What US Finserv’s Growth In Cuba Means For Corporates

On Tuesday (June 28), U.S.-Cuba relations hit another mini milestone following President Obama’s visit to the island in March, marking the first time in decades a sitting president had done so and pushing the U.S. forward in efforts to improve relations with the country. 

Since, financial services restrictions have also eased, and finserv players are slowly trickling into Cuba. These developments have caused a buzz with U.S. travelers looking to step into the once-forbidden country, and Florida-based Stonegate Bank amplified the chatter with news this month that it would become the first U.S. bank to issue cards that work in Cuba. 

But the sudden burst of U.S. finserv operations in Cuba, and Stonegate’s announcement, are beginning to spark chatter of a different sort.  

Stonegate’s decision included one small detail that could hint at something bigger: its rollout of cards for use in Cuba would include commercial and payroll cards, too. The bank’s president Dave Seleski recently told PYMNTS that the decision to include these corporate payment tools in its rollout isn’t necessarily a groundbreaking move – yet. 

“It’ll be small-scale, just like everything in Cuba,” Seleski explained of the business he anticipates from card use in Cuba.  

Initially, he said, travel to Cuba will be tourism-related as consumers entertain their curiosity about the country. But, said Seleski, “there’s no question” that corporate payments by U.S. professionals will also gradually heat up, with some corporations already holding small conventions, attracting business professionals and, with them, the need to spend corporate cash. 

The biggest area Seleski said he anticipates commercial card usage is in the hotel industry. Indeed, on Tuesday (June 28) reports emerged that Starwood Hotels & Resorts will become the first hotel conglomerate to operate in Cuba under a U.S. brand, Four Points by Sheraton, since 1959. Starwood will also be operating a state-owned hotel in Cuba. It signals an incoming demand for U.S. company executives to travel to and from Cuba, taking their corporate finances with them.

It’s also a move that could have significant impacts on the ability for corporate travelers to operate in Cuba (and stay in hotels there), in more ways than one. 

According to Seleski, American companies like hotels and airlines are readying to operate in Cuba. “They’re going to need some presence there – they can’t rely on Cuban nationals to run things,” he said. That means these companies will need commercial card and payroll products that U.S. professionals can use while in the new market. Plus, corporate travel is likely to rise as a result of U.S. firms’ increased presence in Cuba. 

Stonegate remains the only U.S. bank willing to issue cards that work in Cuba, despite MasterCard and Visa having allowed use of their cards there for some time. With the United States’ trade, economic and financial embargo staying put on Cuba, access to financial services across borders remains tricky. 

Even Stonegate’s modest rollout of Cuba-friendly cards has ignited debate. Reports Monday (June 27) said critics argue these credit card and hotel agreements in Cuba violate the existing embargo. 

But the financial services sector’s progress in launching business in Cuba continues forward. 

Separate reports Monday said financial institutions between U.S. and Cuba are boosting their cooperative efforts. 

“Until today, Cuba hasn’t been able to do financial transactions directly with U.S. banks, although we’re working together with several institutions to do it in the near future in a safe an efficient manner,” said Cuba’s vice president of its central bank Irma Martinez, referring to Stonegate’s bank entrance in the country. 

Starting this week, MasterCards can be used at ATMs in Cuba to withdraw cash – and that includes Stonegate’s cards. The bank’s Cuba banking manager, Tania Fernandez, recently told reporters that so far, about 500 of its Cuba-friendly cards have been issued, stemming mostly from both individuals looking to travel to Cuba as well as U.S. companies that are seeking to do business there. 

The gradual increase in financial services cooperation between the U.S. and Cuba, as well as the emergence of U.S. hotel names in the country, may eventually lead to a burst in cross-border business transactions and corporate travel. 

Until then, Stonegate’s Seleski admitted, progress is modest. 

“In the big scheme of things, are credit card revenues two years from now, is [Cuba] going to be 50 percent of our credit card revenues? Probably not,” he said. “It’s probably going to be small.” 

What’s important in this regard, however, is being the first to break ground in Cuba, which may open the floodgates for the finserv sector. 

“I think there’s a lot of pressure from technology firms and banks,” he said, referring to the demand for faster and more sophisticated development of financial services technologies. Credit cards may not be the most innovative tool, but it doesn’t mean they can’t prove innovative — and enabling their use in Cuba is an example, he added. 

“It’s a great opportunity for a bank to leverage existing technology without having to go out there and create their own technology to compete,” he explained. “I think there’s still the traditional credit card options on the corporate side, it’s a great cash management tool. We view that as being very important to our clients, and it falls very nicely into our Cuba strategy.”