Local e-retail lags behind

| 19/08/2009

(CNS): Although the vast majority of Cayman Islands businesses now have websites, very few offer their customers the ability to buy goods or services directly online. While e-retail generates billions of dollars around the world, in Cayman very little money is generated through this potentially lucrative route.  One local business owner told CNS that she believes the fundamental problem is local retail banks, which are not offering the necessary facilities to enable their business account holders to accept online payments, acting as a barrier to the development of local e-retail.

At present there is only one retail bank, out of seven in Cayman, currently offering online merchant accounts, with one other preparing to introduce the service by the end of 2009.

Before a business can accept money online it must set up an internet payment gateway and then have that gateway pass the money to their bank, but without a special online merchant account the business owner cannot receive the payments.

Lynne Byles of Tower Market says she introduced a gateway to Cayman some five years ago expecting it to facilitate the take off of online shopping, but because of the slow uptake by local banks to offer online merchant accounts, e-retail still only accounts for a tiny percentage of trade in Cayman.

Byles explained that C-pay offers local business a secure gateway for them to sell their goods andservices to the local market, but unless they bank with Butterfield they have no way of receiving the funds. “C-pay is designed to offer the interface between a website, where a customer is buying goods, and the seller’s bank account but to accept that money the seller has to have a special internet merchant ID which C-pay uses to credit the online business.”

Byles went on to explain that an internet merchant account is just an extension of a regular merchant account, which nearly all retail businesses have with their banks so they can accept credit cards. “Cayman is so far behind the rest of the world in online retail because of the failure of local banks to offer the upgraded facility,” she added.

Byles said that the C-Pal service is finally starting to attract considerable local interest but the first thing she has to tell any Cayman business looking for the gateway is that she can’t offer it to them unless they bank with Butterfield.  “Shopping on line is big business everywhere else, but here, one of the world’s most sophisticated financial centres offering untold innovative financial products, we can’t find a way to help our own merchants sell goods and services through their websites,” Byles said.

Cayman’s broadband internet use has grown rapidly in the last few years, and according to the latest Labour Force Survey from the Economics and Statistics Office, more than 60% of households now have broadband internet access. And while Caymanians are now doing more and more things on-line, not least reading and commenting on the news, local businesses are unable to tap into that ready market of potential buyers.

Ormond Williams, the President of Cayman National Bank, disagrees that it is the fault of local banks that e-retail has not been as quick off the mark in Cayman as in other jurisdictions as he explained it has not necessarily been a top priority service for his customers. However, he did say that CNB hopes to be offering the facilities by the end of the year.

“We have been looking at this for some time but when we introduce the service we want to ensure we have got the quality of the service and the integrity of the system right,” Williams added. He noted that there were risks associated with the systems, especially fraud, but there were also other issues which the bank had to consider.

As a smaller organisation than his competitors, Williams explained that CNB can’t just take a system off the shelf from another jurisdiction but has to create the system from scratch. He said that given the amount of projects with which CNB, as a small bank, is engaged the demand regarding merchant internet accounts and the facilities to enable businesses to receive on-line payments has not until now been a priority. Williams said the bank had chosen not to be aggressive about this particular service, though he admitted that there was growing interest which would make it commercially viable for the bank to get involved sooner rather than later.

There are also issues of security and fraud which have held banks back from offering the service, but local businesses disagree and a number of traders told CNS that the internet sales transaction is no more insecure than a normal credit card purchase, but what is putting the banks off is the economy of scale.

Of the few local businesses that are offering an on-line shopping such as major players like Tortuge Rum Company are using Butterfield bank’s on line services but others are using US banks to receive the transactions, while others are using considerably less secure means by having customers e-mail credit card details. Companies can use Pay-Pal but the money has to be paid into a US account or another country in which the service operates.

Byles says that she has begun to take on a number of new accounts with the C-pay system that hold Butterfield accounts, but given the business potential that is out there, she says the only way e-commerce can really take off is if all of the local retail banks embrace the concept and finally open up what she says is an untapped market of potential income for many business.

Byles also noted the possibilities for government to become more efficient by offering people the opportunity to pay a number of different fees on line, from trade and business licences to garbage fees. She said that while it may still be some time before the supermarkets are set up to offer internet grocery shopping, there are still many small businesses that would benefit enormously from being able to ply their trade online.  “It’s astounding really that we are so far behind,” Byles lamented.

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  1. anonymous says:

    i live here and have ordered tortuga  products online for many years and never had a problem. i belive a local bank handles the tranaction. i would like to see them offer depit cards would cost me les than my american express .

  2. Anonymous says:

    Fraud is a problem in Cayman because your credit cards/debit cards have NO physical billing address located to them.  For example, in the US, if you have somethign shipped to 1234 ABC Street, Podunk, Utah, that shipping address has to match your billing address.  This is the major way companies protect themselves online.  PayPal also tracks IP addresses, so if you live in Africa and log in, but your credit card was added from a different IP address and has a US Billing address that throws up a BIG red flag.  PayPal’s fraud prevention system was built in house (which is why they were the only major online payment to survive).  The fraud system is called IGOR, after a Russian hacker who tried to defraud PayPal. By the way PayPal hires FBI agents to help them combat fraud.

  3. Anonymous says:

    I think Marek picked up his business skills in a christmas cracker.

    If Apple normally sells itunes for 99C why would they take a loss of 4C per song by selling to you cheap? they could set up here themselves for that price (open a PO Box like every other company that ‘resides’ here). The reason they didn’t I would imagine is because they know the legislators would change the rules if they did relocate they servers here and somehow find a way to still charge taxes. Also of course isthe lack of quality network infrastructure in Grand Cayman.

    Given that bandwidth, reliability and support of Cayman’s internet operations is not exactly world class (or even caribbean class!), it could never handle traffic of that quantity. My internet is frequently broken both at home and at work (different companies) so god help Apple if they were relying on Digicel or Lime to route their downloads.

    • Marek says:

      Christmas Crackers… you might want to do a little homework before making such comments as I founded and successfully ran one of the largest online ecommerce companies before selling out to Western Union a decade ago. I also founded and sold three companies to eBAY all of which were ecommerce related and hold a number of patents related to internet security and ecommerce…

      But, to answer your question. Apple charges 99 cents for a song (plus 9 cents sales tax) built into the price so they net 90 cents on the transaction… whereas under my proposal thier net per song would be 95 cents – thereby increasing thier bottom line by $100 million a year- but more importantly, it gives them a price advantage if they’re willing to forego those increased profits they can pass the savings on to the consumer.

      As for network issues, the servers don’t need to be located here in Cayman. In fact, we could lease thier existing infrastruture from them… all perfectly legal.

      By the way, that four cents we charge would generate $80 million a year in fee’s and that is … a lot of crackers.


      Kind regards




      PS:  To answer your second question about why they don’t just set it up themselves. It is exactly because they don’t own and operate the business that they enjoy the tax advantage, if they set it up they might well be challenged for tax issues.

  4. CaymanStoryBooks says:

    My business is only online and is publicised by word of mouth and by marketing my website.  Setting up to receive online payments has been an absolute nightmare for me!  When I did find a gateway willing to accept my transactions, the cost was astronomical.  While I agree that the potential for fraud is HUGE, I agree that it is time for local banks to step up and totally disagree that e-commerce is solely for the big players.  E-commerceis what levels the playing field and allows competition with those big companies and millionaires!

    To answer CIShopper, if I could make online payments, I would order flowers, books, makeup, clothing, fruit baskets, furniture, wedding presents, renew my post office box, ink for my printers, stationery, electronics, pest control services… and lots more.  Then I could actually eat lunch during my lunch break!

  5. Marek says:

    Hi All;

    Decent article and replies. World wide online merchant accounts are vast to be sure but Cayman has some limitations, those being.

    Pretty much everything we sell is imported and has duty applied on landing, we then have two outbound problems those being the shipping costs and the duty for the purchaser.

    I used to be ‘very’ involved in the online ecommerce/internet payments business.

    I think you would find that the vast majority of online purchases are made from etailers that are either or both … not offering the goods at the retail level and/or are more than fifty miles from the buyer.

    In that we are such a small island, I don’t see the need for etailing. If I want a TV, I can drive to the store, pick it up and be home within an hour… so using an online option doesn’t really work.

    Likewise and as mentioned, selling good to people elsewhere in the world also does not work because we can’t be competitive on price.

     However, online bill payment is an excellent and perfect use. I think you can TopUp from both LIME and Digicel online…

    Writing an interface between your online program and your merchant account, is quite easy. If you spoke with CNB… obtained a merchant account and explained that a portion of your sales would be coming from online … there are a number of software programs that allow you to interface your point-of-sale terminal with your online system.

    Fraud, is ‘absolutely’ a major problem. Both you as a merchant and your merchant bank need to be very aware that there are some amazinly good scammers out there who can and often do take companies for millions of dollars before they even realize what has happened.

    Having said all this, there is nothing to prevent any local company from setting up a US based paper company in Miami,having merchant services and processing payments. There are no tax implications to this if it is structured properly.

    My final comment and somebody sort of touched on it above. Cayman has an amazing opportunity (absolutely amazing) to become an offshore sales center for service based sales, there is however something in the way and it is the bandwidth.

    Globally governments are scrambling for revenus, in the US many states and the federal government are imposing sales tax on online organizations (this taxis the difference between being competitive and the buyer going elsewhere).

    Amazon, Microsoft and Apple have all recently been faced with this. Local state governments have for one reason or another deemed them to be ‘present’ in thier state and therefore subject to sales tax.

    Go to Apple site order a computer online, delivered to FL and you will be charged sales tax – even though Apple is in California. HOWEVER… go to an individual merchant in California and make the same purchase delivered to the same address in Florida and NO SALES TAX…

    That’s because the state has deemed Apple to be ‘present’ because of their retail outlets. Likewise Amazon has that probem because they have affilates who are local in each state.

    Now, consider iTunes with $1.7 billion in sales. This is an intagible item (software), ebooks, Microsoft… etc…

    Currently I would hazzard a guess that the top ten major players in the US sell upwards of $25 billion a year in software and intagibles that they charge sales tax on.

    Those operation can be located in the Cayman Islands (legally). It would be so easy it makes my head spin with the possibilites.

    I could contract with Apple to buy their iTunes for 95 cents (they sell them for 99 cents). They could make me thier exclusive distributor and all sales would be conducted via servers in the Cayman Islands… that makes each song 8 cents cheaper for the consumer. Laugh if you want but they are on track to sell two billion songs this year. What’s four cents … times, two billion.

    This iswhere Cayman could be a global leader, rivaling our offshore banking.

    Ponder dat !!!


    kind regards






  6. Anonymous says:

    It would be better if we could shop on Sundays and not beripped off bymost of the stores with their huge mark ups on outdate goods.  I shop online a great deal – to order goods in from abroad.  I have commitments on Saturdays and dislike being ripped off. 

    • noname says:

      I absolutely agree with this – we should have Sunday trading laws allowing the stores to open, say, between 10 am and 4 pm.  As I am out of the house working from 7 in the morning till gone 7 at night, Saturdays is the only day I can do the supermarket shopping.  I suspect there are many many many people like me and this would explain why the supermarkets are so packed on a Saturday!

      But I still would like the option to buy online or at least peruse their product line and prices!

  7. Anonymous says:

    Back in the UK, you could buy anything online which is great if you didn’t drive and needed to buy larger items or even if you were unable to get out.

    I used to do my grocery shopping online, it saved a drive to the supermarket and a couple of hours walking up and down aisles. You go to the online store, choose all of your items, book  adelivery time and sit back and wait for your shopping to be delivered to your kitchen. This used to saveme hours a week. It would be even better for the disabled or people without transport who have to cart their shopping home on the bus or by taxi or who steal the trolleys to walk home.

    Other services such as car insurance quotations could be dealt with online and save having to visit the offices in person and sit through a formal meeting just to renew your car insurance. That is such a waste of time.

  8. Anonymous says:

    This system works perfectly in many countries.

    I invited a friend to visit me from Peru some time ago. She left her son in care of her younger sister in Peru. While here she communicated with her home in Peru by MSM.  Whenever her family needed groceries they gave her the list by MSM. She then placed the order with her Supermerket in Peru on-line, and the Supermarket then delivered the items to her house.

    She had full control of her families needs in Peru while she was here in Cayman, This did not only apply to Groceries, but she also paid her utility Bills and other necessities all on-line.

    The beauty of the internet is that she could sit at my computer here in Cayman and see and relate to her family in Peru almost as if she was in her own home in Peru.

  9. Anonymous says:

    Great idea for people who don’t have time to shop or do not feel like dealing with traffic to go to the store to purchase the items.  The majority only have one hour lunch or saturdays to go shopping, so I think a lot of people would benefit from this.  Also persons who are unable to leave their house for different reasons.

  10. Cayman Offline says:

    Great article! I would however like to extend this further. If we can get comfortable with the fraud / antimoney laundering checking – why not offer to be the headquarters for online operations? If a Company manufactures an item in South America and sells it online around the world, why couldn’t Cayman be the headquarters for this entity? In tough times – we should be looking at new opportunities.  Except for online payment capabilites, we have all of the other requirments -favorable tax situation, infrastructure, etc.

    I am involved with an online Company that is headquartered in Cayman. Trying to set up a payment system was a nightmare. I talked to local banks who were not interested and assumed it was pornography or gambling – which it is not. I talked to Paypal that you can make payments with, but cannot receive them in Cayman – they mentioned that they wanted to be available here, but had resistance from our government / regulations (I do not know if this is a fact or not). I talked to other online payment providers who did not offer services in Cayman. I heard of a couple of possibilities for Cayman – but these were too expensive and you needed to be doing business here. What did we end up doing? We incorporated a subsidiary in another offshore jurisdiction whose sole purpose was to process online payments – and are still considering moving all operations there for this one reason!

    To get things moving – I think a first step would be to talk to some of the large players – Paypal, Worldpay, etc. and figure out what needs to be changed to have an account here. In the end – these systems are linked to Cayman credit cards – so presumably, you have already been vetted when you opened your bank account.  I think the first Bank to do this will be surprised as to how fast new quality business comes in!

    I am glad the door has now been opened for discussion of this item – thanks to the Author!

  11. CIShopper says:

    I guess I never gave this much thought because Cayman is so small…why do I need to buy online from Store X when its literally no more than 15-20 minutes from my house? 

    For those in the know, could you provide some examples as to how on-line shopping in Cayman is in demand?  Besides paying my bills on-line, I cannot think of another instance that I would want this service. 

    Even though we are a leading financial centre, it relates to big companies and millionaires, not regular ol’ me so I don’t necessarily agree that we have the demand for such advanced services but hey, what do I know?

    Interesting topic!!!

    • Dennie Warren Jr. says:
      e-Government.  Below are a few things we could use online payments for:
      • For any kind of license – Trade & Business, Drivers Licenses, Security License company and guard licensing…;
      • Police Records…;
      • Birth, Marriage, Death Certificates…;
      • Customs duties on Imported Goods at the airport…;
      • Speeding tickets, other fines and court cost…;
      • Renewal of vehicle licensing – for example, after having your car serviced, your mechanic could provide you with a Vehicle Inspection Certificate. You then submit the certificate number to the Licensing Department website along with the insurance details and pay online;
      • Apply for and renew postal boxs rentals;
      • Register your children for entry into a public schools and pay book fees…;
      • Your architect could submit house or other development plans to the Department of Planning and pay online;
      • Certified electronic or paper land registry documents from Lands & Survey;
      • Electronic submission of advertising to Radio Cayman;
      • Donations to the Blue Iguana Recovery or other such programmes; hurricane relief efforts;
      • Purchase and print information from the Economics and Statistics Office;
      • There are many times when representatives such as lawyers and brokers will act on a customers behalf and use these online services to improve the overall quality of service to us the customer…
    • English Ex Pat says:

      Store X might be literally 15-20 mins from your home if you own a car, but many of us dont, so Store X now becomes 40 mins away if you factor in waiting and bus times!

      Also (for those of us living in BT and more easterly districts), as many stores are now located down West Bay Road, make that two bus journeys and 1-2 hours to reach!

      In England most business trade both online and offline.  However, in Cayman, if you visit someones web site, for the most part you will see the same advert that business post in the newspaper – you cannot flick through their product catalogue or see their prices, which means once again (in my case) hop back on the bus and go all the way to the store only to find they sold out or no longer stock the product?  Online shopping would save me the journey!  Also in England, a great number of us do our supermarket shopping online and the stores deliver to you within 24 hours of making your order – this can help substantially by reducing traffic congestion on the roads.

      If you could select and buy your products online, and have them delivered, you are saving time, energy and costs, at the same time helping to alleviate the traffic problems on the island…

  12. Anonymous says:


    Please  – get it together Cayman!

    For far too long this discrepancy between our world-leading financial center status and our local on the ground primitive banking/retail practices has been happening.

    Yet we wonder why "our people" are lagging behind in certain areas?!

    Online business is simply the standard every where else in the world  – even Africa and Asia (no offence – you know what I mean) has leap-frogged over us in this regard!

    It is truly a shame what we do to ourselves! Considering our otherwise trend-setting (sub) industries we should really be ahead of the game  – just think about it…we provide a perfect environment for innovative banking / retail practices.


    P.S. The final piece of the puzzle is to organize a super-efficient yet reasonably priced logistics company. You know  – one that wouldn’t charge $75 for delivering a digicam to one’s address.

    Partnership venture anyone??

    P.P.S. Does anyone have knowledge of "Paypal’s" policies in regards to C.I. Are our banks allowed to be added to their website and receive funds?

    P.P.S. To whom it may concern – when developing an e-retail service please do not assign an overly localized name! It hampers the expansion to other markets.

    CNS: We’ve added the part about Paypal. Sorry that was left out originally.

    • Caymanluvr says:

      Who dat is – we’d be interested in a partnership, actually been thinking about this for some time…