“No cash, no problem”


… such goes the slogan of Jamaica’s official new digital currency. Called “Jam-Dex”, short for Jamaican Digital Exchange, the currency promises to lower transaction costs and bank the unbanked.

That’s an ambitious goal, given that 17% of the population is unbanked and Jamaicans widely consider banks a privilege for the rich, due to their high transaction costs. This inefficiency is caused by a market duopoly: Two banks control a staggering 60% of the market share. Since they do not face much competition, they can easily hike prices.

A digital currency could give the Jamaican banking system some healthy competition. Internet penetration in Jamaica boasts 55% and almost 100% of the population has access to a mobile phone. This provides fertile ground for the roll-out of Jamaica’s digital currency initiative.

Richard Turrin, digital currency expert and best-selling author of “Cashless”, explains: “The most important thing to understand about this new central bank digital currency or ‘CBDC’ is that you don’t have to have a bank account to use it! Digital sign-up makes using Jam-Dex a breeze for Jamaicans who now no longer have to worry about hiding money under their mattress.”

The Bank of Jamaica, the nation’s central bank, wants to replace 5% of circulating Jamaican dollars each year for the next couple of years. A gradual introduction surely is a good approach to getting a project of this size started. Officially the initiative does not aim to replace other forms of payment but rather provide another alternative to the already existing payment methods.  The central bank also pledges to replace any funds in case a wallet provider loses them.

To get started with the new payment platforms, customers must sign up for a digital wallet and deposit money via an accredited Jamaican financial institution. Digital wallets require a name, address, taxpayer ID, and picture ID. In addition, all transactions conducted on Jam-Dex will be traceable. This could give concern to data privacy advocates and anyone suspicious of the state’s reach and power.

Allegedly, no identity data will be transferred with the payment and all payments will be handled anonymously. Yet, like with credit cards too, the wallet provider will store user data and can be ordered by court to release it.

And no, Jam-Dex is not a cryptocurrency. It looks more like a digital banking / fintech system where a few wallet providers in contact with the central bank handle the transactions. One such wallet provider, to which the currency has been added to, is the popular Jamaican payment app “Lynk”.

JamDex is integrated into the Payment App Lynk – source: lynk.us

“For the banked customers, you can add your debit or credit card to the wallet and, from there, you can move funds from those instruments into the wallet. If you’re an NCB customer with an online bank account, you can also add [that] to Lynk and you can then move money between Lynk and your bank account seamlessly and immediately,” says John Matthew Sinclar, Chief Product Officer for Lynk.

According to Richard Turrin “Jam-Dex will likely take a while to catch on because people change their habits slowly.  If you’ve used cash all your life, going digital may take a while.“

JamDex launched on July 11th and so far there have been no major reported problems. The government paid out a $2,500 incentive, which is about 16 USD, to each of the first 100,000 Jamaicans who signed up.

“So, the next phase is for merchants to be signed up – that’s the key phase; merchants across communities who sell all manner of goods, and [when] it begins to take off, have more banks take it up”, announced Dr. Hon. Nigel Clarke, Minister of Finance and Public Service.

With more merchants accepting the digital currency, we can expect a network effect to set in: the more merchants sign up, the more widely JamDex will be applicable, pulling in more Jamaicans into the digital currency network. Likewise, with more people wanting to pay via JemDex, more merchants will offer the payment method to their customers.

Richard Turrin expects that “Jam-Dex will start turning up in shops and once people see how safe and convenient it is it will attract new users until it reaches a tipping point and people flock to use it.  I saw this first hand in China with WeChat Pay, the first year after it launched people didn’t use it so much, then all of a sudden when all the shops converted over it took off.  My bet is that it will be the same in Jamaica with Jam-Dex.”

According to the digital currency expert, there is “another major benefit of CBDCs that people don’t talk about: Jam-Dex can be used instead of cash and carrying less cash means less crime”, an important factor for the country with the second highest murder rate in the world.

Jamaica is making a big technological leap towards staying at the forefront of nations in the adoption of digital currencies. Taking the initiative is sure to pay off and contribute to Jamaica’s economy.