Jun 2010 Financial News

Customers spur bank competition online

Jun 25, 2010

Customers and cost of operations have spurred banks to compete online as the effects of internet and mobile penetration and the game changer that is the Jamaica Debt Exchange (JDX) force innovation and efficiencies.

The JDX, which saw the government exchange its high interest bearing instruments for those with lower yields and longer maturities effectively reduced the financial sector's reliance on the repo model as a source of income. Innovations had to be found to offset the losses resulting from the JDX.

Additionally, reduced income necessitates reduced cost of operations and better service to attract customers. Fortunately, customers have not only been telling the banks what they want, but what they want coincides with better efficiencies and financial institutions are developing new products and services that add value for customers.

Customers are demanding more convenience in banking as internet and mobile penetration grows across the island. More institutions are therefore finding ways to reduce costs, improve service delivery and differentiate their products and services by making use of electronic channels.

For many years there have been online systems. But these have for the most part been engaged by commercial banks which offer customers the chance to pay bills, check balances and make inquiries online.

Commercial banks such as RBTT, National Commercial Bank (NCB) and Scotiabank all have online systems that customers can utilise to access accounts. However Scotiabank recently raised the ante with its Scotia Mobile banking system, through which customers with web-enabled mobile phones such as the popular Blackberry or iPhones can do everyday banking activities anytime, anywhere.

The service enables customers to check account balances and transaction details, view credit card and line of credit balances and payment information, pay bills, and transfer funds between accounts. Hughton Leslie, manager, non-branch sales and service at Scotiabank said the Scotia Mobile system was a strategic move by the institution spurred by customer demand.

"This is a strategic move by our bank, and it was done primarily to create better convenience to customers as well as to reduce our cost of processing transactions. It is a win-win strategy," Leslie said. "We think customers will love it, as they have been asking for mobile banking for some time now. We just need to tell them about it and they will utilise it," he said adding that the convenience factor was a major benefit to Scotiabank's customers- and to the bank. "While there is an initial capital cost to develop these services online, the long term financial benefit far outweigh the initial development cost," Leslie said.

The securities sector is not to be left out of the fray with Barita Investments Limited this year launching its 'Barita Online' web service, which offers Barita's customers a place to securely view information on their accounts 24 hours a day- an offering that was not made available by company in its over 30 years of operation in Jamaica. Chairman Rita Humphries-Lewin described it as an "improvement of operational efficiency". Ian McNaughton, GM, Barita added that it was also a response to client demand.

"Surveys done with our clientele and target market indicated to us that being able to access account information at any time was vital to our clients," noted McNaughton. "Value added services are critical in maintaining our competitive advantage so having an online service was a clear tactical move for us," he said.

McNaughton disclosed that the online system has already improved the efficiencies of the company, which made a 10 per cent increase in net profit last year despite the financial crisis.

"Clear benefits include reduced call volume to our offices which have allowed our team members to focus more on sales. Clients are also able to make faster decisions regarding their portfolios," McNaughton said.

He added that the service, which was launched in April 2009, has been a "major attraction" for new clients opening accounts with the securities dealer. "Our clients have responded favourably to this new offering," he said.

First Global Bank's (FGB) online banking portal 'Global Access' could be described as the mother of all online systems locally. Global Access, launched in March this year, took online banking up many notches by facilitating funds transfers by customers of all financial institutions, including FGB, offering international funds transfer and cross-currency transfers between accounts, and online cheque and draft ordering.

At the launch of Global Access, Dalton Fowles, FGB's assistant vice president for e-business said the facility would not only offer convenience to customers, but reduce the cost to FGB of processing transactions in branch.

Paula Barclay, VP retail banking at FGB told the Caribbean Business Report (CBR) on Tuesday that Global Access has "exceeded expectations" as customers are "expressing a high level of satisfaction". "The most popular features are ACH transfers, that is transfers to other local banks and wire transfers," Barclay said.

She noted that even though competition is growing, FGB's Global Access has still not been surpassed in terms of service offering by competitors.

"We have set a new standard and expect other banks to attempt to catch up. However, we will stay ahead by remaining close to our customers, providing unmatched intimate customer care and listening keenly to their concerns so that we can develop superior understanding of their needs," Barclay said.

"You can expect further improvements in our service delivery channels and product benefits in the months ahead."


Source:
By Alicia Roache
Jamaica Observer
Friday June 25, 2010

http://www.jamaicaobserver.com/business/Customers-spur-bank-competition-online_7743384