The digital money race is on, but who is really winning? Although Central Bank Digital Currencies (CBDCs) promise a new financial dawn, the reality might be very different. This article delves into why internet banking is poised to continue its dominance.
In a rapidly evolving digital financial landscape and across the Caribbean region, the introduction of Central Bank Digital Currencies (CBDCs) appeared to be a watershed moment. Though small and economically challenged, Caribbean countries were seen as leaders in the digital currency space through a solution that would facilitate the financial inclusion of the unbanked and underbanked, that would make the cost of money more affordable, more secure and more efficient.
However, CBDCs would not exist in isolation, but would have to operate alongside established internet banking systems and other forms of digital payments, which presents a fascinating dynamic. Although they all aim to modernise payments and enhance financial efficiency, it would appear that policymakers did not anticipate that CBDCs would face an uphill battle for widespread adoption and, perhaps more importantly, that internet banking could see continued growth in usage.
However, that seemingly counterintuitive trend has in fact occurred in The Bahamas, where it was reported that the number of Internet banking users grew by 39% in 2024, whilst the volume of digital wallet transactions declined year-over-year “despite the regulator and industry’s ever-escalating drive to push consumers to electronic banking channels” (Source: The Tribune). In Jamaica, though similar statistics are not publicly available, the slow take-up of Jam-Dex, the country’s CBDCs, has been widely reported.
The entrenched dominance of internet banking
To be fair, internet banking has had a significant head start. Over the decades, commercial banks have invested heavily in building robust, user-friendly, and comprehensive online platforms that facilitate integrated financial management. Through these platforms, users can view multiple accounts (savings, chequing, credit cards, loans), pay bills, set up recurring payments, manage investments, and access personalised financial insights – all from a single interface.
Furthermore, consumers have had long-standing relationships with their banks, thus fostering some degree of trust and customer service, which reduces the perceived risk associated with online transactions. Also, consumers are already comfortable with the interface and functionality of their bank’s online portals or mobile apps, making them a default choice for digital financial interactions. Additionally, due to the competitive nature of the commercial banking space, most banks have sought to up their game by, among other things, assigning personal advisors to customers, making personalised offers, establishing loyalty programmes, or facilitating access to a wider range of financial products, such as mortgages and personal loans, directly within their internet banking ecosystems.
The hurdles facing CBDC adoption
On the other hand, while CBDCs are the new kids on the block, as previously mentioned, they offer potential benefits such as increased financial inclusion, reduced transaction costs, and enhanced payment efficiency. However, their path to widespread adoption is fraught with challenges that could hinder their growth, some of which are outlined below.
First, for many consumers, especially those already using internet banking or digital wallets, the immediate tangible benefits of a CBDC might not be clear. If existing digital payment methods are already fast, convenient, and low-cost, the incentive to switch to a new system, even if it is backed by the central bank, weakens. In other words, the value proposition to switch to a CBDC platform, or even add it to a user’s existing suite of platforms, is unclear.
Second, introducing a new digital currency requires significant public education and a seamless user experience. If accessing and using a CBDC is perceived as more complex or less intuitive than existing internet banking platforms, adoption will suffer. In Jamaica, for example, the use of the Jam-Dex has not been integrated with internet banking. Two separate platforms or applications must be accessed and funds juggled between them as needed, which increases users’ headache to monitor transactions, spending and budgeting across multiple platforms. Ultimately, the success of any digital payment system hinges on its “convenience value.”
Third, consumer concerns surrounding CBDCs and the potential for increased government surveillance and reduced privacy in financial transactions must also be acknowledged. Although countries that have current privacy and data protection legislation have adopted the principle of privacy by design, and central banks may not be interested in individual transactions but more so transaction volumes and other trends to inform national decisions, this bugbear speaks to the lack of trust for those in authority.
Fourth, it must also be highlighted that a widely adopted CBDC could potentially alienate commercial banks by allowing individuals and businesses to hold digital currency directly with the central bank. Being disintermediated, and no longer required to facilitate saving, borrowing and payment transactions between two parties (for example), threatens banks’ deposit bases and revenue streams, which could lead to resistance or a lack of enthusiasm from the banking sector in promoting CBDC usage. There is thus an incentive for banks to aggressively increase their customer base, such as by simplifying the requirements to open a bank account, and to get new customers onboarded onto their digital banking platforms.
Finally, this point was raised in our March 2025 Community Chat episode, where one of our guests was of the view that CBDCs were a “solution looking for a problem”. In societies where digital payment infrastructure is already well-developed and efficient, a CBDC might be seen by the general public as a solution without a pressing problem, making its adoption a lower priority. However, for the initial and ongoing investment required to maintain a CBDC, it may seem trite, per the Bank of Jamaica’s CBDC FAQ document, that a CBDC would just give users another option to spend and make transfers, especially when cash, credit cards, debit cards and online transfers have had such a longstanding advantage in the market.
A symbiotic, yet competitive, future?
Although internet banking and CBDCs operate in the same digital financial space, their trajectories could diverge. Internet banking is likely to continue its growth trajectory due to its embeddedness in daily financial lives, comprehensive service offerings, the proactive posture banks have adopted, and the strong existing trust in commercial banks. Consumers often prioritise convenience, familiarity, and access to a broad range of integrated services, all of which established internet banking platforms already deliver effectively.
Conversely, for CBDCs to gain significant traction, central banks will need to clearly articulate and demonstrate unique, compelling advantages that address genuine pain points for consumers beyond what existing digital payment methods offer. Simplifying the user experience, finding a way to integrate seamlessly into the existing financial ecosystem without alienating commercial banks, and overcoming privacy concerns, will be crucial for any CBDC to flourish and truly complement, rather than struggle against, the pervasive rise of internet banking in the Caribbean.
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