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More and more banks are going digital and closing branches or switching to cashless. Scotia, NCB, CIBC, just some recent examples. But what does it mean for you and your money?

Well the push towards further digitising banks has been a long time coming. Most millennials prefer the ease of doing business online rather than taking a whole day off work to stand in line, but a number of older customers still prefer the personal interaction that they’ve grown up with. Today, however, with the COVID-19 pandemic, long lines and all-day banking trips are no longer seen as safe – especially for the elderly. So banks have pressed gas on their digital drive, forcing a switch from in-line to online.

Recently, Jamaica’s second-largest bank, Scotiabank, announced that it’s closing two branches next year – Black River in Saint Elizabeth and Old Harbour in St. Catherine. They’re also switching six other branches to digital-only, meaning they won’t be doing any cash transactions in-branch.  For that, you’ll have to use the ATM.

Now there were a lot of negative reactions when I Tweeted this #BreakingMoneyNews, so I invited Scotiabank Jamaica’s President and CEO, David Noel, on Taking Stock a few weeks ago, to explain. He defended the move by pointing out that people have been doing less and less in-branch transactions over the years. In fact, this September, he said less than 6% of Scotia’s total transactions were done inside its branches. 

David Noel, President & CEO of Scotiabank Jamaica

“Over the past few year’s we’ve seen a steady trend of a decline in in-branch transactions and in increase in digital transactions so many of your viewers probably do most of their banking online, do most of their transactions online; they don’t think of going in a bank to line up to pay a bill and so we’ve seen that trend happen over the last 10 years. Just 5 years ago you had over 30% total transactions happening in branch, that has been coming down steadily and online and mobile transactions use to be less than 10%. Online and mobile transactions crossed branch transactions in about 2017 so you basically had more online transactions than branch transactions. Branch transactions is now down to less than 6% so in some of our branches that we are closing, we’ve actually seen a 50% drop in transactions in a one year period but that trend started many years [ago], “ said Noel.

Of course, some of this behaviour change by customers can be attributed to COVID-19, since there’ve been limits on public gatherings and nightly curfews but Noel said that even before Covid, branch traffic had fallen by about half in some locations.

It’s not just Scotia.

Other institutions are also making changes to reduce in-house transactions. In September, NCB finally started allowing new customers to open savings accounts online.  And starting December, customers will also be able to manage their “standing instructions” online.  This means that you will be able to create recurring transfers or payments such as wire transfers, utility payments and third-party transfers to other NCB account holders. And this is great because it means there’s less need for you to visit physical locations during this pandemic and beyond.

Other institutions, like JMMB, have also been expanding their online offerings. At its recent annual general meeting, JMMB Group CEO Keith Duncan said the pandemic has accelerated their digitisation.

Keith Duncan, JMMB Group CEO

“Digital is going to be the new normal and drive in that experience. The upgrade to online banking has been very successful for us at the retail and business levels. ETMs (Electronic Teller Machines) converted to ATMs  (Automated Teller Machines); the Core enabling technology (T-24), we’re going to be upgrading that in the medium term; the Visa debit card service that we roll out; Online APO; we’re going to be building out more online and boarding channels, I think we’ve rolled out online chat already,” said Duncan.

Since the start of the year, JMMB has introduced new features such as online sign up for its online banking platform, Moneyline.  They also launched a Visa debit card, real-time trading, and are scheduled to begin rolling out intelligent ATMs by the end of the financial year. You’ll be able to make deposits and pay bills at these ATMS.  They’re also working to make opening an account online possible.

Mayberry Investments also sped up its digitisation plans by upgrading their app so customers don’t need to go to the office as much, especially since most of their staff are still working from home.

And of course, PROVEN Wealth has also been at the forefront of this digital push. Even before Covid, they launched their really cool app which allows you to access account balances, get alerts when a dividend payment hits your account, set watchlist alerts for stocks you have your eye on, and a bunch of other stuff. They also launched IPO-PRO, a one-stop investment hub to apply for IPOs.

But as I mentioned earlier, this digital transformation has been a long time coming, so the pandemic isn’t the only contributing factor.  It just sped things up.

So those are some of the positives. But these changes also have a downside.

First of all, people don’t like change. Especially people who’ve been doing things a certain way for a long time, such as the elderly.  It also means job losses. Scotia, for example, has closed 35 branches across the Caribbean. Back in May, NCB announced that it would be closing three of its locations, and focusing more on facilitating transactions through intelligent ABMs and drop boxes. And just 2 weeks ago, CIBC FirstCaribbean announced that it would be closing its Twin Gates branch on Constant Spring Road in St Andrew. That’s a whole lot of jobs.

We also have to consider the digital divide. How many people actually have access to the internet or smart devices to conduct transactions? David Noel mentioned that Scotia’s app is zero-rated, meaning you don’t use any data when you use the app.  BUT you still do need to have a data plan on your phone, which to me defeats the purpose.

Also what about the senior citizens who may not be so tech-savvy? The bank claims that many seniors have already transitioned to digital with the onset of the pandemic. But I don’t know because many of the branch cuts and cashless branches are within the farming belt – deep rural areas – spotty wifi if it even exists, and low levels of education as well.

 So, what does this digital transformation mean for you and your money?

 In Jamaica, it means that transactions within the six cashless branch locations will likely be faster. That’s because cash transactions, which still account for a good chunk of those long lines at the bank, will be eliminated. Instead customers can access cash outside at the ABMs. The bank expects that as a result, more complex transactions can be done within a given day. This is expected to be revenue neutral for the bank, meaning the earnings will balance out the losses.  It should also give customers more time for banking advice and financial solutions.

For investors holding shares in Scotia Group Jamaica, it should result in a more efficient bank, meaning revenue should remain stable but spread across lower fixed costs like rent and utilities, and lower staff costs. Unfortunately, like I mentioned before, branch closures implies job losses. Scotia’s stock price dipped roughly 12% for the latest quarter and its market value now hovers at $136 billion. 

Personally, I think this digital switch is a good thing, even with the job losses. I think where technology can be used to make systems more efficient, go for it! This frees up human brain power to do other things. For example, have you seen the historical film Hidden Figures? It’s about these three black women who were computers for NASA and helped to put John Glenn on the moon.  You heard me right!  Their job title was literally “computer”.  There was a time when a computer was a person, not a thing.  Their job was to compute – to do math all day.  Computers as we know it are so much more efficient at that though. 

Can you imagine buildings full of people all over the world punching calculators all day for basic stuff?  The work that computers do for us now, frees up our minds and our time to do other more productive and creative things. I think the same will happen in banking. If bank workers spend less time dishing out cash, which an ATM can do, they have more time to solve customers’ actual problems, which we’ve all complained about – having to wait forever for customer service or to get someone on the phone.

Categories: MoneyMondaysJA