The Bahamas is “going in reverse” by increasing physical cash in circulation by 20 percent, a digital payments provider argued yesterday, even though its Sand Dollar roll-out is “the model for the rest of the world”.

Nicholas Rees, Kanoo Pays’ chairman and co-founder, told the Bahamas Business Outlook conference that this nation was moving in the opposite direction to the world’s increasing embrace of digital technologies and payments by expanding the volume of physical currency in circulation to $588m as at November 2024.

In contrast, the amount of Sand Dollars, the Bahamian digital currency, in circulation and available stood at $1.9m at the same date - a volume equivalent to just 0.3 percent of its physical equivalent. Mr Rees, though, argued that the numbers represent a positive indicator and expose that there is room for “some growth” in Sand Dollar usage throughout The Bahamas.

Acknowledging that barriers related to education, awareness and adoption remain to be broken when it comes to the Bahamian digital currency, the Kanoo chief said total electronic transactions in this nation over the past five years totaled some $94m compared to just under $1bn worth of payments via credit and debit cards.

“Total cash in circulation is $588m, which is an increase over 2019,” Mr Rees said. “When we look at that [20 percent increase over 2019], why are we putting more cash into circulation when the rest of the world is going in the reverse?”

However, the $1.9m worth of Sand Dollars in circulation represented a 3,983 percent rise on the volume that was available when the Bahamian digital currency launched in October 2020. And, in just over four years, the number of Sand Dollar ‘residential’ wallet users has grown to 144,000, with the figures for businesses and foreign users standing at 2,100 and 973, respectively, at November 2024.

Pointing out that the number of residential Sand Dollar wallet holders exceeds the 109,000 in “physical cards” issued by Bahamian commercial banks, Mr Rees signalled that there was sufficient promise in the numbers for Kanoo and other digital payment providers to maintain their faith in the Bahamian digital currency’s long-term evolution.

“It includes 144,000 residential wallets in an environment where there’s lagging education, awareness and adoption,” he said. “So this is telling me that there’s some growth and somewhere we need to go. This is a positive indicator…..

“If you look at Sand Dollar churn, you have about $14m compared to electronic money transactions of about $80m. Your total digital wallet market size over the past five years is about $94m in transactions versus card transactions of just under $1bn in the same period.

“Those are very interesting numbers to me. Why haven’t we adopted Sand Dollar? It’s due to lack of understanding, lack of awareness and lack of mobilization to hit the target.”

Mr Rees said secure access to the Government’s digital payments system, as well as the necessary retail and point-of-sale infrastructure roll-out, were critical to further adoption and use of the Sand Dollar by Bahamian businesses and consumers. The Kanoo chief acknowledged that it was also critical to address data privacy and security concerns given the perception by some that the Sand Dollar and its counterparts are “the boogeyman of currency”.

However, he backed the Central Bank’s cautious, phased roll-out and implementation of the Bahamian digital currency, noting that “we did it before China; a couple of months before”.

“The model of the Central Bank digital currency that was rolled out here, I feel, based on what I’ve seen and studies is the model for the rest of the world,” Mr Rees asserted. “We have some tweaks to do. They’ve taken a very measured approach to rolling out the Central Bank digital currency. That’s something that’s quite unique and quite special.”

Arguing that the elimination of cheques as a payments instrument will eventually occur, and that this has only been delayed to give businesses and individuals time to adapt, the Kanoo chair said that, in the US, physical cash was now only used in 16 percent of transactions with debit and credit cards accounting for 81 percent of payments.

And, with card payments in the US having jumped from a total $7.1bn in 2010 to some $131bn eight years later in 2018, he added that “behooves us if we want to engage tourists” to embrace the digital era and payment methods that they are increasingly using.

And he revealed that Kanoo has developed “a tokenized ring”, which has captured both Sand Dollar and Visa debit card information, that allows the wearer to make “payment anywhere in the world with a tap of the wrist”. Mr Rees showed the Bahamas Business Outlook conference a video demonstrating the successful processing of such a transaction at the newly-opened Applebee’s franchise at Fusion Superplex.

The Kanoo chairman said digital payments will ensure recent situations, such as North Andros residents having to provide pilots with their debit card and PIN numbers so they can fly to New Providence and withdraw cash on their behalf, following the vandalising of the area’s only automated teller machine (ATM), will become a thing of the past.

He also recalled how Kanoo and other digital payment providers adjusted the electronic food assistance solution provided to approved Department of Social Services beneficiaries so that they could access goods at ‘Mom and Pop’ stores in their own Over-the-Hill communities rather than be restricted to larger outlets, thus ensuring the spending would benefit their own areas.