Fintech continues to generate a wide variety of new opportunities to build financial products and deliver financial services in ways never imagined. The Bahamas is committed to grasping the opportunities that Fintech presents to the financial services industry and the broader economy, as it takes collective action to transform the way it does business.

Fintech is a new, disruptive combination of technology and finance that is rippling throughout the financial sector and beyond, causing significant structural change and also affecting the way individuals relate to their personal finances and other transactional business. This new approach to traditional business models is driving cost-savings, efficiency and global expansion of firms engaged in this space.

Fintech, and particularly blockchain, has the potential to positively impact the whole financial value chain and thus improve financial access, effectively revolutionizing the ways in which we attract and service both domestic and international clientele.

The opportunities
Opportunities abound for The Bahamas in Fintech. With the government’s commitment to creating a technology hub in Grand Bahama and the provision of incentives under the Commercial Enterprises Act, the jurisdiction is ideally suited to attract investment and attain success in this space.

For The Bahamas, Fintech presents a platform for innovation that should be leveraged to participate and thrive in this new digital era set out by a variety of next generation technologies. Opportunities for entrepreneurs, as well as established firms, can be created in this new environment, although both run some risk in the absence of regulatory and legislative guidelines as a lot of the technology is so new. But this in itself presents an opportunity: The Bahamas could be one of the first international financial centres in the world with a regulated ecosystem for crypto exchanges and crypto assets, including digital currencies (ie stable coins), and other blockchain-based financial products, such as virtual securities tokens and commodity- backed digital tokens.

One of the primary opportunities available in the Fintech arena is for Bahamian entrepreneurs, who now have a platform within their grasp to develop high value-added financial services businesses based on an entirely new operating model–the network model. By solving traditional problems with new approaches, small and medium-sized firms can lead on a pathway to success.

Another key way to leverage Fintech is in the field of safeguarding against fraud and cyber threats.

Blockchain uses secured “blocks” of records that are timestamped and linked through a distributed database. It can help prevent fraudulent activity and it can reduce the risks that come with holding information in one location, where hackers can target it more directly. Blockchain also offers the potential of making public services and banking processes more streamlined, as well as more secure. Blockchain-based ID solutions help people control their identities better, while at the same time giving anyone who needs a government- approved identification a secure, blockchain-based, free solution that can be used anywhere, for a number of purposes, including credit scoring.

Initiatives such as these will help create new, high-quality jobs, although in fewer numbers, and many existing job functions will evolve, which is why it is critical to attract more firms to The Bahamas to provide growing job opportunities.

Fundamentally, Fintech provides the environment in which to create new financial products and services. Blockchain technology and crypto assets present a basis for an uplift in entrepreneurial activities, as well as a basis for established firms to pivot their business models and avoid being rendered redundant by this technological revolution.

This provides scope for Fintech innovators in areas such as:

1. Cutting-edge community and traditional banking
2. Digital payments and micropayments solutions via mobile
3. Legal advice
4. Crowdfunding
5. Insurance
6. Fiduciary services
7. Digital asset exchanges/trading platforms
8. Financial planning, investment management and portfolio allocation
9. Crypto-ATMs and kiosks

Non-traditional models
Hedge funds investing in crypto assets and related businesses are already being launched in The Bahamas. Funds touch all aspects of financial services, and with the growing blockchain ecosystem, fund managers are being attracted to set up shop here.

There are also broader investment opportunities using other non-traditional models. While crypto currencies may bear some resemblance to familiar assets classes such as commodities, currencies or securities, it is a new digital asset class and presents a broad array of investment opportunities from tech startups seeking to gain market share to well-established businesses seeking to improve their customer experience.

This can give rise to new sources of investment capital. The move to integrate digital currencies into our capital system adds to the sources of the capital available to jump-start economic growth. Crowdfunding should flourish in this new digital environment, boosting impact investments and philanthropy and giving rise to new financial products.

Such digitization gives access to new wealth management clientele. As a tech hub and international financial centre, The Bahamas continues to attract and cater to the changing demographics and expectation for digitization by our global client base. It also broadens financial inclusion, with the ease of access provided via blockchain technology giving people who do not have the opportunity to be banked to become active participants in the global economy.

Another important element of Fintech and blockchain is the advent of Smart Contracts, which allow greater automation, as well as enhancing transparency. Automation of administration operations of all sorts can be introduced to financial institutions to increase efficiency and scalability of businesses and government resources. Fund and corporate administration services can be automated to reduce cost and improve service delivery. Similarly, blockchain technology presents opportunities for process improvement and can be used to develop more efficient entity incorporation and registration with the advent of a completely digital corporate registry, which would allow for the further development of a digital financial asset registry to allow for increased liquidity and seamless trading of digital assets of all kinds.

Finally, Fintech solutions allow for the expansion of financial services by non- traditional companies. Regular businesses can integrate financial services into their business models to increase sales volume and to improve the customer experience by securely extending credit and proactively identifying viable clients.

Leveraging the opportunities
Education, infrastructure and regulation will be the key drivers of success in Fintech. A highly-skilled and well-trained workforce must be a pillar in building a Bahamian Fintech hub. The Bahamas has a highly educated local workforce and a long tenure in financial services excellence, creating a deep pool of skill and experience that is recognized and trusted worldwide. Most Bahamian students who aspire to careers in wealth management attain their degrees from the University of The Bahamas, as well as universities in the US, Canada and the UK. Professional development and training remain high priorities for the industry, which confers degrees and certifications locally through its professional associations.

As well as human resources, The Bahamas has an abundance of natural assets that make it an attractive location to conduct Fintech activities. The Bahamas has developed its land, premises and fit-for-purpose infrastructure with the singular focus of facilitating international business. Modern office facilities are connected globally through fibre optic cable networks, with data protection operating at the Organisation for Economic Co-operation and Development standards. The Bahamas is easy to access, with some 21 nternational airports and 40 other airports situated throughout the archipelago, as well as countless ports of entry and marinas that can accommodate the largest yachts.

More than 10,000 acres on Grand Bahama have been earmarked for industrial and commercial development. The Freeport industrial zone has one of the most efficient and deepest harbours in the region, as well as an international airport capable of handling the largest aircraft in service, and an international business and logistics park for value- added and cargo handling activities.

Regulatory conditions
There is also regulatory infrastructure being put in place to facilitate growth in Fintech. The government and regulators, along with the private sector, are drafting policy and rules designed to allow this business to develop and bloom. These coordinated efforts are driving the creation of appropriate regulatory regimes for the emerging blockchain technology and crypto currency sector.

The Bahamas encourages the growth of its financial sector through adherence to internationally accepted regulatory principles, and efficiency in their administration. Regulatory independence is maintained through the separation of roles of policy makers and regulators; regulation and regulators are subject to independent assessments by the Caribbean Financial Action Task Force, the Caribbean sub-group of the Financial Action Task Force, and the International Monetary Fund. The Bahamas also is an active participant in multilateral organizations established to set and monitor standards for regulation and anti-money laundering and countering of terrorist financing.

Industry is proposing a rule-based approach providing the necessary certainty as to regulatory treatment, with the flexibility for such rules to be easily modified to consider new business processes, activities and the changing characteristics of digital assets, as entirely new business models.

This combination of human resources, and physical and regulatory infrastructure, puts The Bahamas at the forefront of developing a regional hub for Fintech activities.