e-Residency and e-Commerce

An often-heard excuse for the lack of e-commerce activity on the island is the fact that allegedly there are limited online payment options available. The main question is, for whom exactly are the options limited? Mostly for those without a credit card, and ironically, that is the group that misses e-commerce the least. Many of those who regularly point to the lack of e-commerce possibilities typically refer to the fact that online payments are essentially still limited to credit cards. However, most of this group falls in the profile of business and/or leisure travelers. We love traveling and ordering online from various marketplaces or online shops in the USA, NL and even Alibaba. When traveling we book our tickets and lodging online as well as our rental cars. We are big fans of Netflix, where we also eagerly pay with our Visa and Mastercard. Yet when it comes to local e-commerce all doors seem to close abruptly.

Almost all local carriers (Divi, EZ Air and Winair) servicing the Dutch Caribbean use the local online payment provider, CX Pay, for their online payments. Staying close to air travel in Curacao, travelers can pay their airport tax online without having to stand in line at the airport, while airlines whose flights pass through Curacao’s air space can pay the air traffic control authority online. CX Pay also assists other transportation providers, such as Luxury Taxi service in Curacao and boat trips by Great Bay Express in Sint Maarten. Bon Aparte Flowers has taken many online orders online and service providers ranging from local newspapers, TV station, payroll services, lodging facilities, trust services all provide their clients the option to pay online with credit card. This includes various charity organizations who welcome donations, also paid by credit card aided by CX Pay.

The trend is no different on the other Dutch Caribbean islands, where for example commercial excerpts can be ordered online via the Sint Maarten Chamber of Commerce. The Chamber of Commerce of Aruba also sets the example in Aruba regarding e-commerce, where many other tour and hospitality operators and various other services providers also entrust CX Pay to facilitate their online payments, while on Bonaire, Stinapa as a nature organization leads the way as one of the merchants with the highest transaction volumes due to the island’s greatly successful dive tag policy.

There is an eternal cry for Paypal, who will not consider small markets like Curacao for lack of a critical mass that is essential to their business model. Yet, close to 80% of all Paypal account holders outside of the USA, fund their account with either a Visa or Mastercard. Those same cards can be used directly when paying for anything online. In fact, the two most frequently used online payment methods worldwide (not including China) are Visa and Mastercard.  So, the biggest mystery to solve is, why do we oppose paying with the very same methods that we otherwise freely use when traveling abroad or ordering online (outside of Curacao)?

E-commerce fees these days are close to-, if not equal to POS fees. So, it’s somewhat confusing why merchants will go through the trouble of setting up an online offering without the little extra mile of integrating an online payment solution. Especially in this time of Covid-19 when social distance is a hot item, why not facilitate those who would like to pay in advance online and avoid any fidgeting with a POS (swipe) machine upon delivery or pickup? Same as we do on Amazon or Bol.com or when booking our next flight online via KLM or American Airlines.

But let’s move to bigger and better things, in our quest to be innovative, and develop a diversified economy on the road to becoming a Smart Nation. With the recently lifted lockdown the governments of Curacao will be pressed to find ways to improve its investment climate create incentives to stimulate and create a new innovative, competitive and diversified economy.

What the lockdown made overly clear is that to withstand any economic headwind a robust and diverse economy is vital to the country’s resilience and economic balance. The key aspects to consider are the underlying challenges of the economy, its labor market, increased labor productivity and competitiveness, as well as sustainability of the country’s economy. It is crucial to ensure that moving forward there are sufficiently skilled and well-paid job opportunities available to take advantage of the opportunities presented by globalization, innovation and technological change and ensure that the benefits of economic success are shared by most instead of a few.  

Curacao’s economy has been challenged with the fallout of the Venezuelan market as one if its major contributors to all sectors, the diminishing and restrictive role of its financial sector, the near closing of the oil refinery, and the sudden disappearance of the tourism sector as a result of the Corona virus. This urges the need to diversify the country’s economy.

As we get ready to startup the economy again, we need to create new economic pillars for the economy with emphasis on innovation and sustainability. One such innovation is the proposed introduction of an e-Residency permit to attract more businesses and entrepreneurs. But what will be the distinguishing factor of our e-Residency?

Creating an e-Commerce Hub Solution for Curacao

The growing global digitalization creates opportunities for those who can best adapt and accommodate businesses with an agile and compliant solution to conduct business and most importantly receive payments from anywhere in the world. e-Commerce and the science of e-payments plays a critical and essential role when becoming a fintech- or e-commerce hub and building a smart nation. Businesses must be able to receive payments from around the world in an efficient and compliant manner. The key to it all is that the payment rails must be (mostly) local to comply with card scheme rules. Furthermore, relying on cross border solutions will inhibit creation of local critical mass and volume, which in turn results in lower fees and cost of doing business and more critically, prevent revenues (and forex exchange) from flowing abroad to international service providers.

Challenge & Opportunity

Due to acquiring rules of card schemes like Visa & Mastercard, merchants are required/expected to process payments for their e-commerce activities via a local bank. In other words, a merchant in Jamaica must use a processing bank in Jamaica, and the same applies for a merchant in Curacao, St. Lucia, Aruba or St. Maarten, Antigua and so on. These merchants must all find a local bank to process their online payments.

The main challenge that merchants face is the lengthy and cumbersome on boarding process, conservative risk appetite of the banks, and possible higher fees. Specific to local gateways like CX Pay, another obstacle often faced is the mismatch between the merchant’s bank of choice and the gateway’s incompatibility with the bank. In order to help resolve some of these inefficiencies and circumvent the inefficient merchant on boarding process, it would be interesting to offer a solution for merchants across the LAC region to register their business in Curacao and obtain a (virtual) bank account which is integrated with an e-merchant account to conduct e-commerce and receive online payments.

The proposed solution is to create a new “hybrid” entity intended solely for e-commerce purposes. To appeal to regional/international merchants, this structure should be competitively priced at below $500.- and be incorporated within a week. Important to note here is that there is no fiscal incentive required as the main interest of the merchant is to have easy access to a workable e-commerce solution.

Benefits

The benefits of this model are multifold:

  • Generates significant new business activity for the jurisdiction
  • Stimulates the location as a favorable e-commerce destination
  • Creates more local processing volume (which in turn leads to lower fees)
  • Increased revenues for local service providers & Government
  • Concentration of local services and expertise instead of having businesses resort to cross border service providers and loss of revenue
  • Helps stimulate and increase e-commerce in the region
  • Spinoff by attracting other tech- and e-commerce players to Curacao

Keys to success

  • Flexibility to introduce such a “hybrid” low-cost e-commerce structure
  • Modernized infrastructure (government and commercial registry to facilitate company formations)
  • Use the Curacao “branch” solution to accommodate international merchants. Key factor will be the ease of implementation and simplifying bureaucracy to ensure a time- and cost-efficient solution.
  • Efficient payment solution (facilitation by the Central Bank)

New Payment Platforms and Solutions

Back to Curacao and the demand for different payment solutions. To help all the efforts of those who care and go the extra mile for fellow citizens, a new local crowdfunding platform (www.together4curacao.com) was launched to help all those people who care about good causes and want to put their money where their heart is by supporting positive crowdfunding campaigns. No more need to go to international platforms and have monies land in foreign accounts of those providers. From now on we can keep all things local and at hands down lower rates!

As per popular demand, soon a new mobile payment app will be launched for the local market. The mobile payment app or digital (e-)wallet will facilitate peer-to-peer and peer-to-merchant transactions. A user signs up by providing name, phone number, email, and identification number. With funds available in the digital wallet, the user can search for other users by name or phone number or scan a QR code directly from another user’s app to make a payment. Every transaction through the platform is required to have a description of the payment which allows for the proper oversight. To ensure all is done in accordance with proper compliance guidelines, all who register via the mobile app will undergo a seamless KYC check.

And finally, as witnessed in Aruba last year, some banks have recently introduced the new Visa or Mastercard debit cards, replacing the Maestro card, which is not e-commerce proof. Expectations are that the debit cards will be distributed later this year, eliminating another hurdle for e-commerce and e-payments.

Soon there will be no more good excuses for either customers nor merchants or even the government, to refrain from participating in e-commerce. Time will soon tell whether we are indeed ready for Korsou 2.0 and on schedule to become a Smart Nation.