The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ digital payments drive will not be stalled by Friday’s global IT outage, a prominent banker argued yesterday, as the benefits “far outstrip” the impacts from this event.

Gowon Bowe, the Clearing Banks Association’s chairman, estimated to Tribune Business that “60 percent of commerce” in The Bahamas was not impacted by CrowdStrike, the cyber security firm, implementing a faulty upgrade that rendered clients’ Microsoft Windows systems largely inoperable.

Arguing that the incident must be placed in context, he asserted that the advantages created by digital payment mechanisms - greater speed and efficiency in closing transactions, improved security and reduced loss and fraud - “far outweigh” the temporary “inconvenience” caused by the CrowdStrike fiasco that is thought to have knocked eight million computers offline globally.

However, Bahamian businessman Ethric Bowe yesterday argued that the global IT meltdown - and the disruption caused to digital and card payments for much of the day showed that “cash is still king”. He wrote in a social media post seen by Tribune Business: “The current global situation is but another reason to avoid the folly of a cashless society.

“We should be creating more ways to facilitate transactions; not less. Money is property and people need secure, easy, reliable, inexpensive and secure access to their money. You pay VAT when you pay for items and then you pay VAT again when the bank charges you to process the charge. All of this is part of the cost of using digital currency. Digitising the money should make it less expensive, not more.”

Speaking subsequently to this newspaper, Ethric Bowe asserted that Friday’s events should at the very least slow The Bahamas’ digital payments transition. “We will probably pretend we didn’t see it, didn’t notice it and go full steam ahead,” of the CrowdStrike meltdown. “That’s what we do. We see the cliffs and press the gas.

“The thing to do would be to make as many options available as possible. When you look at it, cashless is very expensive. You have to pay between 3.75 percent up to a 5 percent fee every time something gets processed. In addition to that, you pay VAT on the transaction and additional fees as well. You don’t get that with cash. I pay my friends in cash, people I don’t know I pay with cards.

“In terms of democracy, we should give people more choices. If you want to use cash, use cash. If you want to use digital, use digital. I use digital a lot when it works, but in our situation it’s too unreliable, meaning it doesn’t work all the time,” Ethric Bowe added.

“The magic thing we have in The Bahamas is called system failure. You could have power, you could have Internet; it just doesn’t work. That’s not irregular. That could happen in any given week.”

Confirming that the inability to process debit and credit card transactions was Friday’s biggest impact, Gowon Bowe told this newspaper this was due to CrowdStrike’s impact on the processing firms rather than Bahamian commercial banks. He added that the Association’s members were impacted to “varying degrees”, but the ability to process customer card transactions for all was restored by the day’s end.

Speaking to concerns that Friday’s events will strengthen arguments against moving towards a so-called ‘cashless society’, the Fidelity Bank (Bahamas) chief executive replied: “I know I would be considered a biased party, but I would say no. Never get too high on the highs or too low on the lows.”

He pointed out that the provision of devices enabling tourism industry operators to accept debit and credit card payments from visitors had led to “greater spend, greater transactions, greater productivity and greater GDP” compared to when they could only accept cash.

And, while cash typically disappears or is misappropriated when lost or stolen, Gowon Bowe said digital transactions create an “audit trail” that allows for tracing and recovery. “The cost of cash and the cost of loss of cash are far greater than those associated with digital payments mechanisms,” he added.

“It [Friday’s outage] was a major inconvenience and one that speaks to the reliance on digital payments and what happens if they fail. But we have to look at it in the broader context. Critics will say this is why we need cash, but the reality is it was a global phenomenon.

“The reality is how often does this transpire, and is it going to create super critical problems? If I can’t pay for my groceries at 9am, but pay for them at 9pm, is that life threatening?” The Clearing Banks chief confirmed he was among those impacted by the IT meltdown as he was unable to pay for gasoline with his car due to having no cash and being reliant solely on a debit card that could not be processed.

Acknowledging that the CrowdStrike failure exposed the need for Bahamian companies to have business continuity and other fall-back plans, Gowon Bowe added: “The protection that comes from card payment transactions far outweighs the inconvenience of these one-off events that happen every few years....

“Digital banking is certainly safer. Sometimes you run into these anomalies, and you have to ask if these anomalies are outweighed by digital banking services’ reduction in fraud, reduction in loss, and ease of payment and efficiency. They far outweigh this type of event. Being interrupted for a day doesn’t outweigh the benefits of being able to take more of a visitor’s wallet every other day.”

Gowon Bowe, adding that he could only speak for the impact on Fidelity Bank (Bahamas), said Friday’s IT meltdown only affected its merchant terminal services. “Those are the merchant terminal devices within the retail industry,” he added, “as it relates to the point-of-sale devices’ ability to use credit and debit cards.

“We were back up and running by 1.30pm-2pm on Friday. We don’t use CrowdStrike for our products so we didn’t have any issues with our systems directly but our processor; our service provider, did so. We had the consequence of their outage for that period of time. Our ATMs were not impacted, the online banking platform was still functioning and branch activity was still functioning.”

The Clearing Banks Association chief added that both the industry’s Automated Clearing House (ACH), which processes transactions between customers of different Bahamian banks, was still operating on Friday as was the Real Time Gross Settlement (RTGS) system that handles the larger payments between banking institutions.

“I would venture to say 60 percent of commerce was not impacted,” Gowon Bowe told Tribune Business. “If you were doing a wire transfer, sending something in cash, it was not an issue. As it relates to the ACH and the exchange of information between banks, that was happening as normal. It was contained in the merchant POS category.”