The opportunity for e-payments

In today’s world of smart devices, cloud computing and social media, the methods of payment have drastically changed. Transformation has been faster and more intense than most of us envisioned. For example, South Koreans take out their tablets or smartphones instead of wallets to pay for food, coffee, event tickets and even money transfers to friends and family. 

But Cayman remains a cash and check-based economy, where electronic payment (e-payment) systems that would ensure faster payment for both businesses and individuals are still a rarity, and banks should be doing more to facilitate electronic payments. Although most of our information, communication and technology infrastructure have facilitated the needs of the 20th century, Cayman’s networks, institutions, infrastructure and legislation were crafted for the past. A huge percentage of the payments made in Cayman are still via paper checks – artifacts of the industrial age that cost both substantial time and money in today’s 21st century technologically-enriched environment. 

The current paper-based clearing and settlement system fails to meet user expectations for instantaneous, information-rich dealings. Entire sectors of service providers, and government in particular, are unable to offer technologically enriched products and services because our payments infrastructure cannot handle the digital norm. 

Consequently, businesses, consumers and government continue to waste time and money. Small and Medium-sized businesses (SMBs) have little choice but to rely on paper checks. Larger entities, including government, face indecision in moving to electronic payments and are hesitant to change due to the lack of accord on the proper standards and protocols. Institutional change has been apathetic.  

Not so for people. Technology has profoundly altered peoples’ behaviors and expectancies. We are early adopters of smart devices, heavy users of the Internet and are aware of the vast potential they offer. 

 

E-payments missing here 

Still, e-payments are largely lacking in Cayman. It is nonsensical that difficult tasks like navigating cities and countries need only an ingenuous finger or keystroke, but the simple act of making a payment does not. 

The unexploited potential of technology, especially mobile, will continue to change society, facilitating speed, ease and a custom-made gateway to conduct commerce. Instantaneous information related to customer tastes, loyalty programs and vouchers is opening new doors of business and marketing. Governments, especially forward-thinking ones, are using mobile technology to add services e.g. parking and travel because of the convenience it provides. 

However, people are understandably concerned about the advent of e-payments and the Internet, frequent news stories of fraud, identity theft and system malfunctions fuel these fears. Moreover, privacy and security are not guaranteed. Without a system to safeguard identity and verify senders and receivers, people cannot be expected to readily embrace the digital environment.  

Lacking a harmonized and complete roadmap to follow, entities move at their own rate, and the space between users’ expectancies and the services provided continues to widen. If we are to meet the evolving needs of Cayman, we require a system designed for flexibility, novelty and interoperability. 

This necessitates government to develop and implement a National Payments Plan, which would contain provisions that are designed to try and force the pace on the e-payments opportunity. The difficulty has been getting banks to respond. This seems to defy logic, as banks will ultimately benefit from the derived savings, probably more than any other sector. Most of the lack in effort and ensuring success is due to the fact banks have a laser focus on business cases that require returns on investment in short periods. While e-payments can enable many opportunities, it is unlikely to fulfill those business goals in the short term. Therefore the thinking behind the NPP should be to change that mindset and accelerate the change to e-payments. 

E-payments are a necessary part of the evolution of Cayman’s financial industry, especially if the country wants to remain a top-notch financial center. The business case may be slim from the banks’ perspective however, it may have to be required by regulation as it has in several countries. The value that e-payments releases will exceed the initial capital investments. Therefore, banks need to collaborate now before they discover that the environment has advanced without a role for them.  

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