­nif­i­cant po­ten­tial to boost the lo­cal on­line mar­ket­place with elec­tron­ic pay­ments.”

In No­vem­ber, Cen­tral Bank Gov­er­nor Alvin Hi­laire an­nounced that T&T will launch a pi­lot project in the first half of next year to test the re­al-time UPI, with the goal of full im­ple­men­ta­tion by the end of 2025.

This fol­lows the sign­ing of a bi­lat­er­al agree­ment be­tween the Na­tion­al Pay­ments Cor­po­ra­tion of In­dia’s (NPCI) In­ter­na­tion­al Pay­ments Lim­it­ed (NI­PL) and Min­istry of Dig­i­tal Trans­for­ma­tion (MDT) to de­vel­op a re­al-time and ef­fi­cient pay­ments plat­form sim­i­lar to In­dia’s flag­ship UPI.

UPI is a re­al-time pay­ment sys­tem in In­dia that al­lows users to send and re­ceive mon­ey, pay bills, and make on­line pur­chas­es. It is a Fast­Pay­ments in­ter­face for the trans­fer of mon­ey be­tween bank ac­counts across a sin­gle win­dow. UPI is a key part of In­dia’s move to­wards a cash­less so­ci­ety

Now, In­di­ans use UPI to pay every­one from veg­etable ven­dors to doc­tors. More dig­i­tal trans­ac­tions are com­plet­ed in In­dia than any oth­er coun­try, ac­cord­ing to its Gov­ern­ment. In 2023, the num­ber of UPI trans­ac­tions topped 100 bil­lion.

Two weeks ago, in its lat­est pub­lic ed­u­ca­tion se­ries, the T&T Cen­tral Bank ex­plained how the UPI sys­tem will work, “in­di­vid­u­als typ­i­cal­ly use cash, checks, on­line In­ter­net trans­fers, deb­it and cred­it cards, while fi­nan­cial in­sti­tu­tions and oth­er busi­ness­es al­so utilise so called ACH (au­to­mat­ic clear­ing house) and RT­GS (re­al time gross set­tle­ments) arrange­ments to move funds.”

Cash is King in T&T

In Au­gust, the T&T In­ter­na­tion­al Fi­nance Cen­tre (TTIFC) is­sued a sum­ma­ry of the re­sults of its sur­vey of fi­nan­cial in­clu­sion in T&T.

The per­cent­age of cit­i­zens who have a bank ac­count dropped from 81 per cent in 2017 to 75 per cent in 2023. On­ly 52 per cent of the more than 2,000 sur­vey re­spon­dents pre­ferred to save their mon­ey in a bank. Some 82 per cent pre­ferred to save their mon­ey at home.

The sur­vey showed there is a con­tin­ued pref­er­ence for cash trans­ac­tions.

Econ­o­mist Dr An­tho­ny Gon­za­les who is al­so a for­mer head of the In­sti­tute of In­ter­na­tion­al Re­la­tions at the Uni­ver­si­ty of the West In­dies (UWI) told the Busi­ness Guardian that there could be a po­ten­tial re­luc­tance on the part of lo­cals in adopt­ing the new UPI pay­ment sys­tem as cash is still main­ly used by a large part of the pop­u­la­tion.

“That is true but we know the lim­its of cash es­pe­cial­ly in a coun­try of crime. It will take some time to con­vert peo­ple as has been the ex­pe­ri­ence in oth­er places as Chi­na and I sup­pose, even In­dia. Peo­ple do not part eas­i­ly with their mon­ey and one has to con­vince them that the new sys­tem will work in their in­ter­ests.”

While he said like the rest of the pop­u­la­tion, he is still wait­ing for more de­tails on the new pay­ment sys­tem, he said de­spite prob­a­ble chal­lenges like cy­ber­se­cu­ri­ty is­sues and lo­cals feel­ing more com­fort­able us­ing cash, the world is mov­ing to­wards dig­i­tal pay­ment sys­tems.

“I have not stud­ied this in any depth. The world is mov­ing to a cash­less so­ci­ety which has ben­e­fits for all. I am not clear as yet on the In­di­an one but gen­er­al­ly I would say that we face sev­er­al im­ped­i­ments in T&T such as the el­der­ly pre­fer­ring to deal in cash as they are not fa­mil­iar with the dig­i­tal tech­nol­o­gy. The fact is that about 70 per cent of MSEs do not have bank ac­counts and the ob­ser­va­tion that pro­vi­sion would have to be made for emer­gen­cies and when the dig­i­tal sys­tem col­laps­es or is hacked. None of the lat­ter, how­ev­er should stop the march to a cash­less world. We are al­ready on our way with some ap­pli­ca­tions. The pro­gres­sion must be in­cre­men­tal and prop­er­ly su­per­vised and reg­u­lat­ed to work ef­fec­tive­ly in the long-term.”

A for­mer Cen­tral Bank Gov­er­nor and Fi­nance Min­is­ter Win­ston Dook­er­an told the Busi­ness Guardian that what­ev­er draw­backs it may have, the UPI sys­tem has proven to be a suc­cess in­ter­na­tion­al­ly and it will strength­en T&T’s fi­nan­cial sys­tem.

“The UPI pay­ment sys­tem is a step in keep­ing with ad­vances, tech­no­log­i­cal and man­age­r­i­al, in in­no­va­tion of pay­ment sys­tems. It will re­quire a ro­bust plat­form- and prop­er reg­u­la­to­ry fea­tures by the Cen­tral Bank. It has been a suc­cess in In­dia and cou­pled with fi­nan­cial lit­er­a­cy has en­hanced in­clu­sion in the fi­nan­cial world. There are some pos­i­tives ex­ter­nal­i­ties, re­duc­ing car­ry­ing cash, and in­stant ac­count­ing fea­tures, in the move to­wards more cost-ef­fec­tive trans­ac­tions. Of course, there will be need for build­ing con­fi­dence and ed­u­ca­tion­al aware­ness in the so­ci­ety, but it is clear­ly a ma­jor ad­vance­ment in cur­ren­cy man­age­ment for the pub­lic.”