Jun 2016 Financial News

President of BATT: Banks must change to stay relevant

Jun 30, 2016

Bankers Association (BATT) president, Darryl White, says banks must change in order to remain relevant and to be able to cope with factors in their external environment. On Monday, members of the profession launched Banking Week signaling there was need to make technological changes to their operations.

White said banks operating locally must adapt to changes in technology and customer demands while, at the same time, cope with challenges in global economies and the shortage of US currency and contraction of T&T’s economy.

Thursday’s vote by British nationals to leave the European Union is one factor which may impact the banking sector. White said bankers continue to monitor the impact of that development.

“I don’t even think that Britain has the answer to that just yet. Markets have reacted instinctively, and it tells you that we have gotten into an unknown space and what happens next, no one knows.”

He also questioned whether it would become a new trend to have other members of the EU do similar to what Britain did.

“Will that become a new tide where you are finding a disaggregation of markets instead of aggregation of markets? Those are the million-dollar questions. Then it brings me to things like trade treaties and relationships and how far international law and banking activities go as well.”

Referring to the banking sector in T&T, he said there has been a lot of “disintermediation” taking place and this could determine the trends for the future. Asked about the demand for sterling (pounds) White said the demand for it would depend on what consumers would want to use it for. Adding that it depends on the “strength of Britain and their trade ties and the products that they buy and exchange with the rest of the world and, in the end, it’s what would determine the demand for the currency.”

White added that a bit of speculation is taking place in the market internationally, describing such behaviour as “normal” in circumstances like Brexit. What is clear, he said, is that with the drop in the value of the sterling since the referendum, the transition out of the European Union for Britain is going to be tough.

He declined to speculate whether there would be further decline in the value of the sterling saying that a one-day downward slide in the value of the currency cannot determine whether there would be continuous decline.

White said change has to come through adjusting the type of technology that banks use so customers can achieve their banking needs.

“People keep asking about first-world banking services because that’s what they like. Now with the reality of mobile banking, mobile Apps, online banking, banking anywhere 24/7 access, we are going to get to the point where people are going to be doing applications online and, hopefully, we are going to have a proper credit scoring system that makes the speed of credit approvals faster.”

Adding that it is all about convenience and reaching the customers more, “this means shifting from the customer coming into banks to get service to taking service to the people.”

US currency

White said demand for US currency has “deepened a bit” but as far as he is aware needs are still being met.

“If I am to be guided with what I am hearing anecdotally, they are saying that containerised goods on the port have dropped somewhat. This suggests a tempering of consumer spending, all these things rely on foreign exchange.”

Concerning credit cards, the bank is seeing “a lot of spend” on these cards which is where people access foreign exchange. He warned the public about getting carried away on the cash aspect of their credit card to obtain US currency.

“I try to explain to the public we have a little bit of cash. We don’t manufacture US dollars in this country. Cash is also very expense to carry. There is not an unlimited supply of cash but you can access foreign exchange in many different ways.”

Giving an update on the proposed seven per cent levy to be attached on online purchases, White confirmed that bankers have had consultations with Finance Minister Colm Imbert.

“He (Imbert) has gone back to the drawing board as it stands. We have provided the information he has requested. The ball is with the minister in terms of how he approaches it. I believe he has ideas on how it can be done.”

Changing the way we bank

Anya Schnoor, managing director, Scotiabank, said banks in T&T are faced with the challenge of increased financial technology firms or fintech firms. Fintech firms, according to Schnoor, are firms whose products or services are built using technology.

“Fintech is changing banking as we know it. It is just like the Internet changed the written press and the music industry. Fintech is already impacting how increasing numbers of individuals and businesses alike conduct their financial matters.”

Some of the services that fintech has focused on include: money transfers, equity funding, personto-person lending, mobile payments, trading platforms and banking the unbanked which is encouraging customers who live in the remote areas to bank. This trend of emerging fintech companies, she said, is causing banks to become worried because ‘the real worry comes from what fintech could do to banks’ market share in the future.”

The growth of fintech is “unstoppable,” she said, and this means that banks need to adapt.

According to Schnoor, since 2008 global investment in the fintech sector has tripled from $928 million to $2.97 billion and is projected to climb to $8 billion by 2018.

With the need to adapt to change in technology this has not phased out the traditional banking at all. Regulation of the financial sector is therefore important, she said.

“It is critical that, locally, we review old outdated laws on the books which hinder access to financial services and prevent the implementation of new technologies which can reduce costs to the consumer.”

Regulations should not only apply to existing players in the financial sector but to new entrants too, so “as to prevent the possibility of regulatory arbitrage and the ability of startups however noble their intentions to create negative issue for the financial sector.” This year’s banking week is from June 27 to July 1.

 

Source:
NADALEEN SINGH
nadaleen.singh@guardian.co.tt
Business Guardian, BG7
Thursday June 30, 2016