MASTERCARD has launched a “war on cash” in the region, pushing digital solutions for everyday transactions.

Dalton Fowles, Mastercard country manager for Jamaica, Trinidad, Barbados & the Eastern Caribbean, in an exclusive interview with the Jamaica Observer on the sidelines of the recently held Mastercard Latin America & Caribbean Innovation Forum in Miami, Florida, identifies significantly reducing cash transactions as a target for Mastercard Caribbean.

“What’s the biggest opportunity for us,” Fowles asked rhetorically in response to questions posed to him, before answering, “It’s that war on cash. It’s making sure that we’re bringing technology solutions that drive digital and financial inclusion. If we win that, we’ll be changing lives.”

Fowles estimated that “It’s probably easily US$100 billion in cash in the economies across the entire Caribbean — Spanish, French, English — and if you can digitise those flows, you’re going to be changing the lives of a lot of small people.”

He added that “from a very practical perspective, that’s what central banks and regulators are now trying to do in terms of CBDC [central bank digital currency]. They are trying to digitise flows. They themselves recognise that it’s an opportunity. So we’re helping them to get there.”

So far, Jamaica, The Bahamas and the Eastern Caribbean Central Bank have launched digital currencies. Mastercard is working closely with The Bahamas on the solution and plans to expand in the near future.

Fowles argued that with pre-COVID figures showing that regional economies produced a combined US$400 billion in goods and services each year with “anywhere between 30 per cent and 50 per cent of their GDP [gross domestic product] in cash”, Mastercard is ready to be the main part of the solution.

“First of all, we’re a technology company, so the reality is that we do have the tech, but in addition to that, we have a range of partners. We boast to be probably the largest network that has fintech partners. It is something that we take pride in because we also understand that in building those ecosystems, you’re going to find people who develop value propositions that are unique, that create value for different people who are operating at different segments of the payment ecosystem,” he stressed.

And pointing out that in the Caribbean now, payment innovations mostly take the form of a terminal on a desktop “and the only thing that terminal does is swipe and you get an authorisation,” he said those terminals could be fully integrated in the merchant business as occurs in more mature markets.

“In mature markets, it does inventory, it does payroll, it does cash management, it does a whole range of things. So if you want to transform markets, you want to find partners with those solutions and you want to bring them to the region to improve the way the merchants and the banks operate and integrate.”

He said as a technology company, Mastercard may not invest in those specific activities, but has partners that have solutions for those activities.

“And part of what we do is bring everyone together to create the value that transforms the industry.”

His stress on the fact that Mastercard is a technology company that specialises in payments, show the transition the US multinational has undergone in the last decade and a half.

“What it means is that we are now providing solutions for all payment rails. So, for example, going back to Jamaica, you have an ACH [automated clearing house] infrastructure. We have what we call real-time payment solutions [for domestic transactions] and we have cross border, that is really extending real-time payment into multiple markets. And when we do that, we use the ACH rails in some cases, or we may use, for example, the card rails. In some cases, we may even support it on crypto.”

“So as a multi-rail company, we are trying to make sure that we meet the customers where the demand really exist. And as a result, we have made several investments in payment solution that span multiple payment rails.”

One of those cross border solutions is a service to help businesses which find themselves being hampered by correspondent banks in the US opting to “de-risk” their exposure to money laundering by either cutting transactions with regional banks or making the process arduous.

“In the Caribbean over the last couple of years, we have seen de-risking taking place. For that we have a cross-border solution that allows small businesses and banks, for example, to allow payments to customers across the globe. So that’s one area that we’re very, very strong on, and we are supporting the region with solutions like that and we already have a couple of customers that have already been onboarded.”

He said the service is a complement to correspondent banking and is for “low value payments, which are payments below US$100,000” that can be moved across the Mastercard payment rails.

“We are operating in over 200 countries. We have partners in every market around the world, so it’s easier for us to leverage that infrastructure to create a solution to manage the risk. We are not saying you can do US$2 million and US$3 million transactions. What we are saying is that for small businesses, which is a lot of what you find in the Caribbean, up to US$100,000 in cross-border transaction, we are providing solutions for that.”

“And then the high value payments where you need to focus more heavily on the attendant risk, then it’s easier to convince your correspondent bank that you have the pieces in place. So it’s not a replacement to SWIFT, it’s a complement to SWIFT.” The Society for Worldwide Interbank Financial Telecommunication, legally S.W.I.F.T. SC, is a Belgian cooperative society providing services related to the execution of financial transactions and payments between banks worldwide.

Another cross-border solution Fowles said is offered by Mastercard is a digitisation of the way remittances are transferred.

“We are not a remittance company, but we are a technology company that will allow [funds being sent] from origination markets to terminate on any cards, anywhere in the world.”

This, he said, will revolutionise remittance transactions which are mostly done through cash pick-ups.

“We have a framework that we call Mastercard Send, that actually allows you to potentially originate the transaction and it can terminate on a MasterCard anywhere in the world. So we are not the remittance agent, but we’re using our infrastructure to digitise the flow.”

Mastercard Send, which was launched in 2015, not only operates for cross-border transactions, but all domestically.

“Domestic send is P2P [peer-to-peer]. So I’m sending money to you in a local market. So any Jamaican cardholder, if their banks allow, it could originate a transaction from the mobile banking app or from a wallet to another Jamaican. And then you have what we call cross border send, which is where the remittance component tend to be a little bit more pronounced. That’s where we’ve partnered with MoneyGram, Western Union. We’re integrating the APIs [application programming interface] with them, that actually allows them through their remittance framework to essentially use our rails to transfer money across borders.”

Fowles refused to state Mastercard’s stake in the region saying the company does not disclose those figures, said the region offers tremendous growth opportunities for the company through the correlation of digital and financial inclusion including e-commerce which is one of the fastest-growing segments globally. He said with regional countries adopting CBDCs, the opportunities for e-commerce are growing.

“If people are comfortable doing CBDC transactions, you can imagine they’re going to be very comfortable shopping online. So we see it accelerating our growth.”

He said even greater opportunities can be pursued by people of the Caribbean finding solutions to some of the issues that are face businesses and individuals.

“We don’t have enough tech. Fintech is one of the fastest-growing segments of the market in terms of payments and they’re coming up with creative solutions. When I joined MasterCard it was very difficult to identify local fintechs that are solving market specific problems. I think I’d love to see more of that. We are doing a great job in terms of signing partners and bringing them to the region, but I think it would be phenomenal for locals to develop solutions as well. We have seen a couple coming up now, but from a regional perspective, we don’t have enough tech companies trying to solve market specific problems.

He said one of the issues to be solved is the digital onboarding of a small business. “There are local regulations that say you need to do KYC (know your customer), well, who’s solving those problems? How do you do credit risk on folks that don’t have credit history? It’s solved other places in the world? I think as a region it would be great to see more tech companies coming up and solving problems that financial institutions have, and that will accelerate growth and adoption of digital and financial inclusion.Why do we always need to be bringing people from outside to solve it?” he asked.