Cashless super merchant
LASCO FINANCIAL Services Limited, LFSL, has handpicked a few business operators from within the micro, small and medium-sized sector for a test run of a new tech-driven cashless business model system, designed especially, but not exclusively, for MSMEs that are among Jamaica’s large unbanked population.
The microfinance company has gone ahead and invested in a fullservice e-commerce platform that allows for the business owners to set up a fully functioning online store with inventory management, do crossborder shipping, conduct cashless transactions, develop and maintain transaction records, automate invoices, and create simple financial statements.
Now, LFSL is getting ready to begin hosting the business owners, particularly those without bank accounts, in the pilot programme. “This financial service is a direct response to the challenges we observe facing microbusinesses, particularly when they attempt to obtain loans from financial institutions. They do not have sufficient records, and they especially do not have even a simple financial statement,” said LSFL Managing Director HallTracey in an interview with the Financial Gleaner this week.
The project is being done in
collaboration with the Bank of Jamaica, BOJ, under the central bank’s fintech sandbox, which is designed to test innovative financial products, services, and businesses.
Approved participants in the sandbox are subject to supervision of the central bank, which wants to promote innovation but within the context where risks are managed, including the prospect of product failure, as well as minimising the risk of jeopardising the integrity and stability of the financial system.
The central bank does not provide financial backing for the projects. Those costs are borne entirely by the applicants.
Hall-Tracey said she was not yet ready to disclose the size of the investment.
Under the LSFL initiative, dubbed Lasco Biz, the microfinancing firm will, in essence, act as a merchant aggregator – or a super merchant to a preferred banking institution – in facilitating the small entrepreneurs, with or without a bank account, who wish to expand their sales and conduct cashless transactions conveniently across countries.
In simpler terms, it means that with LFSL acting as a super merchant to a banking institution, the microfinance company can create multiple accounts for business owners to conduct transact in-store and online business if they do not already own a bank account.
The details regarding plans for the settlement of the transactions and the banking partnerships were not disclosed by Lasco Financial.
The merchant aggregator concept is new to Jamaica, but international businesses that act as super merchants to banks often allow for payments to business owners via debit or credit cards held by the super merchant, after which settlement will be done with the business owners.
Hall-Tracey did not detail how income earned from sales would be transferred to business owners. However, the microfinancing company could leverage its network of MoneyGram stores islandwide for cash payments, or have the money sent to its cobranded prepaid Mastercard – Lasco Pay – which the company released last year.
“Imagine a small entrepreneur operating a business on a social platform now being able to sell to customers and accept your payments any time and from anyone, anywhere, without the risk of sharing your banking details or collecting cash,” HallTracey said in an interview with the Financial Gleaner.
“These entrepreneurs or business professionals will no longer have to restrict their services to a fast-depleting cashbased customer segment,” she said.
The test phase for Lasco Biz will run for up to two years, but the start date for the pilot is still to be determined. Once the test run ends, LSFL will need BOJ approval for a national roll-out of the service.
The central bank’s fintech sandbox, which itself was only rolled out this year, has been generating interest from fintech companies and banking institutions looking to offer both mobile wallets and phone credit as a cash equivalent, in line with the sandbox objectives of encouraging innovations in financial services, promoting competition, and promoting financial inclusion for the unbanked.
The programme also offers another means of closing off channels for the flow of illicit money by bringing more of the unbanked into the formal system.
Both BOJ and telecoms regulator, the Office of Utilities Regulation, are collaborators in the sandbox programme. The sandbox regulations replaces those for the BOJ’s Electronic Retail Payment Services programme, or ERPS 2, which were withdrawn on March 2. The sandbox took effect two weeks later, on March 16.
Under the initial phase of the sandbox, fintech companies and other regulated firms, such as cambios, remittance providers, securities dealers and banks, will form a partnership with deposittaking institutions for delivery of payment services. Securities dealers seeking to participate in sandbox projects must get permission from their direct regulator, the Financial Services Commission.