COVID & Cash: A Call to Action for Caribbean Banks & Regulators

By Robert Frederick

The widespread change wrought by the COVID-19 pandemic in how the world transacts, interacts, and contracts may at last be the catalyst that allows Caribbean financial services players to overcome long-standing resistance in the region to banking in the digital sphere.

When the pandemic struck, the significant segment of the Caribbean population who had not yet joined the growing global migration to digital financial services were caught off-guard by sudden branch closures and found themselves unable to access vital services—including cash withdrawals—they normally carried out face-to-face.

This harsh lesson clearly demonstrates to me that the only way to weather another such crisis without severely inconveniencing consumers is for the financial services industry to step up and proactively engage with regulators on purposeful and strategic steps to speed the shift toward digital banking.

There are of course risks to a headlong rush away from cash. In Sweden, one of the world’s least cash-reliant economies, urbanites have taken to the lower risk and higher convenience of non-cash transactions in droves, with thousands even opting to embed microchips under the skin that allow then to pay for goods and services with a wave of the hand. Unfortunately, many rural, elderly and vulnerable citizens have struggled to adapt to the payment revolution, particularly given the extensive branch closures it has caused. In November 2019, the Swedish parliament addressed the concerns of those left behind with legislation to force banks to guarantee cash services, including access to local Automated Banking Machines (ABMs).

In contrast to Sweden, Caribbean economies are rich with small enterprises and tourism-dependent informal traders (e.g. taxi drivers, small tour operators, beach vendors etc.) who transact the lion’s share of their business in cash. The degree of cash-dependency varies by country but, by some measures, 65% of adults lack a bank account entirely. A further 20% are what is termed “under-banked”, or do not use the full range of services available. The proportion of unbanked Caribbean residents is well above the 31% of adults without accounts globally, according to a World Bank report released in April 2018.Those surveyed cited various reasons for not having an account, chief among them insufficient funds, lack of need (e.g. they could use the account of a family member), lack of access, and concern over costs.

From all I have learned as both a resident and long-time banker in the Caribbean, additional factors are at play here, including residents’ unease about the security of internet transactions and a reluctance to have their affairs known to the government. I therefore believe the best and perhaps only way to overcome lingering resistance is for financial services providers and regulators to actively work to bolster financial knowledge, address concerns about costs, simplify transactions, and ease worries about cybersecurity breaches and identity theft with tough security measures.

Potential barriers to successful digital adoption

  1. Socioeconomic and linguistic differences: Socioeconomic challenges such as language barriers and differing financial literacy rates among Caribbean nations could complicate region- and industry-wide initiatives. Earlier coordinated attempts by central banks, such as the Financial Information Month initiative in the Eastern Caribbean, have yielded mixed results. The solution here is to take advantage of the COVID-19 wake-up call with a renewed push for innovative and engaging educational materials, in multiple languages where necessary.
  2. Legislative complexity: Requirements and complexity will vary by country, but this is not insurmountable. To overcome this hurdle, the financial services industry must work in concert with regulators and governments to proactively craft comprehensive legislation governing platforms such as mobile wallet and contactless payments.
  3. Limited institutional resources, particularly among indigenous institutions: Home-grown Caribbean banks, which serve the bulk of the region’s account holders, are often smaller and more limited in resources than international players in the region. These banks also account for a high percentage of lower mass-market customers who have spurned international banks because of higher fees, placing constraints on how much indigenous banks can charge to offset the cost of expanding digital offerings. In other markets, banks have met this challenge by taking a customer-centric approach to the product offering and launching simplified services that this segment of customers can actually afford.
  4. Customer resistance to change: As I outlined above, individuals and small enterprises in the Caribbean have a wide range of reasons for resisting the move to electronic banking. Some prefer the warmth of human interaction offered by in-branch service. Some worry that internet transactions are not safe, while others are concerned about reliability and the possibility of exposing their transaction histories to government eyes. Institutions keen to win over the reluctant will need to address these concerns directly, with innovative and compelling communications that lay out clear benefits, detail available support, and outline steps to safeguard security.

Customer needs are weakening customer resistance

The privations imposed by the pandemic have compelled individuals and small business holders across the region to rethink their relationship with cash. Government subsidies offered to individuals and businesses on the grid may even have caused some to question their reluctance to be tracked by officialdom. Many are actively exploring adopting or expanding their use of digital/electronic banking services—from online loan and account applications and ABMs, to Internet banking and cards (debit, credit and prepaid). This presents a major opportunity for financial institutions to help speed the migration.

There are forces beyond COVID-19 that are creating momentum to expand digital services. These include:

  • Pressure on financial institutions to demonstrate compliance with international standards designed to counter money-laundering and the financing of terrorism;
  • An opportunity to overcome the challenge of scale through the acquisition of assets from major international institutions—many of which are pulling back from the region— by indigenous banks. This gives these home-grown players a large and embedded customer base already versed in digital services;
  • Available funding from the World Bank, IFC and other development institutions to offset the cost of digital transition and the provision of consumer education.

Where do we go from here?

To make the most of this opportunity, financial Institutions should act swiftly to engage—through their respective associations—with central banks and regulators on the creation of a roadmap for expanded electronic banking and robust merchant and small business services, online payments, mobile wallet offerings, etc.

As I stated above, any such effort must be multilingual where applicable and should incorporate attendant platforms with strong cyber-security, to both lessen the risk of fraud and identity theft and to foster consumer trust.

Communication and customer education are equally important. To make any system-wide adoption push work, stakeholders will need to demonstrate to consumers and small businesses the benefits they will reap from digital adoption, along with the legislative and technical safeguards that will be set up to protect them.

The rewards of 21st century banking

In sum, evidence suggests that the difficulties consumers have faced in the COVID crisis have primed the ground for financial services providers to stage a well-coordinated effort to spur migration to digital platforms. Such a migration will unquestionably yield a multiplicity of benefits for both them and for their customers.

Digital banking is not only a more cost-effective, flexible, and secure mode of doing business in the 21st century, it can also help ensure customers and businesses have full access to resilient financial services now and during future crises.

Robert Frederick consults both independently and with Digital Financial (;, a boutique advisory firm made up of senior financial services professionals with deep experience at successful national and multinational organizations in banking, insurance, payment systems, telecommunications, and technical services.

Robert has held a variety of senior positions at international banks in Antigua, Dominica, Grenada, Montserrat, St. Kitts, St. Lucia, and Toronto.

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