Banking innovation: Key to improving financial well-being

Dmitri Dawkins, Commercial Director, MC Systems, believes smaller financial institutions need to invest in innovation and improved service delivery to lower the barrier for financial adoption and inclusion.

Dawkins said that currently, large banks have a competitive advantage because they can afford to invest in technology and digital channels; however, credit unions, microfinance institutions and others could provide better experiences with the right technology.

The fintech expert believes that in order to improve financial well-being, more Jamaicans need to be aware of the digital services that exist, in order to enjoy better banking experiences, which will eventually lead to personal financial growth.

CYCLE OF MISTRUST

“Lack of public awareness of financial products is the number one threat to financial inclusion, followed by negative public perception and common mistrust,” Dawkins underscored.

“To break this cycle of mistrust, banking services need to innovate more speedily, to maximise customer convenience, as customers require the use of financial services across multiple locations. Customers also need to be educated about the benefits of technology and how it can build, as well as improve, relations with their financial institutions,” he added.

He stated that small financial institutions, such as credit unions and small banks, have an opportunity to compete effectively and “perhaps even more successfully, given their smaller customer base and their ability to offer an experience that is more personal and customised”.

He said bank fees are also directly correlated to the efficiency of banking operations, which include the percentage of the population that is unbanked and under-banked.

“What this does is create a chicken-and-egg scenario for customers who want best-in-class service, but often, financial institutions aren’t large enough to cover the cost of service, requiring significant growth to offer this experience. This needs to be fixed, and options are available through automation and fintech technology tools,” he added.

The commercial director for Phoenix International – a core banking platform owned by MC Systems, a member of The Jamaica National Group – pointed out that one of the misconceptions about the banking experience is that most customers have a negative feeling about banking fees.

“People do not change their behaviour, type of account or bank to avoid fees, because they like the convenience,” he affirmed.

BANK FEES AND SERVICES PROVIDED

He added that the number one beneficiary of bank fees are customers, who benefit from the services provided. He argued that if the bank did not deliver services as promised, then it would fail, and customers would switch to competitors.

Dawkins explained that the Jamaican public, overall, also greatly benefit from high bank profits via corporate income taxes, which are collected at 33 per cent as a regulated entity versus 25 per cent for other companies. He said pensioners were the third-largest beneficiaries of bank profits, benefiting from consistent dividend income, and capital gains. Pension plans, including the National Insurance Scheme, are major shareholders in publicly listed financial institutions.

COVID-19 AND DIGITAL TRANSFORMATION

Dawkins stated that the COVID-19 pandemic has been an effective path for a stronger shift on experience and digital transformation, which was previously only being implemented piecemeal.

“It has now found impetus with the sustained restrictions on gatherings and demands for safer ways of doing business,” he stated. “‘Adoption hesitancy’, which many larger banking institutions faced towards the digital technologies they had invested in and deployed to reduce customers’ need to transact in-branch, is abating as the perception that they are necessary to achieving a new form of normality takes shape.”

“Globally, as more persons in societies where a large percentage of the population is either unbanked or under-banked gain access to financial services which are convenient and easy to use, there is generally an uptick in financial well-being. I am confident that as more Jamaicans are educated about innovative banking products and its importance in daily life, more will begin to see financial institutions as a utility, rather than a chore,” he said.

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