Meanwhile, local and international financial institutions have faced recrimination and condemnation globally for their part in numerous economic crises since 2008, including the collapse of CLICO insurance, the collapse of BAICO, and the LIBOR scandal. In the low interest, highly risk adverse climate that has pervaded the world in the wake of the 2008 recession, traditional finance avenues have become much more reluctant to lend. Indeed, few institutions still offer interest-bearing checking accounts and even savings accounts are subject to so many restrictions and fees for such little gain that they have become unattractive.
The institutions have even shown a reluctance to handle funds, both macro-economically as is evident by the devastating correspondent banks’ de-risking exercise and micro-economically, where local banks have implemented or raised fees to manage accounts. Government agencies, stricken by the lack of correspondent banking relationships and moribund after a long recession with a heavy wage bill, simply are unable to intervene effectively.
One threat that governments, the finance companies and ICT firms have had to deal with jointly is the surfeit of ways in which malicious agents attempt to breach device and account security. As more people rely on mobile devices, they increasingly leave confidential moments, documents and financial information in the device storage. Thus, theft and attempts to remotely access these devices through deception or electronic manipulation have also jumped.
However, such threats are well-known in the tech industry, particular electronic intrusion (cracking) and social engineering (phishing) to gain important access details. Both the software developers (Apple and Google) and the hardware manufacturers (Samsung, Apple, HTC, Huawei, etc.) have the skill set and experience to actively educate, warn of, thwart, and rectify damage caused by such efforts. Even government intelligence agencies have acknowledged difficulty in accessing information from certain mobile devices and applications, often requiring controversial legal action against both manufacturers and developers to force divulgence of data.
Due to anti-money laundering rules and know-your-customer regulations, banks, credit unions and other traditional lenders face a comparatively unfamiliar and seemingly relentless assault from the same malicious agents who aim to improve their nefarious productivity by stealing data en masse, such as lists of credit card numbers, national insurance information and databases of other government-issued identity documents (driver’s and professional licences, identification cards).
In short, we have an environment with the following conditions:
- a relatively inexpensive, almost-ubiquitous mobile computing device that has the ability to easily act as telephone and computer with increasingly secure software, durable hardware and battery longevity;
- a lack of trust for local governments and financiers that is indirectly proportional to the trust given to international technology companies and device manufacturers;
- a lack of options biting into labour productivity and stifling local commerce;
- higher barriers against digital finance in the government and financial sector versus the flexibility of technological options based outside the region;
- numerous external threats that target both sectors with higher degrees of success recorded against financial firms as compared to technology cohorts, and the current correspondent banking problems, and
- a lack of regulatory framework or guidelines to reduce criminal activity without becoming burdensome to implementation.
Others may wish to vouch for the potential of digital finance solutions to answer other pressing problems in the Caribbean, notably the management of foreign currency reserves and ease of trade both within the CARICOM region and extra-regionally. In this article, what I wish for us to peruse now is the possibilities for improved productivity that digital financial tools present for our societies, as well as the significant risks we must address promptly.