An opening discussion on e-commerce in the Caribbean, and some of the challenges that are being experienced.
We are fast approaching the midway point of the second decade of the 21st century, and most commercial banks in the Caribbean still do not readily facilitate local businesses receiving payments online. Many of them might allow businesses to open merchant accounts, but either do not offer, or offer with considerable constraints, online payment facilities.
In a recent article on e-commerce, published in the Nassau Guardian, a consultant in the Bahamas noted,
… without the banks having an aggressive and innovative payment system and online merchant account system, where small and large businesses can take online payments in a reasonable and cost-effective way, that’s a massive hurdle…
In this post we are beginning a discussion on e-commerce, and why the Caribbean is not further ahead on this matter. Do share your own experiences and thoughts on what might be the problem, how and the extent to which it might be affect you as a business owner or a consumer, and let us see whether we can engage in some meaningful dialogue on this issue.
Are we really transitioning to a digital economy?
Across the Caribbean, there have been and continue to be a number of programmes and initiatives to foster the take-up and use of ICT across all sectors of out societies, all of which are ensuring the transition to Information Societies and knowledge-based economies. An important component of the new paradigm is the “digital economy”, which speaks to the ability to conduct economic activities using digital technologies, such as, via mobile/cellular devices and the Internet.
The establishment of digital economies allows for the more efficient delivery of a broad range of economic and social services in-country, but also internationally, as might be necessary. A useful indicator of how well established a country’s digital economy might be, is the extent to which it is a cashless society.
Although we all either have, or have access to, credit and debit cards which can be used to pay for goods and services, in some Caribbean countries, these transactions must be conducted in person and the card must be swiped. Hence, even in the absence of e-commerce capability for in-country transactions, consumers still cannot complete a credit card sale remotely, e.g. by calling or faxing their credit card details to the vendor.
Additionally, due to the relatively high processing fees charged by the banks for credit card transactions, many small businesses do not accept this form of payment. Hence customers can be greatly inconvenienced, if they must have the cash with which to complete a purchase. Of note is a recent case in Jamaica, which undoubtedly has affected both the vendor and consumer:
The Jamaica Gasoline Retailers Association recommended that all member service stations discontinue the acceptance of Mastercard and Visa credit cards for fuel transactions
According to JGRA president Trevor Heaven, financial institutions are charging “unacceptable” processing fees for the use of these cards (Source: Jamaica Observer)
We have credit cards, so what’s the problem?
Although most, if not all, Caribbean countries have indigenous banks and financial institutions, there are also a number of large foreign banks that are well established and have longstanding relationships in individual countries and with the region. Those international banks would have comprehensive e-commerce facilities to serve clients in their overseas markets, but frequently, Caribbean business customers are not readily being invited to use the platform.
Should a Caribbean business be eager to process online payments, there are a number of challenges to overcome. First, the application process tends to be especially rigorous. It is intense and invasive, which can be a deterrent to many businesses applying for the facility.
Second, a major concern is the fees and charges payable to secure and maintain access to online payment facilities. Vendors must not only budget for the set-up charges, which might be expensive, but also the processing fees payable per transaction, plus any other mandatory service and maintenance charges. While the set-up charge might be a one-off expense, the processing fees can also be quite high. This processing fee, which tends to be a percentage of the sale that is shared by all local and international institutions that are part of the transaction process, must be deducted from the vendor’s sales margin (per transaction), which ultimately, affects the profitability of the business.
Finally, approval of applications for access to e-commerce services might not reside at the local branch or main country office; they may need to be forwarded to the global corporate headquarters for approval. When the global headquarters must be involved, it does signal that the bank in question considers applications for e-commerce support the exception, rather than the norm. Furthermore, this might be a chicken-and-egg situation. Banks in the Caribbean cannot yet justify placing the necessary resources at the national level to process such applications, but the e-commerce framework can be so onerous – the process, charges, etc. – that few merchants are prepared to try.
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