Costa Rica has taken significant steps in modernizing its payment ecosystem. The national payment system, SINPE (Sistema Nacional de Pagos Electrónicos) is managed by the Central Bank of Costa Rica (Banco Central de Costa Rica, BCCR) which includes multiple rails operating in different layers;

1. SINPE Móvil (SINPE Móvil) which is a fast payment system (FPS) which enables peer to peer transfers using mobile numbers. 
2. SINPE (core SINPE rails) is the electronic payment platform for bank accounts, interbank transfers, check clearing and direct debit systems.
3. SINPE-TP is another important aspect of the payment infrastructure for public transportation fare payments including open loop contactless card services and QR code payments, etc.  

These rails along with electronic wallets, mobile banking, regulatory support and expanding merchant payment systems together make up the robust payment ecosystem in the country. Let’s better understand these rails and how they’re tied together for the best working of the payment infrastructure of Costa Rica.

The working of the payment rails in Costa Rica

Here’s how the main rails and services of Costa Rica function;

1. SINPE / National Electronic Payment System

SINPE, launched in 1997, connects financial entities like banks and public institutions through a streamlined telecommunication network. It facilitates electronic cash transfers among client accounts, clearing checks, direct debits and direct loans, etc. it is the backbone of back transfers and interbank networks in Costa Rica.

2. SINPE Movil 

SINPE Movil was launched in 2015 and is also managed by the Central bank. It is the major facilitator for P2P and small value transfers to and from bank accounts using mobile numbers instead of bank details. These transfers operate 24/7 via mobile apps, online banking and SMS and ATM as well. It requires the user to have an account in an active financial entity and an active mobile line.

3. SINPE-TP (Public Transport Payment Rail)  

These rails are specifically built for fare payments and collection in the public transit using digital payments - QR codes, digital wallets and contactless transfers. It first started from train transits and has eventually extended to buses with a goal to better penetrate in the entire public sector transport system.  

4. Open loop and contactless payments - Mobile wallets/NFC/QR

There have been efforts to enable contactless payments via cards and mobile wallets as well as the ‘tap to pay’ quick payment solutions. Mobile wallets and the functionality of QR codes is being explored better in these systems and eventual integrations are being adopted at all levels. 

5. International payments and cross border networks

Costa Rica’s SINPE network is a strong domestic network connecting the country well locally. On the cross border side of transactions, businesses mainly rely on SWIFT or correspondent banking for international transfers. There have been efforts from banks to automate these transfers and to increase the associated security and speed of these payments. While these methods are complex, many financial institutions are experimenting with rails which can better suit the international networks. 

What makes these rails strong?

1. Convenience and shared interests - SINPE Movil makes day to day transactions easy using phone numbers which are available round the clock and are used commonly by folks for day to day transactions.

2. Financial inclusion - SINPE Movil has contributed to higher bank account usage by helping those who may not have access to bank accounts but prefer digital payments. This has reduced dependence on cash.  

3. Low cost for smaller transactions - for many transactions, there are no underlying fees locally.

4. Public transport integration - SINPE TP is a game changer for public transportation usage supporting more merchants, reducing cash handling in public transit. 

5. Government and regulatory support - the central authorities support constant development ensuring fintech involvement, enabling open loop transactions and making enhancements like QR adoption etc. 

Addons to these payment rails could power up the transactions and the potential of existing systems. TransFi’s systems are built to make existing rails stronger, integrating them with the power of blockchain and leveraging speed, security and transparency. 

Pain points around the financial system

While Costa Rica is ahead of its counterparts in many respects, a bunch of setbacks account for developmental opportunities, some of these are listed here;

1. Currency limitations with domestic systems
2. Cross border delays and fees
3. Interoperability & account access
4. Regulatory and legal requirements
5. Transactions/usage limitations
6. Fraud and security risks
7. Lack of Infrastructure and merchant readiness 
8. Scheduling gaps 

The rails are constantly diverted towards betterment, Costa Rica expects a cashless society in the coming times and not just this, but the combating of these challenges at the right steps could bring the aspiration closer to realisation. 

What global businesses should consider while making payments to Costa Rica

For businesses and individuals sending money to Costa Rica like Vendor payments, remittance, payrolls etc, should watch these out in order to adopt best practices and least errors;

1. Know whether the beneficiary account is eligible for reception of amount via SINPE or SINPE Movil.
2. Currency choice should be taken into account, conversion costs and delays could hamper the process of payments in case of foreign currencies.
3. Ensure proper information about the beneficiary’s account
4. Use well integrated and reliable channels, check compatibility.
5. Understand limits and associated fees.
6. Have compliance in order
7. Consider local rails and rail enhancements when required and suited.
8. Monitor transaction status 
9. Use risk controls by verification and digital measures.
10. Take time and schedules into account. 

To explore tailored cross border payment solutions and local payment benefits in Costa Rica, get in touch with the expert team at TransFi and expand your financial empire. TransFi offers quick and accessible integrations with local payments rails, easy digital assets settlements and a worldview into currencies and payments methods used all across. TransFi is helping the many countries in the global realm embrace a better future with the ease of the best services and interface at power by connecting users with over 100+ currencies, 250+ local payment methods, and 80+ digital assets, giving both senders and receivers control, speed, and cost savings.  

To know more about local payment rails, also read: Spain’s Payment Rails & How They Work – SEPA, Bizum & Instant Transfers

Frequently asked questions (FAQs)

1. What is SINPE?

SINPE connects financial entities like banks and public institutions through a streamlined telecommunication network. It facilitates electronic cash transfers among client accounts, clearing checks, direct debits and direct loans, etc. it is the backbone of back transfers and interbank networks in Costa Rica.

2. How much do fees cost for domestic transfers vs. cross-border payments?

Transfers via SINPE and SINPE Movil are often free under certain thresholds while cross border transactions can come with high fees associated with SWIFT and correspondent banking. TransFi on the other hand can make cross border transactions cheaper, quicker and accessible from anywhere anytime. 

3. How does SINPE Movil promote financial inclusion?

SINPE Movil has contributed to higher bank account usage by helping those who may not have access to bank accounts but prefer digital payments. This has reduced dependence on cash. 

4. What is SINPE TP?

These rails are specifically built for fare payments and collection in the public transit using digital payments - QR codes, digital wallets and contactless transfers. It first started from train transits and has eventually extended to buses with a goal to better penetrate in the entire public sector transport system.  

5. How can TransFi help the local rails in Costa Rica? 

TransFi offers quick and accessible integrations with local payments rails, easy digital assets settlements and a worldview into currencies and payments methods used all across. TransFi is helping the many countries in the global realm embrace a better future with the ease of the best services and interface at power by connecting users with over 100+ currencies, 250+ local payment methods, and 80+ digital assets, giving both senders and receivers control, speed, and cost savings.