Digital money system to go private in 2018
President Lenin Moreno announced Tuesday that management of the government’s digital — or electronic — money system will be turned over to private banks next year. Ecuador’s Central Bank (ECB), which has managed the program since its inception in 2014, will function in an oversight role.
“Through discussions over the last two months, we have reached an agreement with the Association of Private Banks (ABP) who will work with the Central Bank to maintain the original objectives of the program,” Moreno said at the conclusion of a meeting between bankers and government officials at the Presidential Palace.
The expectations of the digital system, designed to function on cell phones, have fallen far short of expectations, according to the ECB. At its roll-out three years ago, the bank estimated the system would have 3.5 million users in 2017 and handle $600 million in transactions. Instead, the system has 350,000 accounts, many of them inactive, with a total $34 million in transactions.
Julio José Prado, president of ABP, said that banks will begin work immediately to build a computer platform to manage the system. “We will work with the Central Bank, using the software they have already developed, and enhance it,” he said. He added that much of the original platform will be turned over for use by the country’s financial cooperatives.
Prado said the private banks support one of the key objectives of the digital money system: to reach people who do not have checking and savings account. According to the ECB, almost 40% of Ecuadorians do not have bank accounts. “Like the government, we want to reach out to those who are not part of the traditional banking system. This program will allow them to pay bills digitally just like those who have bank accounts. At the same time, however, this will be system for all Ecuadorians and will streamline the way make financial transactions.”
If the new arrangement is successful, Prado said, it will also reduce the amount of cash the ECB must keep in circulation in the country. “This will save the government hundreds of millions of dollars a year,” he said.
Private bankers said they have been assured that the digital system will be based on real money. “Our concern with the former government was that they would not guarantee that it would be backed by hard currency,” said Antonio Acosta, chairman of Banco Pichincha. “Today, we are confident that each electronic dollar will be backed by a real dollar. For us, this guarantees the integrity of Ecuador’s financial system.”