Roadblocks to a successful digital marketplace for JAM-DEX: 5 critical issues to tackle

As early as July 2023, Jamaica should have a digital marketplace, which it is hoped will drive increased e-commerce and the use of digital payments, especially JAM-DEX, the country’s Central Bank Digital Currency. However, cognisant of the challenges JAM-DEX has been experiencing, the immediate success of the digital marketplace is not assured. We outline five issues that must be addressed before the digital marketplace for JAM-DEX is likely to be a success.

 

At the recently concluded Expo Jamaica 2023, a tradeshow and marketplace for Jamaican manufacturers and exporters, and during a panel discussion on e-commerce, the Minister of Industry, Investment and Commerce, Senator Aubyn Hill, announced that work was underway to develop the digital marketplace. This marketplace, which should be operational by the beginning of summer 2023, is supposed to be a centralised platform where merchants and digital wallet users can interact with each other using JAM-DEX, Jamaica’s Central Bank Digital Currency (CBDC).

In Jamaica, Lynk is the only digital wallet authorised to transact in JAM-DEX, as was discussed in a recent podcast episode with John Matthew Sinclair, Lynk’s Chief Product Officer. However, additional wallets are expected to come on stream soon, potentially increasing commercial activity in the digital space, whilst also increasing the value and impact of Jamaica’s digital economy.

However, in listening to the panel discussion, which included representatives from Lynk and the Bank of Jamaica, in addition to the Minister, there seemed to be some unspoken challenges that will need to be addressed to have a successful digital marketplace. Suffice it to say, none of the issues outlined below were raised during the discussion

 

1. Government not putting their money where their mouth is

Although one could not help but admire the Minister’s enthusiasm for JAM-DEX and the digital marketplace, a glaring omission exists. The Government of Jamaica does not transact in JAM-DEX. In other words, when interacting with the Government, citizens cannot pay for goods and services in JAM-DEX. They cannot pay their taxes, register a business, or renew their driver’s licence using JAM-DEX. Even if an individual had JAM-DEX, they would need to use cash or credit cards when doing business with the Government.

Such a posture by the Government of Jamaica could inherently be leading to the reluctance of businesses and consumers to adopt JAM-DEX, though the Government and the Bank of Jamaica are enthusiastically encouraging them to do so. Also, governments tend to be the largest employers and procurers of goods and services in their respective jurisdictions and are entities with which every resident interacts. They thus have the power to change the behaviour of their citizens through the policies and practices they implement.

If the Government of Jamaica were to adopt JAM-DEX for payment, and even encourage payments to be made in that currency, it could result in a marked increase in public confidence in this new dispensation. Essentially, the stamp of government approval has to move beyond encouraging everyone else to use JAM-DEX, to the Government also itself using it.

 

2.  The interoperability of wallets is absent

This issue was highlighted in a recent article in which WiPay Jamaica noted that the current framework was encouraging silos by mobile wallet and payment systems providers. Essentially, the customers using a specific mobile wallet would only be able to interact and transact with other holders of the same wallet. Cross-provider transactions are not allowed, which means that if an individual had a WiPay wallet, for example, and wanted to send money to someone who uses a Lynk wallet, it cannot be seamlessly and easily done. The money from the WiPay wallet would most likely need to be transferred into a bank account, and thereafter transfer to their Lynk wallet in order to send funds to another Lynk wallet holder.

This emerging fragmentation of the mobile wallet and payment systems space is likely to hinder the establishment and growth of the digital marketplace. Consumers would not be able to only focus on what they want to purchase, but will also have to consider whether they are using the same mobile wallet or payment system as the vendor. On the flip side, vendors would most likely need to juggle multiple mobile wallets and payment systems, which would be an administrative headache and consequently, could be a deterrent to transacting with digital money altogether.

 

3. The still overwhelming emphasis on cash

Over the past several months, there has been a spate of news reports in Jamaica of fraud and theft involving large sums of money. In recent weeks, automated teller machine (ATM)-related burglaries have been more frequent, which inherently highlights the ease with which cash can disappear when it falls into the wrong hands. This point was again highlighted in our recent podcast interview with Eldred F Garcia, of First Atlantic Commerce, on digital payment fraud in which he discussed how expensive cash is and the need for Caribbean countries to more fully embrace digital forms of payment.

In the Jamaican context, an argument could be made, though draconian as it may seem, for cash transactions to become more difficult. It is still relatively easy to make large purchases in cash – vehicles, building supplies, airline tickets, expensive medical tests, etc. – and so cash still has considerable clout, not just in the value it represents but also in the ease with which a broad range of transactions that can be done without raising any queries.

However, it must be emphasized that if the use of digital currencies and payments is to be encouraged instead of cash, universal financial inclusion must be realised. All citizens must be allowed and must have access to the requisite facilities to conduct their business digitally, and so the underlying hurdles, including matters related to identity, must be resolved. The recent experience of India in which it rolled out its digital ID system, which has been taken up by over 90% of the population, along with providing access to very basic bank accounts and the establishment of a digital payment infrastructure, could be instructive to Jamaica and to the wider Caribbean region, especially countries that have rolled out CBDCs.

 

4.  The lack of critical mass

This challenge can be summarised as a ‘chicken and egg situation’. People are likely to be hesitant to use the digital marketplace until it becomes well-established and popular; but it is unlikely to become well-established and popular until it has a fair number of merchants offering a broad range of services and a healthy customer base.

The architects of the marketplace will thus need to devise incentives and targeted strategies to address this conundrum. One strategy, for example, would be to get ‘anchor clients’ on board, who can draw their customers to the marketplace. And once there, these customers would be able to access the products and services offered by other merchants.

 

5.  The impact of digital illiteracy

Finally, digital literacy, and more specifically, the lack thereof, is a challenge that has not been decisively addressed in Jamaica, and in the wider Caribbean region. To varying degrees, the efforts have been fits-and-starts: short-term programmes addressing specific aspects of digital literacy. So far, very few comprehensive and sustained initiatives have been implemented.

Having said this, it appears that there has been some conflation between ‘digital skills’ and ‘digital literacy’. Although they are interrelated, the emphasis is different and should be reflected in the programmes developed. Unfortunately, the seemingly high proliferation of smartphones, of varying capabilities, suggests that digital literacy is high in the region, but those on the ground, which again emerged in my conversation with Lynk, have learned otherwise.

 

In summary, establishing a digital marketplace could leapfrog Jamaica’s adoption and use of JAM-DEX and the development of its digital economy. However, the success of the marketplace is underpinned by a broad range of enabling features, which if currently not aligned with fostering the marketplace, also need to be addressed.

Finally, it is emphasised that the digital marketplace should not be considered, or even developed in isolation. It will part of a wider ecosystem that can support and drive other initiatives, which should be contemplated now, so that the marketplace is sufficiently robust, yet flexible, and can accommodate emerging opportunities.

 

 

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