#BTColumn – Are we ready for a cashless society?

Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

The current narrative by many policymakers, some academics and business administrators and those who fancy themselves as social commentators, is that the world is going digital, and everyone needs to get on board or be left behind. The global agenda is compelling institutions and individuals alike towards a consolidation of data and the access to information at the speed of thought. One of the by-products of this agenda is the move towards digital payments and a complete eradication of cash for transactions.

One well-quoted source suggests that digital payments are transactions conducted through digital or online channels, eliminating the need for physical cash exchange (Forbes Advisor, 2023). This mode of transaction is also known as electronic payments and involves the transfer of value between payment accounts using digital devices like mobile phones, computers, or cards. Both businesses and individuals can be involved as payers and payees in digital payments.

A scan of the business environment in Barbados suggests that despite the increasing use of alternative payment methods like credit and debit cards and mobile wallets, cash continues to be widely used. According to the Central Bank of Barbados’ 2021 Annual Report, the value of cash in circulation increased to $960 million by the end of that year.

The COVID-19 pandemic prompted more people to adopt online banking and e-commerce, fueling discussions about the long-term decline of cash usage. However, the pandemic also highlighted the “cash paradox” where the value of cash in circulation continued to rise despite a decrease in cash transactions. This phenomenon has been observed globally, including in Barbados, where cash in circulation increased during the pandemic.

Some individuals will always rely on cash as their preferred payment method. Older or less tech-savvy individuals, those without bank accounts and people without access to digital payment technologies will continue to depend on cash. It is essential therefore to provide a means for these individuals to pay for goods and services.

In Latin America and the Caribbean (LAC), the percentage of the population making digital payments via mobile, or internet saw a significant increase of 23 per cent between 2017 and 2021.

In 2021, a substantial 78 per cent of the LAC population had at least one account in a banking or financial institution or in a mobile money service. Some proffer that this high percentage of account ownership suggests a strong foundation for transitioning towards a cashless and digital payment society (Miranda Newswire, 2022). The increase in the percentage of the population making digital payments and the high ownership of banking or mobile money accounts demonstrate for some, a favourable environment for transitioning towards a cashless society.

However, it is important to consider the factors discussed earlier, such as the persistence of cash usage and the need to accommodate individuals who still rely on physical currency. The region’s readiness to transform into a cashless and digital payment-only society may vary, and efforts should be made to address the needs of different segments of the population while promoting digital payment adoption.

According to a Caribbean Economic Research Team (CERT) working paper, a survey was conducted online in October 2019 to gain insights into consumer perspectives, payment habits and attitudes towards cash and other payment forms. The survey received a total of 1103 responses, with participation from various Caribbean countries, Barbados accounting for 58 per cent of respondents.

The survey found that 80 per cent of those polled were likely to reduce their usage of cash over time. The main reasons cited for this inclination were the expectation that digital payment methods would become more widely accepted (58 per cent), simpler (53 per cent), quicker (53 per cent), and more secure (53 per cent). Interestingly, approximately 70 per cent of respondents believed that digital payments would not necessarily be cheaper or lead to a shift in preferences away from cash.

Although 77 per cent of respondents did not foresee negative consequences from a reduction in cash usage, cash still plays a crucial role in the payments landscape, particularly for individuals in rural areas and those engaged in informal transactions. Among the 23 per cent of respondents who expressed concerns about a decline in cash usage, their reasons included easy availability, wide acceptance, convenience, lack of trust in digital payment methods, cultural preference, absence of associated fees and costs, and security concerns with digital payments (Caribbean Economic Research Team, 2019).  

Small businesses in the Caribbean face both opportunities and challenges in transitioning to a cashless and digital payment modality. While there are benefits, readiness for a complete transition to a digital payment regime is influenced by several factors, as cited by Michele Marius (2019): including limited banking infrastructure and cash-based economy; convenience and safety; traceability and security; concerns about privacy and cybercrime and financial inclusion and education.

Whereas change is constant, attention must be paid to the cost of adopting these new models at the speed and level of disruption often required. The argument is therefore being made for a gradual approach to development, particularly due to the small size of the Barbadian society and the need to ensure no one is disadvantaged. Overcoming challenges related to limited banking infrastructure, privacy concerns, cybercrime risks, financial inclusion, and education will be crucial. Promoting digital literacy and ensuring a supportive regulatory environment, small businesses in the Caribbean would be better prepared to adopt the new digital payments regime.

The Small Business Association of Barbados (SBA) is the island’s non-profit representative body for micro, small and medium enterprises (MSMEs). Connect with the SBA: https://www.sba.bb/sba/