Whenever I visit the Caribbean, I am struck by the fact that there is still distrust in electronic payments (credit and debit cards) and many countries remain focused on cash payments. Interestingly, cash is more inconvenient than many realize. There are accounting costs, secure storage concerns and the cost of moving and depositing cash can be high. Thus, the trend of diminishing fees makes electronic payments, and now mobile payments, more enticing for businesses. In fact, many businesses in European Union countries are cashless. For example, in the Netherlands and in Sweden, there are many restaurants, retailers and museums that will not accept cash. The United Kingdom is the largest payment card market in the European Union (EU), accounting for 30% of all EU spending and 75% of all retail spending in the UK was made using a payment card (creditcards.com). In the United States, cash transactions are a higher percentage of spending but there has been tremendous growth in mobile payments (transactions via smart phone).
There are security concerns for consumers in the Caribbean about electronic payments – especially associated with online shopping (or e-commerce). The fact is that you are generally safer shopping online with a credit card than using a credit card at a restaurant. At a restaurant you surrender your credit card to a server, who may hold that card out of sight for a number of minutes, within which time your payment card information could be copied from the magnetic stripe using a handheld skimming device. When shopping online, most retailers do not save your payment card information but instead pass on your payment information in an encrypted format, which only the card issuer can decrypt. Therefore, shopping online is generally very safe.
The mobile payment industry has experienced tremendous growth over the past couple of years, especially with mobile wallets like Samsung Pay, Android Pay, Google Wallet, PayPal, Vodaphone Wallet and Apple Pay. Based on our research at Pace University, mobile wallet payments have become a very secure method of payment and continues to improve. The acceptance of Apple Pay at US retailers has grown significantly. It has been successful because it collaborated with American Express, Visa and MasterCard during its development. Apple Pay is secure because a unique device account number is generated for each transaction and the vendor can never access the credit card number. Moreover, a dedicated chip on the iPhone is used for Apple Pay and this chip does not interact with other mobile applications (apps) on the user device. The vast majority of smart phone users in the Caribbean do own an Android operated handset however and Android Pay is likely to be the preferred method of payment if mobile payments are adopted. Although Android Pay is not quite as secure as Apple Pay, it still should be viewed as a very secure method of payment. The latest versions of Android (Lollipop and Marshmallow) provide full-disk encryption, as does the iPhone, which means that payment card information is extremely difficult to access without consent of the user. Mobile payments are safer than credit card payments in general and therefore retailers in Barbados and the Caribbean should seriously consider its introduction. Additionally, Apple is seriously considering the introduction of peer-to-peer payments, i.e. payments via your smart phone without a financial intermediary. This is not a new concept as this is a popular method of payment in a number of African countries but it is new in the West.
Finally, virtual currencies are not a passing phase. The most prominent of these virtual currencies is Bitcoin and more than $100,000,000 worth of Bitcoin are transacted daily. This virtual currency can be used for online purchases, hotel stays, booking flights or even to order a pizza. There are many Bitcoin ATMs now worldwide. Bitt is the Caribbean’s first Bitcoin and digital exchange company, which is actually based in Barbados. Virtual currency will gain momentum in the Caribbean as it has done so in many other parts of the world.
Electronic payments should be embraced more in Caribbean nations, like Barbados. The worldwide demise of cash transactions continues and has been welcomed by many governments as costs associated with printing currency and counterfeiting are being dramatically reduced. The costs for businesses are also declining because with mobile payments and payment card transactions, financial accounting becomes more efficient. Additionally, the transaction fees are moving lower with increasing competition from new technologies and physical security risks, associated with cash transactions, can be dramatically reduced.