By Rhea Yaw Ching

Banking in the Caribbean has been around for generations, yet, millions are unbanked, living a cash-only life. Solving this will be key to unlocking the value that can be created by digital financial inclusion solutions.

Including the Excluded

There are reasons why people remain in the informal economy and, generally speaking, few financial institutions in the region have adequately invested in understanding why. Unlocking the value of formal financial services in the minds of the unbanked will be crucial to building a solution that makes sense for them.

The term ‘financial inclusion’ has been thrown around a lot over the last few years. In the Caribbean, it has been touted as a significant enabler for sustainable growth.  But with international banks downsizing their footprint in the region, and banks across the Caribbean losing important correspondent banking relationships (CBRs), can we really claim progress in this area?

On the surface, the impact of these changes appears to be limited. A look deeper, however, reveals the sobering truth. The cost of banking services has increased. Families are unable to collect remittances from relatives abroad. Businesses are being cut off from international trade and financing and overall there is an invading philosophy of risk aversion. The question must therefore be asked, is financial inclusion really a legitimate growth opportunity for the economies in the Caribbean? If history is any indicator, the answer seems to be a resounding “no”. Thankfully, with the right approach, we may be able to defy history and create a sustainable path to financial inclusion for the Caribbean.

The Cash Conundrum

It is estimated that more than twelve million people in the Caribbean live in a cash-only economy. This is either by choice or because of structural barriers that prevent them from accessing banking services. A further six million have been classified as underbanked, retaining a bank account simply as a safe facility for storing and accessing their cash. The need to provide alternative financial products and services to serve this segment is great and long standing.

Persons already vulnerable to unforeseen circumstances, such as medical bills, job loss or property damage, can find it extremely difficult to respond or recover. This reality limits their ability to participate in the wider economy and the overall impact continues to be substantial, critically affecting national and regional progress, undermining the region’s capacity to meet its development goals.

Digital Financial Inclusion

Technology, finance and government organisations, however, are recognizing the significant potential of serving unbanked households. Digital Financial Inclusion is defined by the Consultative Group to Assist the Poor (CGAP) as “digital access to and use of formal financial services by excluded and underserved populations. Such services should be suited to the customers’ needs and delivered responsibly, at a cost both affordable to customers and sustainable for providers.”

Over the past few years, the Caribbean has seen increased debate around new, technology-based, solutions, such as mobile wallets, mobile money and bitcoin. There is also increased recognition of the potential of such tools to transform citizens’ access to financial services.  Indeed, the dramatic growth in the number of technology-based solutions across the developing world in the last ten years has thrown a spotlight for the on the role of technology-based channels in providing unbanked beneficiaries with access to financial services in a cost-effective manner. It has also underscored the potential for greater efficiencies, savings and security.

Lessons are also being learnt closer to home. Haiti, for example, has deployed several digital solutions over the past eight years to improve financial inclusion. Barbados-based Bitt, one of the Caribbean’s first blockchain-based digital payment providers, has been forming strategic partnerships with Central Banks and financial regulators across the Caribbean. Bitt is trying to demonstrate, among other things, the power of blockchain technology to improve the financial inclusion metrics in the region. There are others, such as SugaPay out of Antigua and Barbuda, WiPay out of Trinidad and Tobago and MMG out of Guyana. These companies, however, are still in their infancy. It remains to be seen if they will produce the kind of transformative effect promised.

Starting with the People

There is a natural starting point for any entity or institution interested in expanding their reach to include the unbanked. It is the people. The solution begins by taking a critical view and assessment of citizens and potential customers’. Who are they? What are their current situational contexts and attitudes toward money: receipt of money, storing of money, borrowing money, spending money, saving money.

Understanding these contexts and the common practices of the underbanked will lead us next to understanding and assessing the perception of the current products and services available to them and why this perception is held. This information not only helps reveal some of the main barriers to uptake of current products and services but may also highlight a pathway to new opportunities and segments.

The process, however, is not simple. Unbanked consumers’ behavior, context and patterns differ from their banked counterparts and even among themselves. The challenge will be to attract the unbanked with products, services and experiences that fit their diverse needs.

In that challenge lies opportunity for the Caribbean. For those who can understand these needs and apply relevant technology-based solutions to meet them, tremendous promise and potential awaits.

Rhea Yaw Ching is the Founder and Executive Director of Covela Foundation, a US-based 501c3 certified non- profit focused on building a resilient, innovation-based infrastructure in the region as well as the use of technology to promote economic diversification and civic participation. She is also the CEO of Covela LLC, a strategy and innovation consulting firm. Follow on Twitter: @rheayawching, Website: www.covela.org