Regional banks risk losing customer base if they do not adopt innovative services, like mobile phone banking and investment advice, in the changing customer demographic bankers heard at the CAIB Conference on Wednesday.
John M. White of the IBM Institute for Business Value described for bankers where banking was today and where it will be in 2015, under the sub-theme: ‘Innovative Product Development, Services and Marketing’ in the broader Conference theme ‘Defining the market space’ at the 34th Caribbean Association of Indigenous Bankers (CAIB) Annual Meeting and Conference which ended on Wednesday.
White said banking in 2015 will see customers taking charge, specialization will be imperative and innovation will become the path to growth as customers will be seeking products and services that are more asset based, like investment strategies.
Customers are fragmented, as people travel more, stay in school longer and families change. So, in today’s environment where services for the masses would include savings, chequing and debit cards, in the US and Europe it is more expertise based, that is, advice in planning wealth management.
The banking environment today consist of large banks, credit unions, community banks, mid-tier banks, small banks, specialist and non-banks, like finance companies, mortgage companies, insurance companies, pension funds and investment banks.
By 2015, he predicted, large banks like the London based HSBC, that offers banking and non-banking services in over 83 countries and territories with 10,000 offices will remain, because of their large asset base. Community banks and small banks because of their cultural links and relationships will also still be here as well as industry specialists and non-banks because of their focus on specific niches, but the middle banks will be squeezed out.
Customers are looking for new ways to do business, according to White and will want services that can meet their needs; they are not concerned with formal banking models. As a result, technology like PayPal, Globe GCash (paying donations, bills, shopping and sending and receiving money over mobile phones) and Prosper among others are taking root. Persons using GCash can made payments through text/SMS, while PayPal allows payments and money transfers to be made through the internet and serves as an electronic alternative to traditional paper methods such as cheques and money orders. Prosper, America’s first people-to-people lending market, allows persons to lend and borrow money online.
Commercial banks were said to be concerned about these developments because they exclude banks and have implications for the future.
White said bankers needed to make a concerted effort to promote innovation and should let their employees know that innovation will be rewarded.
In an interview with Stabroek News, White explained that Caribbean banks were at the same point in innovation as many of its counterparts around the world: trying to understand how to deliver products to customers in a way that makes sense. In this regard, he said, mobile banking was the way for the future.
Earlier this year Demerara Bank launched online banking and last year Republic Bank introduced store value Visa cards, followed by the Guyana Bank for Trade and Industry (GBTI). However, White pointed out that e-banking has been slow to take off because a lot of people do not have access to computers, unlike in Europe and North America where employees can access their accounts at the work place, but a cellular phone is more accessible.
Canadian HIPNET Inc Founder and Chief Executive Officer Herb I. Phillipps Jr also encouraged bankers to look at collaborative approaches with mobile providers, for example ‘top-up’ services. He give the example, where at 3 am, a man in one of Jamaica’s party districts wanted to buy a chicken meal, but had no money, so the vendor asked the man if he had phone credit, since he was out of credit himself, and offered to swap the man’s phone credit for the meal.
Ansa Merchant Bank Limited Corporate Manager-Private Portfolio Nigel Edwards in his presentation ‘Developing and Marketing New Products and Services in the Caribbean Financial Services Sector’ recalled that the Caribbean has gone through phases of privatization in the 1980s, recovery and restructuring in the 1990s and from 2000 growth and technological advancement.
He called for a shift in the mindset of the region, in relation to payment for ‘advice’.
“The most valuable thing we have to offer is our advice,” according to Edwards, noting that our product offering needs to supplemented by our advisory services. In the Caribbean context, he explained that “it is not that people do not value advice they just do not want to pay for it.”
Value-based advice services such as taxation, lending, acquisition; financing and regulation can be developed.
He mentioned that challenges such as reaching critical mass to benefit from scale of economies and lack of liquidity existed. Competing imperatives for banks include a one-stop-shop to fulfil all the needs of customers under one roof and a strong brand was cited as crucial to attracting and retaining customers and growing product sophistication.
The implications of this will be collaborative approaches amongst niche providers and international and regional partnerships to fill out product offering.
