Various jurisdictions in the Caribbean are very well known for their financial sectors. Countries such as The Bahamas, Dominica and The Cayman Islands have well-established offshore banking services. However, as offshore banking receives more scrutiny from organizations like the European Union (EU), Caribbean countries like Jamaica are pursuing a different angle.
By pushing for regulatory updates, educational programs and an incentive-oriented policy framework, Jamaica is attracting the attention of an increasing number of companies operating in the financial technology (fintech) space.
A Sizeable Opportunity
The use of information technologies to enable financial services such as lending, money transfers and payments is on the rise. Even traditional banks are dedicating significant resources to assimilate these trends within their business models.
The global fintech market will reach around US$225.1 billion by 2027. International venture capital firms are targeting fintech opportunities in underdeveloped markets such as Latin America and Africa.
In Latin America, a large number of people do not have a bank account or do not use regular financial services. In rural areas, where logistical issues complicate the process of opening and managing a branch, banks often will not even engage the local population.
So-called challenger banks or neobanks, as well as other financial institutions, are doing very well in the region for that very reason. The opportunity to bring a new segment of the population into official banking is too big to ignore.
Playing to Jamaica’s Strengths
In that context, jurisdictions that are capable of offering the right regulatory framework, support and human capital will succeed in attracting more fintech entrepreneurs.
Jamaica is well positioned to become a location of reference for fintech services in the Caribbean. The island has robust experience assisting the business and knowledge process outsourcing (BPO/KPO) industry.
Jamaica has the human talent and capabilities to easily assimilate the back office as well as customer support needs of the fintech industry.
Even while fintech companies use a digital-first approach that usually leads to the automation of many business functions, customer support remains very important in the industry. Customers generally expect personalization in their interactions with a service provider.
There are currently over 60,000 workers employed by the BPO/KPO industry in the country. Jamaica’s experience and talent pool in the sector creates a significant advantage.
Preparing to Capitalize
Jamaica could do more than provide back office and support services. The country is putting significant emphasis on upskilling and educational programs that would create a competitive advantage for its workforce. For example, Jamaica is implementing a national coding in schools program that will train 400,000 students in coding, and 15,000 teachers to deliver the program.
Jamaica has a clear opportunity to attract founders and talent that can add value to the country’s ecosystem. There is already evidence of this potential.
The Jamaica-based microfinance firm Sprint Financial Services Limited is an example of the island’s potential.
Sprint Financial was targeted in 2021 by a US-based company for a partial acquisition. This transaction exemplifies the interest of US and international market participants for local talent and opportunities in Jamaica.
Even established banks –like the National Commercial Bank (NCB) Jamaica– are fostering this culture of innovation. NCB Jamaica recently transformed its core IT platform through various application upgrades and the implementation of modern solutions. The bank has been recognized as one of the most innovative banks in Latin America and the Caribbean.
There is another factor. Fintech can’t advance without adequate physical and digital infrastructure. The industry needs reliable internet. Even when there is still much work to do, Jamaica keeps making robust progress in this area.
The COVID-19 pandemic accelerated Jamaica’s efforts to strengthen its infrastructure. The health emergency forced the BPO/KPO industry to adopt remote work as an industry standard. Since then, telecommunications companies in Jamaica heavily invested to improve their capabilities.
Central Bankers Want to Help
Central banking plays a crucial role in allowing innovation in the industry. The Bank of Jamaica (BOJ) understood this and recently approved guidelines to encourage innovative players in the financial services.
Under these guidelines, the BOJ set out the legal and regulatory framework for some fintech operators in Jamaica. Fintech companies tend to be less regulated than traditional financial institutions. Nevertheless, fintech firms may be more vulnerable to cyberattacks since they often hold consumers’ sensitive financial information. For that reason, the regulation component is essential in the industry.
An effective regulatory framework offers assurances for certain risks, such as the implications of fintech firms’ penetration in the financial system, data privacy and market participants’ exposure to cyberattacks.
However, the rapid growth and change of the fintech industry poses a real challenge for regulators. Fintech firms are rapidly incorporating new technological innovations while taking on more risks themselves and exerting pressure on long-established industry rivals. This will remain a challenge for regulators in Jamaica and elsewhere.