Central Bank of Montenegro: How to Boost Banking and Payment Innovation in a Small Developing Economy

Posted on Dec 14, 2021 by Ivan Bošković, Head of Division, Payment Systems and Financial Technology, Central Bank of Montenegro

The transformation of existing conditions matters because it is a fundamental source of long-term growth. Financial services which rely on digital innovations are rapidly transforming markets, and this process has been accelerated by the Covid-19 pandemic. Many countries are now trying to catch up.

Fostering innovation brings with it different challenges depending on the level of development, market size or even the geographic position of a country. When compared to the frontrunners, small markets face barriers that are much more challenging than those found in advanced economies. However, some countries such as Singapore, Luxembourg and Malta are among the frontrunners. Their visionary policies have paid off and they are now treated as role models for many others. The key question is whether their success can be easily followed or copied.

We need to examine the situations of some small players who are currently rethinking their innovation policies in an effort to improve their regulatory environment in support of innovation. Faced by unstoppable trends in payment systems, the decisions they face are not easy.

Small countries often lack the most basic requirements, such as physical and human capital, which becomes more acute as technology develops. Their authorities are struggling to support innovation and in particular the accumulation of innovation capabilities. In order to design, implement, and coordinate an effective policy, policy makers must take into consideration everything that affects the accumulation of all types of capital—physical, human, and knowledge.

Setting up a favorable policy framework seems to be just one of the factors required to achieve effective technology transfer and the commercialization of new discoveries with long-term benefits for economic growth and making improvements in both the quality of life and standard of living.

Fostering Innovation in the Balkans

There is something to be learned from each country profile and we will now look at what the Central Bank of Montenegro (CBM) is doing in order to implement digital payment innovations. ...

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