The Tribune

THE Central Bank yesterday appeared to concede that fees for payment services were too high and “require legitimate redress”, a view shared by 78 per cent of Bahamians.

The regulator, unveiling its 2018 survey of ‘customer satisfaction’ with the commercial banking industry, said its “planned acceleration” of reforms to the Bahamas’ payments system - together with the increasing shift to electronic banking - would help “address these particular concerns”. However, it again expressed its preference for a solution based on increased competition, better information access and consumer education to resolve Bahamians’ complaints about the level of bank fees, with 49 per cent of survey respondents arguing these charges are “too high” and another 29 per cent finding them “somewhat high”.

Outlining the survey’s findings, the Central Bank said they also showed some Bahamians felt it was too difficult to switch commercial banking providers - something that could restrict sector competition and inhibit consumer choice.

“This survey provides a strong basis for interventions to improve consumer education around bank fee structures in the Bahamas,” the regulator concluded. “It also underscores the scope for more effective practices around notification of fee changes, and stronger mechanisms to allow consumers to compare fee across institutions.

“Scope also exists to reduce constraints, perceived or otherwise, on the ease of switching between financial institutions for products and services. Also, concerns around the level of fees concentrated most on payments and transactional facilities where average costs require legitimate redress.

“The planned acceleration of the Central Bank’s payments system modernisation initiative should begin to address these particular concerns.”

The survey, conducted in January 2018 by the Public Domain firm, canvassed opinions from 1,007 Bahamians, less than 5 per cent of whom did not have access to banking services in any form.

The Central Bank, though, argued that this likely “understated” the level of so-called ‘financial exclusion’ in this nation given that low income and immigrant populations were not fully represented among survey respondents.

“Also evident from the survey results, the demographic divide between income and age groups also has to be factored into policy approaches to financial literacy and inclusion, with vulnerability evident in some cases for older customers of financial institutions, and in other cases more so for lower income households,” the regulator concluded.

Turning to commercial bank fees, which remain the ‘hot button’ issue among the Bahamian public, the Central Bank said most persons surveyed understood that such charges were required to cover costs incurred by institutions in processing transactions.

“However, the ability to distinguish between direct government taxes and the institutions’ own charges is only possible for an estimated 42 per cent of the banking public,” the Central Bank found.

“In the meantime, the view is pervasive that fees are too high, with the most common products singled out being those related to payments services (ATM use, cheque cashing and deposits of cash and cheques.”

The Central Bank said the survey results showed Bahamians were “polarised” on the issue of whether banks deliver ‘value for money’, adding: “Thirty-two per cent of respondents agree that they receive value for money, while 29 per cent strongly disagree that they receive value for money.

“Similar disparities exist when the data is analysed on the consumers’ admitted understanding of why banks charge fees. Forty-six per cent understand why they are charged vis-à-vis 40 per cent that do not understand at all. In the middle ground, 14 per cent of respondents only partially understood why fees were charged.”

Nathaniel Beneby, Royal Bank of Canada’s (RBC) Bahamas managing director, revealed last December that the bank had introduced a $15 fee for cashing a non-customer’s cheque as a “deterrent”, hoping it would drive persons to use their own bank.

He suggested that moving customers to electronic and mobile banking, where fees are typically lower, would ease public concerns and pressure over ever-increasing bank charges and combat “all the noise in the marketplace”.

RBC and other Bahamas-based commercial banks have come under increasing public fire over ever-increasing fees in recent years, which a Central Bank survey in 2017 found had increased by up to 43 per cent within a six-month period.

Many Bahamians view the increases as tantamount to price gouging and exploitation in an already-depressed economy where wages are stagnant, and their protests were sufficient for the Government to announce the formation of a tripartite-style committee - featuring representatives from the private sector, trade unions and government - together with the banks to investigate the issue.

But the fee increases are also a likely banking industry response to reduced interest income stemming from the industry’s near-$1 billion past due loan pile, as well as the 3 per cent ‘Business License’ fee that the former Christie administration imposed on the sector in the 2014-2015 Budget.

The Central Bank, now moving to take the pulse of consumers, said that while fees were seen as too high there was no unified public view “on the direction in which they should be adjusted”.

“Forty-nine per cent of respondents opined that bank fees are too high, while another 29 per cent felt that fees were somewhat high,” the Central Bank said. “Although multiple products could be identified, ATM withdrawals was the most commonly viewed service as costly (21 per cent), followed by the monthly fees for checking account (9 per cent) and savings accounts (8 per cent).

“Disagreement with the level of fees charged was most concentrated for ATM withdrawals (41 per cent), check cashing services (23 per cent) and cash and cheque depositing (19 per cent). On average, about 49 per cent of those surveyed expressed a preference for bank fees to be adjusted downward versus 31 per cent that indicated no adjustment was necessary.”

Almost two-thirds of Bahamians, some 62 per cent, were found to hold the perception that bank fees in the Bahamas are higher than elsewhere in the Caribbean. And four out of every 10 Bahamians complained they were never notified of pending fee changes.

“By law, banks are required to give advance notice of fee changes on products, although awareness of when such change occurred, or whether such notifications were practiced, was limited,” the Central Bank said.

“Of persons surveyed, 43 per cent acknowledged that their bank did give notice of fee changes, while a separate 42 per cent indicated that they were not notified of fee changes. These outcomes could reflect how such notices are being made.

“Notably, respondents with experience of the process cited postal letters (29 per cent) and e-mail notices (29 per cent) as the two most common communication channels, versus 8 per cent that indicated being notified through the respective provider’s website. Other clients (24 per cent) indicated that they learn about fee changes inside the branch.”

The survey found that online/electronic banking penetration was on the rise, especially among Bahamians aged between 18-34 years-old, with 51 per cent of respondents revealing they had access to online banking. However, use of such channels was less frequent or ‘mostly never done’ for 38 per cent.

This age group was also found to switch banking provider the most, but the Central Bank added of the data: “It suggests that between 15 per cent to 20 per cent of customers view the process of changing banks as being too cumbersome. This, therefore, impacts the mobility of customers across the banking system.”

As for the 33 per cent, or one-third of Bahamians, dissatisfied with their bank, the Central Bank said: “The top reasons chosen included unsatisfactory customer service, high service fees and long wait-time in branches.

“Another source of dissatisfaction is the difficulty experienced in obtaining credit, although only as highlighted by 8 per cent of respondents.”