The world of internet and smartphones enables a pleasant shopping experience. And even logistics – although mostly each store is handling its own deliveries – is doing well. It’s the payments which should be facilitated by the financial infrastructure in the Caribbean that still don’t appear to get off the ground. Online credit card solutions are too expensive for stores who’d rather put the 2%-5% costs into logistics to keep delivery to customers free or cheap as much as possible. This means that banks must find other venues to facilitate low-cost digital payments.
Niche players are entering the market with crypto or e-wallet solutions. But the Caribbean reality is that consumers and storeowners still prefer solutions offered by the banks that they know on their specific islands.
Why is it taking so long?
Banks are traditionally slow institutions. And many island-banks could still be considered old-fashioned “moths” rather than agile “behemoths” (pun intended). The gap between what both retail consumers and corporate clients expect from banks in the Caribbean is becoming wider. Overburdened KYC and Compliance procedures, tediously long credit processes, semi-automatic operations of all sorts, all make our relationships with banks very stressful. Unlike banks in mature markets that have migrated to adapt to the customer and its experience, Caribbean banks require customers to simply fit into their own monolithical structures. In the Caribbean we still face branches with waiting lines. Try to explain that in North America, Europe, or Australia !
Our Caribbean banking culture and the quasi-monopoly of players within the sector, Central Banks that are cautiously holding-back a bit too much with regard to opening-up the financial sector and allowing-in new concepts and disruptive models, are the most obvious explanations for why it is all going so slow and taking so long. But Covid-19 is also having and impact on banks. And this impact will push the changes required forward in an accelerated fashion.
Consolidate your banking relationships
The Covid pandemic has been signaling a rapid consolidation of consumers with their multiple banks and bank accounts. Fewer banks and accounts, with a much clearer use-purpose are the key determinant. A recent Oliver Wyman study about post-Covid banking revealed that about 86% of banking leaders are signaling accounts and relationship consolidation. And banks that are able to virtualize their products and services rapidly, including digital advisory (via app, chat or traditional online), are gaining the upper-hand fast. In the Dutch Caribbean it is clear that the largest bank player has been going down this route in a well-defined and strategic approach. Seamlessly integrating all solutions in one platform where customers can choose their most preferred channel and best product solutions. Certain problematic and negative events with other banks have further accelerated consolidation, especially toward the dominant institution on the ABC islands.
Banking staff skills are falling behind
All entrepreneurs know that you don’t need the best systems and processes if you have good people. Besides, you’ll perfect your IT and processes as time goes by, your company grows, and you have more money to invest. Because technology enablement costs a lot of money.
Caribbean banks with visionary leadership or large foreign owners have generally delivered the tech promise. Their staff has been continuously challenged to keep up-to-date. But banks with a more traditional or bureaucratic mentality toward products, service and the way to treat customers have fallen behind. And with Covid they have fallen “way behind”.
Covid has challenged banking operations worldwide into an adaptive work mode. Suddenly staff had to operate remotely, from home. Using the available technology at hand, and leveraging the bank’s system remotely as well.
Smart staff can work around deficient or even inefficient processes and technology of their banks. “As long as I have a connection, and a way in, I can manage the rest”. These employees have made their banks survive and even thrive in restrictive times. It has also enabled the banks to select their employees for the future, and filter-out those that are insufficiently adaptive, or simply made bad use of the time at home. And, then there are the banks with command-driven and hierarchical structures. A bureaucratic mentality. These have been unable to keep customer satisfaction sufficiently afloat, and are seeing their market-share shift towards the more nimble players that have been able to reach-out to customers during the difficult lockdown phase. It’s not just about the loan repayment waivers, because all banks have done that. It’s about the way banks have kept their relationships with customers.
Resilient banks and alternative models
If you are looking for clarity with regard to which banks you must select, if you want to consolidate, there are a few simple triggers that can provide guidance. Working with cloud technology is a key indicator of how tech resilient your bank is. It’s not easy for a novice to determine this. And not a common question to ask your virtual relationship manager either. So look for the way banks deploy new technology solutions, how they adjust and update them. With “cloud” I’m not saying that your personal data has to necessarily be “in the cloud”. There are all sorts of different data privacy rules surrounding this issue, and each country has a different view. But technology solutions rely on environments where they have to be built, tested and deployed. Banks that work on their own hardware (computers & servers) are slower and require more costly steps to offer their customers new products and services. And when these solutions have faults, it takes more time to correct them. Banks who design, experiment with (called gamification…), test and deploy using cloud technology and all sorts of other virtualized services like SAAS have a more digital and agile culture.
If you notice that your online or digital relationship with your bank is starting to show “behavioral” responses in the same way that Google seems to target you with ads related to something you recently searched, then chances are that your bank is using at least some basic Artificial Intelligence or “Big Data Analysis”. It’s a great tool to better tailor solutions for you, and it shows that your bank is cutting-edge. If the pop-ups, or proposals don’t seem to match at all, then your bank is probably faking it and using semi-automated or even partially manual approaches to marketing adequate solutions for you.
Finally another distinguishing factor is if your bank is experimenting with partnerships with fintech companies, and especially active in all sorts of payments services. Digitization in payments, e-wallets, cryptocurrencies, cheap cross-border payment platforms, integrations with digital solutions provided by Visa or MasterCard, for example, are all signs that your bank will be a great help to you for at least the coming 5 years. Rapidly modernizing and tech savvy banks are also leaving an attractive space for a more “slow banking” approach. It is a more efficient version of your traditional bank of today, with just the right level of technology, and generally a much higher availability of personal interactions. Especially credit unions have been working to occupy this space. These players are gaining market share with consumers over 50 years of age, or persons who ideologically search for the value of cooperative and more socially conscious banking. Modern credit unions tend to act “anti-cycilcal”, opening branches where others are closing, having more ATM locations, and being accessible for the human touch with extended working hours. Their solutions are less sophisticated in the virtual world and they may offer fewer products and services. Many consumers in mature markets are actually ending-up with one bank in each concept model. They genuinely want to feel that they are cooperating and collaborating with society at large and a more sustainable economy through a credit union or cooperative bank. But they also need the fast paced and more individualized solutions of a digitized and anonymous financial ecosystem.
In the Dutch Caribbean we have both flavors today, and very likely market consolidation and simplification may drive us to see even fewer banks and at most one relevant credit union. The big unknown is if banks from the Netherlands will enter our Dutch Caribbean airspace and be the drivers of even more modernity and consolidation by gobbling-up some local players.