The Central Bank of Ecuador is talking to private bankers about assuming management its “electronic money” system.
Launched by the government in December 2014 as way to extend banking services to people without bank accounts and to reduce the amount of physical cash in circulation, the electronic money system has fallen far short of expectations.
In the roll-out of the program, the Central Bank estimated that by the end of 2016, 5% of all financial transactions, in dollar terms, would come through the system. In fact, the system handled less than one-tenth of one percent, or only $9.5 million.
On Monday, Ecuador Finance Minister Carlos de la Torre and other government officials met with Ecuador Association of Private Banks president Julio José Prado and other bank representatives to discuss a possible hand-over of the system.
De la Torre called the talks “exploratory” but said that the government of President Lenin Moreno is open to sharing operations of the system with private banks or turning it over entirely. “The system has not functioned as we had hoped,” de la Torre said. “It is clear that we need a different approach to build trust and to make it successful.”
The Central Bank originally estimated that the cell phone-based system would have one million active accounts by the end of last year. In fact, it had less than 80,000 accounts, most of them inactive.
Private banks had complained about government efforts to force them to offer electronic money services, claiming that since they were not administering the program they could not guarantee that it was backed up by hard currency. In December 2016, Superintendencia of Control of Market Power ordered banks to provide a full range of electronic money services but the order was rescinded days later.
Private banker Prado said he was encouraged by the meeting with the finance ministry and said the banks are interested in administering the program. “I am encouraged by the openness of the government to discuss the issue,” he said. “Clearly, they see the importance of including the private sector in the operation. We look forward to continuing the talks.”