Guest Articles

May 21

Nicholas Rees

Promoting Financial Inclusion in the Caribbean: A Broken ATM in the Bahamas Reveals the Need for Digital Banking Solutions Across the Region

Imagine if your only access to your salary and savings depended on a single ATM. Now imagine someone takes a hammer and smashes it up. What then?

That was the situation the roughly 4,000 residents of North Andros, a district in The Bahamas, found themselves in earlier this year, after an act of vandalism damaged the district’s sole ATM. Making matters worse, the damage was just the latest in a series of issues facing bank customers in North Andros: In fact, one local business leader attributed the vandalism itself to residents’ frustration with the ATM, which had been frequently out of order for years, and inoperable for the three weeks leading up to the incident.

North Andros residents have had to go to extreme lengths to remedy this ongoing issue. Due to the ATM’s unreliability, some local business owners have resorted to asking the pilots who land supplies on the island to transport their money to The Bahamas’ capital, Nassau, in exchange for a “nominal fee.” This requires them to hand over not only the cash they want to deposit, but also their ATM card, PIN and other personal information, to enable these pilots to make deposits on their behalf — a process that has obvious safety implications. Similar informal bank deposit services are also offered by local boat captains, who bundle up and transport significant amounts of cash from local businesses in their trips to the capital.

These challenges are all too familiar for many people in The Bahamas and across the Caribbean. In these regions, local economies depend heavily on cash transactions, and many small islands might have just one ATM or bank, if any. This problem is worsened by the efforts of foreign banks to engage in de-risking, which lead them to withdraw from areas where they see the risks of operation as outweighing the benefits. As a result, small, remote communities like North Andros are often left with minimal (or no) options for formal financial services — and are forced to turn to improvised, risky workarounds when these services fail.


Solutions to Financial Exclusion in the Caribbean

While a broken down ATM may seem like a small issue in the grand scheme of things, it nevertheless highlights the real world impact of the term “financial exclusion”: Ordinary people are left cut off from basic financial services, unable to even access their own money. 

In the Caribbean, digital banking solutions have the potential to address this exclusion and reshape the financial landscape. In the region as a whole, two thirds of its 45 million population are estimated to be unbanked, despite a high rate of internet connectivity and smartphone adoption: The overall rate of internet adoption in the Caribbean is estimated at 68.4%, with mobile connectivity standing at 84%. In The Bahamas specifically, my country of birth, mobile internet access is in fact better than the regional average, with an overall internet connectivity of 94.4% and smartphone/tablet penetration at an impressive 98%. Yet with financial inclusion rates lagging behind these rates of internet access — both in The Bahamas and across the region — it’s clear that many communities are still reliant on traditional banking infrastructure for their day-to-day financial needs. 

Among the solutions to financial exclusion in the region, those with the greatest potential to transform lives and economies are digital wallets, offline payment capabilities and Central Bank Digital Currencies (CBDCs).

Digital wallets, also known as e-wallets or mobile wallets, are virtual platforms that enable users to securely store, manage and transact funds electronically using a mobile device or computer. Upon setup, the digital wallet is linked to a bank account or credit/debit card. To make a purchase, the user opens the digital wallet app, selects the preferred payment method, and completes the transaction using methods such as scanning QR codes or tapping the phone on contactless payment terminals. Transaction records are maintained within the digital wallet app, offering a convenient means to track spending and manage finances. 

For individuals in remote islands with limited access to banking services, a digital wallet eliminates the need to hold and carry cash. Users can easily access their funds and make purchases at merchant locations across the island, creating a closed-loop environment that promotes financial inclusion. Moreover, since a digital wallet can be linked to traditional bank accounts, it can ensure accessibility even in areas where ATMs are scarce.

However, digital wallets face some limitations in the Caribbean: In particular, a lack of reliable high-speed internet connectivity, especially in rural areas, has been identified as a factor hindering the widespread adoption of digital banking services in the region. For that reason, in areas with patchy internet connectivity, offline payment capabilities are essential for ensuring continuous access to financial services. 

Our company, Kanoo Pays, is addressing this need in the Caribbean, with plans to expand across the region. We have invested in revolutionary technologies that provide these offline services by enabling physical card-to-card payment transactions. These cards utilise near-field communication technology to allow users to transfer funds directly from one card to another, without using a bank as an intermediary. Along with the cards, at least one mobile phone is also necessary, with our app acting as a terminal where users can type in the transfer amount — but the technology works with or without an internet connection. By managing an offline ledger, we ensure that users can conduct transactions seamlessly, regardless of internet availability. This capability represents a crucial last step in closing the gap for complete end-to-end adoption of digital financial services, particularly in remote island communities.

Central Bank Digital Currencies (CBDCs) offer another key solution to financial exclusion in the Caribbean, and they have important implications for digital inclusion in other regions around the world — particularly in developing countries with insecure or poorly developed banking infrastructure. CBDCs are digital forms of a country’s fiat currency, issued and regulated by the country’s central bank. This differentiates them from cryptocurrencies such as Bitcoin, which operate independently of central authority and are bought and sold largely as speculative assets. In contrast, CBDCs are fully equivalent to paper currency, such that one Bahamian dollar, for example, is exactly equivalent to one “Sand Dollar,” which is The Bahamas’ CBDC. 

Users can store CBDCs in digital wallets and conduct transactions electronically, benefiting from reduced costs, faster settlement times and greater transparency in financial transactions. These benefits come from the underlying technology that’s driving these transactions: While both fiat and CBDC can be sent and received digitally, Sand Dollar transactions are instantaneous — unlike paying through a traditional bank card, where there might be a delay before the transaction is processed as its sorted by banks or payment processors. Since the CBDC payment is settled directly between wallets, it doesn’t have to go through these intermediaries. 

The Sand Dollar also provides greater financial inclusion, since all you need to use it is a mobile phone (which most Bahamians have) with a digital wallet enabled, which is significantly easier than setting up a bank account. Additionally, CBDCs can enhance transparency, as they are recorded on a secure, centralised ledger managed by a central bank.

Due to these advantages, CBDCs have the potential to modernise the financial system, thereby promoting economic development and financial inclusion across the region. To capitalise on these benefits, in 2021 Kanoo Pays became the first financial institution in the world to completely integrate a CBDC into its system: Our digital wallet lets users transact in Sand Dollars just as they do with regular Bahamian dollars, allowing interoperability between these different types of currency. This approach enables the public to transact digitally with individuals, businesses and the government, while also enabling the government to digitally distribute aid and conduct other large transactions — processes that are too complex for a typical mobile wallet to facilitate. These services are impacting thousands of Bahamian citizens, and we’re in the process of expanding them regionally.


Overcoming Barriers to Digital Banking in the Caribbean

Despite the promise of digital banking solutions, the road to widespread adoption of these services in the Caribbean is obstructed by significant barriers, notably a lack of awareness, understanding and trust among potential users. Overcoming these hurdles demands a concerted effort from companies operating in the digital banking space. 

The lack of awareness is a function of a wider deficit of financial literacy in the region — something both governments and fintech leaders have a duty to ameliorate. In The Bahamas, fintechs like ours have embraced a proactive approach by integrating educational and awareness campaigns into our business model, creating or partnering with organisations dedicated to education and training in the technology and financial sectors, and hosting events such as free public workshops and training sessions. Through these means, we hope to empower users and foster confidence in digital financial technology. Building trust is paramount, and comprehension drives trust. Addressing customers’ common “pain points,” such as their difficulty sending remittances and accessing foreign currencies, is another way to build this trust in financially excluded communities, by demonstrating the material benefits of using financial technology. 

Government collaboration can also play a pivotal role in accelerating the adoption of digital banking solutions across the Caribbean. By tailoring solutions to the country’s financial landscape and regulatory framework, governments can facilitate widespread adoption and enhance financial inclusivity. And when it comes to new technologies that customers aren’t familiar with, like CBDCs, robust regulations are imperative to instil confidence among citizens. To help reassure users that this new technology is trustworthy, regulations must treat CBDCs no differently than traditional fiat currency, ensuring consistency and security in monetary transactions. By addressing these obstacles collaboratively, through partnerships between companies like Kanoo and government entities, the Caribbean can forge a path toward a more inclusive and digitally-driven financial future.

Through these approaches, businesses, governments and other stakeholders can address the pressing need to leverage digital banking solutions to promote financial inclusion and accessibility across the region. This constitutes a significant opportunity, particularly for the private sector: The Caribbean’s digital payments landscape is projected to reach a total transaction value of US $34.66 billion by 2028.

By collectively tackling the barriers to digital banking, the Caribbean can create a financially inclusive and digital-forward future. If it pursues this path, future generations of customers will not need to resort to sending bundles of cash to the bank via informal channels when an ATM is damaged or banks reduce their services in remote communities.


Nicholas Rees is the Chairman and Co-founder of Kanoo Pays.

Photo credit: David Goehring




Finance, Technology
digital finance, digital payments, financial inclusion, mobile finance, regulations