Over the past few years, and in the Caribbean region, there has been a growing excitement around fintech. However, it does not yet appear to have a solid footing in the region – both with regard to development/supply and demand.

 

Financial technology, more commonly known as ‘fintech’ is a growing segment of the tech space, which to some degree has been garnering considerable attention globally, and even here in the Caribbean region. For example, over the past several days, the value of Bitcoin exceeded USD 50,000 for the first time, whilst here in the region, and in our news roundup published on 22 February, there were articles on:

  • the launch of the first digital currency-linked debit card in the Bahamas
  • the first DCash (the digital equivalent of the Eastern Caribbean Dollar) transaction being successfully completed
  • the intended launch of DCash by the Eastern Caribbean Central Bank in March.

To be clear, fintech is much broader than cryptocurrencies and digital currencies. Different definitions abound, but essentially, fintech tends to encompass technologies and solutions that aim to improve and automate the delivery and use of financial services. However, and to a considerable degree, people are still struggling to wrap their head around exactly what it is, and the types of services that would fall into that category.

Historically, fintech was applied primarily by traditional financial institutions, to optimise their back-end systems. However, the current emphasis is in the consumer space, and the creation of consumer-oriented services. More importantly, the creators of these fintech products are more likely to be tech companies, and not established banks and financial institutions. As a result, there is considerable innovation occurring in fintech, as today’s companies and start-ups are thinking outside the box, and so are challenging some of the entrenched views and perceptions of the traditional financial services construct.

In the Caribbean region, there have been regular calls for its entrepreneurs and innovators to develop fintech-related services and solutions. However, and with very few exceptions, there does not yet appear to be signs of a growing industry that potentially could become a major force. Several reasons are likely for this. We highlight five.

 

Enabling environment is still underdeveloped

Although banks have been in the Caribbean region for at least 100 years, the banking and financial services ecosystem is still underdeveloped. Seemingly basic services that are available in more developed countries, may not necessarily be available here in the region; and if they are available, they might be difficult or expensive to access. For example, and in some Caribbean countries, it was only due to the pandemic that online banking services were being actively promoted. Before then, the banks only permitted in-person transactions. Similarly, access to e-commerce facilities, and even being able to conduct third party wire transfers online, can be still be problematic in this day and age.

In that vein, the state of ICT in the region must also be considered, which in turn affects the extent to which consumers can access digital services, including those offered in the fintech space. Although mobile/cellular service subscriptions is high across the Caribbean region, individuals may not have the devices needed to benefit from the broad range of services that can be delivered over the Internet. Additionally, among the business sector, there appears to be some dissatisfaction with the about the price-versus-quality of the Internet service, in particular, that they can secure, which in turn can affect the types of services they can access, or which they can offer.

 

Digital adoption, though growing, is still low

It is also important to highlight that across the region – even with the high penetration of mobile/cellular devices that exist – digital literacy is still low. Accordingly, digital adoption is also quite low.

Having said this, digital adoption in the region got a shot in the arm, thanks to COVID-19, and the urgent need it precipitated for individuals and organisations to use technology and the Internet more than they had before. However, crisis was the impetus for the greater use of technology that occurred. It no way reflects a consistent change in behaviour or in culture, that would be evident across the board.

For example, and with regard to financial services, although across the region individuals had devices that would allow them to access online banking tools, a large segment still insisted on conducting bank transactions in person. Due to the pandemic, many of the banks had to insist, through various promotional drives, that their customers to transition to online banking.

 

Traditionally conservative financial choices

Coupled to the offerings from traditional banks and financial institutions across the region, the investment and lending options also tend to be limited. As result, Caribbean consumers have not been as exposed to what might be considered more innovative offers and services, and so are unlikely to develop the acumen that would allow them to understand, and thereafter consider, the growing fintech offerings.

It is thus interesting to note that in the Caribbean countries that are trying to leverage fintech and, for example, have established sandboxes, to allow companies to test their products before they are fully launched, outside of Bitt (in Barbados), which existed before the sandbox, no other prominent product or service, so far, seems to have emerged. Although there would be segments of Caribbean society, such as those in tech, in financial services, who either have had prior exposure to various fintech services or are sufficiently comfortable to embrace them, they would not represent the mainstream, and so may not constitute a critical mass towards viability of fintech services in the region.

 

Caribbean governments appear to be still wary of fintech

Paradoxically, as much as Caribbean governments might be eager for fintech-driven innovation in their countries, they also appear to be apprehensive about the technology. To a considerable degree, this wariness might be due to the fact that policymakers, themselves, may not fully understanding what fintech is about. Admittedly, the field is still (relatively) new, and so the domain expertise needed to develop policies, legislation, and to support the wider enabling environment is still lacking. Further, international best practice, upon which they can rely, may not yet have emerged on a consistent basis.

Further, policymakers might be concerned around cryptocurrencies, in particular. Over the past few years, the cryptocurrency segment has garnered considerable attention, with regard to not only the valuation of some of the currencies, such as Bitcoin, but also their potential to disrupt current financial structures as we know them, and to be used in illicit dealings.

 

 Lack of awareness of fintech

Finally, and for those of us in the tech space, we may take for granted how ‘new and shiny’ fintech is, and the fact that if we want to learn more about it, we know how to use the numerous online tools and resources that are available to do so. However, as noted earlier, fintech covers a variety of tools, applications and services, and so may not necessarily be easy to understand.

Having said this, and noting the enthusiastic response fintech has been receiving in some quarters, such as by Central Banks in the Caribbean, it could be argued that generally, little public awareness has been done to help more people understand, among other things, what fintech is about, why it is important, and how they might benefit those services.

 

 

Image credit: Raisin – Finance Stock Images (flickr)