The rejection of digital wallets and contactless payment options by Jamaican merchants seems to be growing with no end in sight. Potentially, there are far-reaching implications than just requiring customers to use other forms of payment.

 

A few weeks ago, on 20 December 2024, I highlighted what seemed to have been an emerging trend in Jamaica:  merchants stopped accepting payment via contactless means. That article sought to highlight the tension between the convenience of contactless payment options to consumers and the consequences to merchants if fraud occurred.

In recent weeks, it appears that the matter is still top of mind. On 10 January 2025, the Jamaica Observer newspaper published an article entitled, Transaction paralysis, highlighting that “JAMAICAN merchants are increasingly refusing to accept digital wallets and contactless payment methods due to concerns over fraud and theft, despite efforts by banks and fintech players to promote these services.”

Depending on the merchant, it appears there may be some differences in the forms of contactless payments that are allowed. Though some businesses might be prepared to accept bank cards or credit cards, with radio frequency identification (RFID) or near-field communication (NFC) technology, that facilitate tap-to-pay, there seems to be greater resistance to tap-to-pay via smartphones and digital wallets.

 

Digital money, digital wallets

Over the past several years, there have been active efforts across the Caribbean region to deploy digital wallets. The initial early efforts were along the lines of mobile money and replicating the Kenya/mPesa experience here in the region with limited success. However, the next phase saw mobile wallets being launched, though the initial functionality was limited as the banking and financial services frameworks in most countries did not readily accommodate digital wallets and non-traditional banking businesses.  

At the same time, some countries such as The Bahamas, Jamaica and countries under the Eastern Caribbean Currency Union, worked on launching a central bank-backed digital currency (CBDC). CBDCs were implemented to realise several benefits including,

  • lowering the cost of printing and managing cash
  • reducing transaction costs
  • facilitating increased financial inclusion, especially for those who are unbanked and underbanked
  • facilitating faster and more efficient payments
  • being more secure than other forms of money, which can help reduce instances of fraud
  • fostering increased digitising of systems and processes and the development of the digital economy.

These and other benefits were echoed by The Central Bank of The Bahamas and the Eastern Caribbean Central Bank with whom we discussed the issue on the podcast, especially to increase financial inclusion and to improve cross-border payments in the case of the Organisation of Eastern Caribbean States (OECS) countries.

However, in the Caribbean countries that launched a CBDC (The Bahamas and Jamaica) or piloted a CBDC (the OECS region), adoption has been slow.  A crucial factor that may not have been considered and planned for at the outset was securing the support of and establishing suitable mechanisms through which to onboard merchants to encourage CBDC/digital wallet transactions. In other words, what would be the point of consumers having CBDCs or getting digital wallets if they are not accepted by merchants?

 

What is the bank’s role in all of this?

A key concern expressed by Jamaican merchants in the newspaper article is the lack of guidance from the (commercial) banks. As noted in our December 2024 article, “When card fraud occurs, it is usually the merchants who lose.” Credit companies tend to side with cardholders, so should fraud or instances of unauthorised or incorrect charges, etc., occur, the merchants would need to reimburse the cardholder and pay whatever other charges or penalties that had been incurred.

Although contactless payment technology provides more enhanced security than older payment technologies, evidenced by the approach merchants have adopted, it appears that banks are not adequately advising their merchant clients of the improved security features on contactless cards and digital wallets to allay fears. Further, some merchants indicated that banks have not provided clear direction on how to address instances of fraud and on practices that could be adopted to minimise fraud whilst still allowing contactless payments.

 

One step forward, two steps back…

The Jamaica Observer article noted that mobile payment services, such as Google Wallet, Samsung Wallet, and Apple Pay, have been growing in Jamaica, but merchants (large and small) have been pushing back. In many instances, they now require customers to revert to using bank cards or credit cards, and even punching in the respective personal identification number to authorise payments.

However, cognisant of the continuing thrust towards digitally transforming our societies, no longer accepting digital wallets or contactless payment options can be construed not just as a step backwards but as thwarting efforts towards a digital society and economy.

To that end, this matter may require policy and regulatory intervention. At this junction, it appears that merchants are doing what they can to manage their risk and exposure, the banks may not be communicating clearly or effectively with their merchant clients to address the concerns they have, and consumers are getting caught in the crosshairs.

 

 

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