Published On: Fri, Mar 17th, 2023

The future of banking

By Hilbert Haar

Digital banking is the future. No question about it, but where will this leave banking clients in St. Maarten? And where will it leave the traditional banks that are currently serving them?

Complaints about the way local banks are treating their clients are nothing new. They make it unnecessary difficult, if not impossible for some potential clients to open an account, their customer service to existing clients leaves at times a lot to be desired and transferring money abroad is usually a major headache. And I am not even beginning about the money the banks are charging for these inconveniences.

The Central Bank has now indicated that it welcomes the digital transformation of the banking industry. That’s nice, of course, but digital banking requires serious investments in technology and it is unclear to me which banks have pockets deep enough to finance such ventures.

This way traditional banks are caught between a rock and a hard place, if you’ll forgive me for using this cliché. If they are unable to invest in digital services to a level that satisfies their clients, they will go out of business. Sooner rather than later.

Why? Because the overhead is going to kill them. Traditional banks have buildings, they have utilities to pay for, security, tellers serving clients who have to wait forever in line for their own money – and so on. And if the overhead is not going to do it, the clients will, because they will no doubt move in growing numbers to banks that do offer digital services.

And mind you, there is still a difference between a traditional bank offering digital services and a virtual bank doing the same thing. Because virtual banks do not have to pay for expensive buildings and their associated costs, and they do not have as much personnel as traditional banks do. Traditional banks will never be able to beat the cost of doing business virtual banks incur.

The future for traditional banks in St. Maarten is therefore not looking good, whether they deliver outstanding customer service or not. This has to do with the scale of our community. Our banks will never be able to invest enough in digital technology. They will always be beaten by larger competitors that are not even on the island – like Revolut in the United Kingdom, or N26 in Germany. Opening an account with these banks is easy, as long as you are able to provide an address that meets their requirements.

The Central Bank has been receiving requests for the establishment of digital banks, but so far the market entry of these companies is in its early stages. I think this is going to be an uphill battle, while traditional banks just cannot ignore the rapidly growing interest of consumers in digital and virtual banking.

These developments have a downside because not every Dick, Tom and Harry is interested in digital banking. Some people will always need the services of a traditional bank. They want to go to a building, see a familiar face and do their business that way. This way, the digital revolution could trigger a trend towards unbanking and that will in itself create a whole lot of associated issues. How do you pay your bills when all traditional banks have disappeared and you are left without a bank account?

The Central Bank seems to think that banking is becoming “future ready” – whatever the hell that means. A banking system ought to be available to all citizens who need such services. If it becomes the playground of a tech-savvy generation that leaves others behind in the dust that future seems rather bleak to me.


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