Although fintech and financial services are mushrooming across the Caribbean region, consumers are either still being underserved, or the challenges they experience are not being fully addressed.

 

Unless you have been living under a rock, financial technology (or fintech) has been receiving considerable visibility across the Caribbean region, with lots of new and diverse fintech-related ventures. However, as was discussed in a recent podcast episode, ICTP 186: Essential tools for Caribbean content creators, and fintech opportunities in the Caribbean region, the focus of many of the conversations on fintech is from the entrepreneur’s or organisation’s point of view, and not necessarily that of consumers. To a considerable degree, the mindset seems to be ‘build it and they will come’… and they might the case, but only up to a point.

In many instances, two frequently overlooked segments of the population are the unbanked and underbanked. These segments tend to make up a large portion of the consumer base in most Caribbean countries, and although some fintech services seek to be more inclusive, invariably, the effort does not necessarily reflected in the results.

For individuals who are not categorised as unbanked or underbanked, challenges still to exist, which can be compounded by how small the markets of Caribbean countries are, which ultimately can hinder the success of most ventures. It is thus important that businesses understand key consumer pain points, and we have outlined six of them. It is hoped that businesses will seek to address these challenges in the products and services they offer, or engage with those who can effect the change needed.

 

1. Digital illiteracy

Digital literacy, and the lack thereof, continues to be a challenge across the Caribbean region. Although the majority of citizens have access to smartphones and other personal digital devices, and internet traffic has been steadily growing, the ways in which they are leveraging that connectivity, and the activity that are being performed online, are still limited. So although people own or have access to digital devices, for the most part, they are using them to check emails, for instant messaging, and for engaging on social media.

With regard online banking, for example, and before the pandemic, take-up was relatively low. However, with banks (and other organisations) required to limit the number people on their premises, and the consequent delays in waiting for service, there was an incentive for more individuals to use online banking. However, it does not necessarily mean that people fully understand and are comfortable with using the internet for their financial services.

 

2.  Financial illiteracy

Gone are the days when the main resources to help you manage your money was a bank or credit union; and the primary options for investing were fixed deposits, and maybe when available, government bonds. Now, a wealth of finance and wealth management-related options are available locally, regionally and internationally, which we can access wherever we are.

To be clear, this point is not so much about fintech, per se, but the fact that most consumers are not as knowledgeable about their finances and the wealth development and management options that are now possible, and could be considered. For example, most of us might not own stocks, and really do not understand how stock markets work. In the past, certain investment vehicles may have geared towards those of certain income brackets, but with fintech, there has been a levelling of the playing field – to some degree. However, the acumen in order to leverage these new and emerging opportunities, may still be absent.

 

3.  Lack of trust in fintech/online financial services

Based on the two previous points, it ought not to be surprising that trust in fintech and online finance services may still be low across the region, noting that we are still cash-based societies. Governments and many businesses still welcome, and perhaps even prefer transactions – large and small – in cash, which in turn is generally reflected in how our societies view money. Hence, having more people becoming fully reliant on online banking, for example, will continue to be a challenge, as it is still easier to conduct business in cash.

In looking more squarely at fintech, and depending on the service, regulation has been limited, at best. It thus means that a lot of the protections and safeguards that we take for granted in the regulated financial services space are absence. Moreover, some fintech market segments, such as cryptocurrencies and those that leverage blockchain technology, tend to be considered ‘a wild west’, where one participates at their own risk. Such services, although exciting, can also be intimidating, which challenges not only an individual’s knowledge and comfort in such spaces, but also their appetite for risk.

 

4.  Lack of trust in government

This point might not be obvious, and may not be very prevalent, but it is also speak to a more general reluctance for people to move into the digital space. Across the Caribbean region, and in various ways, lots of citizens still fall between the cracks. Although their births would most likely have been registered, they may not necessarily have a tax number, identification (ID) card, driver’s licence or passport – though some would. While this may be seen as a bad thing, for many, it also means that they can operate under the radar of the government, especially with respect to taxes and tax collection – even if they are not engaging in illegal or nefarious activities.

However, and as our societies become more digital, and to facilitate greater inclusion, we will all need to tagged, which in turn will allow us to be tracked and monitored – even if it is just virtually or across the digital platforms with which we interact. There are those among us who will fight this inevitability to the very end, as it is not clear how our data or information will be used, and so will seek to avoid fintech or online financial services for as long as they can.

 

5.  Difficulty satisfying requirements for inclusion

To a considerable degree, and in order to access fintech or online financial services, individuals need to have bank accounts, or channels through which their funds – either directly or indirectly, such as through debit and credit cards – can be leveraged in transactions online. However, for individuals who currently are underbanked or unbanked, opening a bank account can be a challenge, as they tend to struggle with satisfying the Know Your Customer (KYC) requirements that have become standard, and a legal requirement, in the banking industry.

Although KYC requirements may differ from institution to institution, at a minimum two form of ID and proof of residence are required. Some banks may also ask for proof of employment and proof of income, in order to determine the sources of funds that will be accepted into the accounts, as well as character references.

Some individuals might not be able to provide the two forms of ID and proof of residence, in order to meet the basic requirements, which inherently means that they continue to be financially excluded. However, some banks have relaxed some of KYC requirements, such as to require one form of ID, but in turn, have also limited the types of services that individuals who do not meet the full KYC requirements can access. As a result, although these individuals may now be ‘banked’, it could be argued that they remain still disadvantaged.

 

6. Challenges accessing some of the services directly

Finally, and this point comes into focus when trying to access unregulated fintech services, such as those in the blockchain technology and cryptocurrency segment, from the Caribbean region. It is still difficult to purchase cryptocurrencies in the region. Many banks have barred their debit and credit cards from being used to purchase cryptocurrencies, which means that it is not a straightforward process to engage in that space, or even in non-fungible tokens (or NFTs), which are all the rage these days.

In conservative quarters, there have been concerns about the use of cryptocurrency for money-laundering and other illegal activities, and to bypass the existing and regulated financial system. However, and inherent in the thrust towards online financial services and fintech, is the expectation that consumers will be empowered to take charge of their money. To that end, it could be argued that in not allowing Caribbean citizens to participate in fintech, and in services that the region itself hopes to benefit from, is counterintuitive and counterproductive.

 

In summary, these are just a few of the challenges on the consumer side that have been limiting the take-up of fintech and of online financial services. The points outlined above will not be applicable to all situations and scenarios, but are likely to be relevant to most. Nevertheless, they offer a good starting point for the conversations that are needed to truly realise the inclusion envisaged, and which we all deserve.

 

 

Image credit: CafeCredit.com (flickr)