The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

ROYAL Bank of Canada (RBC) believes its digital banking drive will slash in-branch transactions by up to one-third, reduce fraud and combat "all the noise in the marketplace" over bank fees.

Nathaniel Beneby, RBC's Bahamas managing director, said the elimination of multiple manual banking transactions come January 2018 would enhance "the customer experience" and boost security for both clients and the bank.

In particular, RBC views its decision to stop cashing cheques for non-clients from January 2 as both helping to reduce long branch queues and potential fraud, along with associated Know Your Customer (KYC) due diligence demands.

Mr Beneby said 33 per cent, or one out of every three in-branch transactions, involved persons who were not RBC account holders or clients, suggesting this was exacerbating the long lines and waiting times stemming from the bank's network consolidation.

He added that RBC also needed to protect itself and its clients from exposure to criminality, revealing that the bank had seen an increase in cheque and card-related fraud.

And the RBC chief also suggested that moving customers to electronic and mobile banking, where fees are typically lower, would ease public concerns and pressure over ever-increasing bank fees.

Mr Beneby revealed that RBC had introduced the $15 fee for cashing a non-customer's cheque as a "deterrent", hoping it would drive persons to use their own bank, but he acknowledged this had failed.

"We see anecdotally from monitoring the branches it could be about 33 per cent," Mr Beneby said, when asked how many branch-based manual transactions involved non-RBC clients. "We have seen the impact on the branches."

He added that this was "not helping" customer due diligence, and efforts to combat fraud and other forms of criminality such as money laundering, given that non-clients posed a greater security risk.

While not possessing statistics, Mr Beneby said he could "confidently say" that cheque and card-related fraud was on the rise in both the Bahamas and the Caribbean.

"I can only speak for our business; that it has increased," Mr Beneby said. "I can confidently say it has increased. It's not unique to the Bahamas; it's across the Caribbean, this increase in fraud activity with negotiating cheques in the banking system."

Kevin Darling, RBC's head of business banking for the Bahamas and northern Caribbean, added that industry statistics showed fraud was more prevalent with manual transactions than the electronic variety.

Mr Beneby, meanwhile, said the potential reduction in bank fees that could result from the digital banking switch was not the main "motivation", but rather a spin-off benefit for Bahamian consumers.

"By discontinuing the service of cashing cheques for non-clients, the $15 fee and all the noise in the marketplace goes away," Mr Beneby said. "When we introduced that, it was intended as a deterrent to drive people" to use their own banks for such transactions.

"Using fees for that purpose doesn't really work," he acknowledged. Mr Darling agreed that fees associated with electronic transactions were typically lower than those for manual ones, describing this as "a collateral benefit" from RBC's move.

RBC and other Bahamas-based commercial banks have come under increasing public fire over ever-increasing fees, which a Central Bank survey 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.

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.

RBC"s latest move to push customers towards Internet and mobile banking, something all the Canadian-owned banks in particular have been trying to achieve, is unlikely to be acclaimed by all Bahamians. The changes are:

• January 2, 2018: RBC will no longer cash cheques, accept bill payments, take deposits or buy and sell foreign currency for non-customers. It will only cash government cheques and pension cheques for non-clients

Deposits and transfers to other RBC clients' accounts will also not be accepted over-the-counter in branches, other than those for FINCO clients

• January 15: TheFasDeposit service will no longer be available
• January 31: Wire transfers will not be processed over-the-counter, and standing orders for credit cards will be discontinued

RBC wants clients to deposit cash and cheques to their accounts via ATMs, and use its digital channel or mobile banking app to pay bills, transfer funds, pay credit cards, send wire transfers and make payments to other RBC clients.

The Canadian-owned bank's digital push is designed to push clients towards "the future of banking", and is consistent with the Central Bank of the Bahamas' desire to increase the penetration of electronic transactions throughout the Bahamas.

However, the Bahamas remains very much a cash-based society, and RBC's move is likely to be received negatively by a significant segment of the market - especially the elderly, poor and indigent, and those who either lack mobile/Internet access or are attached to traditional forms of banking.

Asked by Tribune Business whether RBC was pushing some clients to 'run before they could walk' when it came to electronic banking, Mr Beneby and other RBC senior executives defended the move by pointing to the Bahamas' higher Internet and mobile usage penetration rates.

Arguing that this showed a significant proportion of their customer base already had digital access, they added that RBC had conducted a "consistent education" campaign to educate clients on the move, promising this would be ongoing.

"One of the statistics we looked at was you have about 395,000 people in the Bahamas, and 270,000 have access to the Internet," Mr Darling said. "If you look at that percentage compared to the broader Caribbean, you're a highly connected population. We believe the majority of clients have access."

Mr Beneby said RBC felt it had "given enough time" for clients to adjust to the electronic/mobile banking switch, which will start just over a month from now right after the Christmas season.

Talking up RBC's mobile banking app as "user friendly and seamless", he added: "We feel definitely that they've had time to adjust."

Mr Darling said RBC's business banking unit had worked with corporate clients to prepare them for the transition, and Mr Beneby said the bank felt there would be a "negligible" loss "target clients" from going digital.

While not specifying who these clients were, Mr Beneby was likely referring to business customers who will likely be the main beneficiaries, since the costs and time associated with the sheer volume of transactions they conduct will likely be cut.

"We are confident that any loss of our target market, target clients will be negligible," he said. "The high volume transactors may not find this comfortable, but they have options."