The problem with banking

The conversation might have been about Big Data on Wednesday, but TTIFC CEO John Outridge pointed to a more intimate problem, the vast number of citizens in TT who are classified as being among the unbanked, and who in this case were even described as “unbankable.”

Those are the 200,000 people who are not part of the formal financial sector of this country, doing most of their business in cash ­– one-sixth of the country's population.

It’s true that any alternative system must acknowledge that large sectors of the unbanked economy may well be criminal in nature, and financial diligence is an unshakeable aspect of today's business models.

But it's hard to imagine a path forward to a cashless economy when such a large part of the country's population either have no faith in the formal financial sector or are barred from participating in it by onerous restrictions.

This number exists alongside survey numbers gathered by the Development Bank of Latin America which tally 1.5 million bank accounts, 700,000 debit cards and 200,000 credit cards in use. Among card users, the survey suggested that those financial instruments are only used 40 per cent of the time.

Those who have, clearly have a lot, while those who don't, have no access at all.

Finance Minister Colm Imbert acknowledged the situation, agreeing that getting a bank account was easier 20 years ago.

While online and digitally enabled bank transfers have unquestionably increased during the pandemic, there hasn't been a revolutionary institutional response to the challenges that face the unbanked.

An older bank customer who isn't digitally literate, or a new, young customer, is likely to experience disproportionate difficulty during covid19 in dealing with an already recalcitrant banking system.

Even experienced customers had difficulties when two major banking institutions upgraded their online systems and sent their customers into financial freefall for days, even weeks on end.

Banks aren't doing enough to proactively offer alternative systems to support required due diligence.

Young people who rent or live with their parents don't have utility bills; and banks don't accept mobile phone bills because of an outdated notion that there must be proof of financial responsibility for a fixed utility connection to a residence.

On that basis, thousands of young people can't cross the first hurdle to creating an identity in the formal banking economy. It's a curious approach to customer acquisition.

Some determined young people and even their elders lodge their business with credit unions that are more open to qualifying customers, but few have the clout of major banks.

These issues haven't been tackled by a notably risk-averse banking sector ­– which is busy contracting its physical locations in many densely populated communities.

That leaves smart, enterprising people locked out of a system and labelled, quite unfairly, “unbankable.”