||Last Updated: Feb 9th, 2022 - 02:05:05
What has happened over the past three decades with commercial banks and near banks is nothing short of rape of the banking public, aided and abetted by the regulatory authorities, under the guise of free market capitalism and anti money laundering initiatives.
The collapse of the financial sector in the early 1990’s primarily due to astronomically high interest rates (in defence of the Jamaican dollar) and blamed on loose banking regulations, have led to bad outcomes.
For one, it eroded the bank manager and customer relationship and replaced it with know your customer (KYC) tick boxes, myriad forms, and the over centralization at head office. The increased use of technology has further distanced the customers and COVID-19 presented a perfect excuse for physically distancing (social distancing) from the holdout customers.
Online banking and automatic teller machines (ATMs) were initially presented as freebies as it saved banks costs by staff reduction and permanent branch closure; the infrastructure costs for online and ATM were one-time non-recurring costs with low variable cost (maintenance).
Another downside was the cartelization of foreign exchange trading. These authorized dealers were licensed to scalp the public on the spread between the buy and sell exchange rates (approx. 4.5%), and if that was not sufficient the arbitrary 2% of deposit fee on cash deposit above USD 500.00 per day when there is already a differential in rates with cash and cheque deposits (over 10%). It is a lame excuse that it costs the banks to ship foreign exchange cash overseas. Even a cheque deposit that clears the foreign bank in 4 days is unavailable to the customers until 15 days after. The case of remittance is highway robbery, with fees and disadvantageous exchange rates, there is no good reason why customers cannot receive the funds in foreign currency if they so choose.
Although permitted for commercial accounts, individuals are blocked from receiving incoming foreign currency in their local foreign currency accounts. Outgoing foreign currency wire from a local foreign currency account is an in-branch service that requires completion of a form that is not even available on-line.
The daily and monthly transaction limits on withdrawal arbitrarily set by the commercial banks at the ATM is ridiculous, for with this the number of free transactions is quickly exhausted and a flat fee of between $25.53 to $42.61 plus GCT is charged. On top of this, the ATM is set to dispense only thirty bills at a time and at some institutions the customer cannot choose the denomination of the currency. So while the customer is restricted at the ATM there is a punitive fee plus GCT for in-branch withdrawal.
Use of a non-proprietary ATM carries an extra charge as each institution claims their cut so the customer effectively pays twice for one transaction.
Maintaining a minimum balance saves the monthly service charge but the number of transactions above a limited threshold carries a fee plus GCT.
Cheques drawn on a customer's account in excess of $1,000,000 attract a fee plus GCT, so it introduces inefficiency by encouraging the splitting of payments or use ACH and RTGS for $17.17 and $173.00 respectively plus GCT.
Payment of National Commercial Bank (NCB) credit card is set up as a bill payment service so even when it is paid from an account with the said institution it counts in the limit of free transactions and earns them a hefty fee of 0.68% plus GCT.
The unbanked are really the unwanted. Financial institutions are no longer financial intermediaries; they are printing presses. The constant harassment for complying with this and with that is unbearable and is meant to weed out unworthy (unprofitable) clients. Opening an additional account at the same branch is not offered online and requires the same application process over again.
Customer contact centre is a misnomer, customers are treated as a nuisance and it’s close to impossible to make contact with the centre (or home branch).
Each and every branch is run as a profit centre and those that don’t make the cut are closed. This has partly led to the development of micro financial lenders to serve the unbanked, so the whining starts and the government jumps to aid of banks by introducing legislation to protect the unwanted from so-called predatory lending. NCB in the meantime has partnered with at least one micro financial institution (MUNDO Finance) to get in on the act.
Credit rating agencies
The financial institutions have under-utilized the credit rating agencies they clamoured for a few years back, now they want ‘open banking’, ‘fintech sandbox’, ‘NIDS’ and GOD knows what else. Forget the “pet projects”, there is enough proven technology out there to enable better service. In more competitive economies there are free payment services like Applepay, E-Transfers etc.
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