Overcoming the Cash-Centric Culture of Central America and the Caribbean

The pandemic pushed governments, businesses and consumers worldwide to look at the importance of digitization as the world becomes increasingly connected. Countries with digitally inclined consumers found value in adapting to digital marketplaces, and countries with higher numbers of unbanked or underbanked consumers face unique challenges during this digital transformation.

Consumers in Central America and the Caribbean still use cash as their primary payment method, as a significant portion are underbanked or unbanked. A cash-based society also means digital transformation is slow moving, as businesses are not adopting the digital means necessary to keep up with global trends, instead sticking with the payment methods used by customers and potentially stagnating economic growth.

This potential stagnation has led to concern in these countries, prompting the push for digital adoption. FinTech companies and legacy financial institutions (FIs) in these countries must focus on earning citizens’ trust while making technologies more accessible and reducing the costs of using digital payment tools.

In this edition of the Digitizing Payments In Latin America Playbook, PYMNTS examines the challenges FinTechs face in making digital pay­ments safer, more accessible and more convenient than cash for consumers in Central America and the Caribbean. It also explores the outlook for upgrading infrastructure and innovating payment processing in the region to boost technology adoption while stimu­lating economic growth.

Around the Latin American Payments Space  

While cash remains the prominent payment method in several South American countries, recent reports have shown that the appeal of cash payments is declining and digital methods are on the rise. Despite this rise, consumers in some countries, such as Colombia, are warming up a bit slower to payments digitization: 28% still use cash as their primary payment method. Despite the slow adoption of digital technologies and high rates of under- or unbanked cit­izens, growth is occurring in the region and the use of mobile pay­ment apps is increasing, with more than 55% of the banked population leveraging mobile payments to send money.

Consumers in Panama are also heavily reliant on cash as a payment method, with underbanked or unbanked citizens comprising more than half of the population. These consumers are also looking to shift toward more digital options. Banks are responding to this shift, making critical infrastructure changes to allow for the increased adoption of digital payment methods.

For more on these and other stories, visit the Playbook’s News and Trends.

EVVA Finanzas on Overcoming Central America’s Cash-Centric Culture

FIs and FinTechs are eager to usher Central America and the Caribbean into global digital payments but face stubborn obstacles. Entrenched psychological, cultural and historical barriers, as well as physical, logistical and outdated regulatory hurdles, are slowing the process in the region. Convincing businesses and consumers to transition from legacy payment methods and adopt digital tools is critical to the region’s economic future.

In this month’s feature story, PYMNTS spoke with Abraham Guzman, CEO of EVVA Finanzas, to get an inside look at how FIs and FinTechs are overcoming these obstacles to help businesses and consumers embrace the benefits of digital payment tools.

Barriers to Digital Payments Adoption in Central America and the Caribbean

As the global economy becomes increasingly digital, countries long dependent on cash remain one of FinTech innovators’ greatest challenges. In many Central American and Caribbean countries, overcoming hurdles to digital adoption must begin with uncovering why so many citizens remain unbanked. Nearly 70% of the population in Jamaica, for example, remain unbanked or underbanked, with avoidance of banking institutions stemming mainly from costs associated with digital banking and the preference for cash resulting from a mistrust of government and FIs.

This month’s PYMNTS Intelligence explores the barriers to digital banking in Central America and the Caribbean and how FinTechs and FIs are working to overcome these barriers.

About the Playbook

In the Digitizing Payments In Latin America Playbook, a PYMNTS and Kushki collaboration, PYMNTS examines the cash-forward consumers in Central America and the Caribbean and what banking institutions are doing to upgrade infrastructure and innovate digital payments to gain consumer trust, boost technology adoption and stimulate economic growth.