Digital advances in the last few years have changed how banks work, allowing them to focus more on mobile and online banking platforms than opening more physical branches. As more people, especially in underserved areas, get cell phones and internet access, this change opens a world of financial opportunities that have never been seen before. Globally, based on the findings of the McKinsey 2024 Report(1), the number of consumers using mobile devices for banking increased by 18% from 2020 to 2023, reaching 57%.
Digital banking can give people different banking options to help close current gaps in financial access. The Trinidad and Tobago International Financial Centre (TTIFC) National Financial Inclusion Survey Report (2023) brought up several problems in our own country that digital banking can help to solve, for example:
- Costs and fees are too high: only 75% of people have bank accounts, down from 81% in 2017. The main reasons they don’t have an account are because they lack the necessary documentation to open an account and are worried about the costs and fees.
- Differences in geography: Large areas of financial exclusion were seen in southern municipalities like San Fernando (33% of the population) and Penal/Debe (30%). Almost half of the population lives within 15 minutes of a bank branch or ATM, but not everyone is close to these facilities, which affects the rate of financial inclusion.
- A lot of transactions are done in cash—about 63% of all transactions are done in cash, and most of them are small, low-value transactions.
This article will talk about the benefits of digital banking to show that closing physical branches isn’t always a bad thing. Instead, this change can make financial products and services more accessible, and easier for underserved groups to benefit.
A Look at Digital Banking and How Popular It Is Growing
The full range of financial products and services that people and companies can access online is called “digital banking”(2). Digital banking lets customers make transactions, manage their accounts, and access financial services 24 hours a day, 7 days a week, from anywhere in the world; while traditional banking requires customers to be at a bank branch in person. However, banks are closing some of it branches and encouraging customers to use mobile and internet banking instead as more people can get access to their money whenever and wherever they need it. For instance, the rise of mobile payment systems like M-Pesa in Kenya is an interesting case because it shows how technology can make banking services more accessible to everyone (3).
Between 2006 and 2019, access to financial services and goods grew by about 56%(4). This is mostly because of the M-Pesa mobile money platform. People found that M-Pesa has helped about 2% of Kenyan families get out of extreme poverty(5). Though, it’s not just new technologies that are causing this shift. Changing customer tastes that value convenience and efficiency are also playing a role. Also, the adaptability and ease of access to digital banking services have made these apps especially popular with younger people. This is clear from the qualitative data from the National Financial Inclusion Survey 2023: young people liked the idea of digital banking and desires to fully access and use it. Also, from the quantitative data collection, 15% of people say they use government online payment systems with the majority expressing that it’s easy, and the other half say it saves them time.
Another example of the drive toward digital banking is in India. India’s demonetization has sped up this change, encouraging people to look for digital ways to handle their money. India has now fully implemented its Unified Payments Interface (UPI) making it easy to connect to the country’s banking system and allows mobile internet users to use a mobile app and QR codes to make real-time transactions between banks. It is now possible to pay for almost everything online in India with UPI. In Trinidad and Tobago, the Central Bank of Trinidad and Tobago (CBTT) is putting in place a mobile payments system that works like the Unified Payments Interface (UPI) in India. CBTT expects a national fast payments system would benefit everyone, making it simple, safe, and almost instantaneous for people to send money using their mobile devices. The UPI system should also help with financial inclusion by making it easier for underserved areas to use banking services(6).
Digital banking has benefits for both individuals and companies.
- More attention paid to financial frameworks that prioritise security
In the TTIFC’s National Financial Inclusion Survey 2023’s qualitative focus groups, people who didn’t have access to money shared a lot about how unsafe online financial transactions are. People in this group were the most worried about the switch to digital banking, citing worries like personal data violations. Nonetheless, regulators are always looking for new ways to protect customers’ interests while also addressing the risks that financial institutions face and other policy goals for digital banking. The Central Bank of Trinidad and Tobago (CBTT) says that banks and other financial institutions in Trinidad and Tobago that offer digital banking services must follow the law to protect customers, ensure compliance, and keep information safe. As the main financial regulator, the CBTT instructs banks they must follow strict cybersecurity rules to keep digital banking services safe from cyber dangers. This means using strong encryption, safe login methods, and regular checks for security. The following are examples of these important rules:
- The Banking Act governs what banks in Trinidad and Tobago can and cannot do. It includes their licensing, control, and compliance duties. For banks to work, they must follow the rules and be supervised by the CBTT.
- The Electronic Transactions Act sets the rules for how electronic transactions can be done legally. It also states how that electronic records and signatures must be used and stresses the use of electronic messaging in business transactions.
- Money Laundering (AML) and Counter-Terrorism Financing (CTF) Regulations: To stop financial crimes, financial institutions must set up Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) procedures. This includes guidance like customer due diligence (CDD), keeping an eye on transactions, and reporting any behaviour that seems odd.
- According to the Consumer Protection Regulations, banks must give clear details about their digital banking services, such as fees, terms, and conditions. Banks are also required to handle customer complaints and protect customers’ rights.
- Data Protection Regulations: The Data Protection Act says that banks must protect the privacy and security of customer information they get from digital banking systems. This means putting in place protections to stop data leaks and unauthorised access.
- Payment systems legislation: Financial institutions that offer digital payment services must follow the rules for electronic payments and make sure their systems are safe and work well.
(Should this be moved up to flow as part of the ‘payment systems legislation’ point?) The CBTT issues guidelines and circulars on a regular basis that explain the expected standards and practices for digital banking. These cover different aspects like risk management, customer authentication, and technology needs.
- Making banking services easier to access
As traditional some brick-and-mortar banks close and there is a switch to digital and mobile platforms, people who had challenges accessing banking services, like low-income individuals or those who live far away, are slowly finding new ways to get involved(7).
To make the banking process simpler, some local banks are putting in place full digital systems. A new data report(8) shows that as of September 2024, there have been 2 million site visits to all of Trinidad and Tobago’s banking platforms. First Citizens Bank was seen as the digital leader, with 675.7 thousand visits, which was 34% of all banking online visits while Republic Bank, JMMB, and Scotiabank had between 18% and 21% of all website visits. This high level of activity on different banking websites shows how important it is to offer digital banking services that people can access and rely on to meet their financial needs.
It is a similar case internationally with the European Central Bank stating that more and more people are using digital banking services, which has led to the closure of bank branches over the last ten years(9). Since 2015, more than 6,200 banks and building societies in the UK have closed which includes branches from well-known banks like Barclays, Lloyds Banking Group, Halifax, and NatWest Group. However, people can access ‘Banking Hubs’ via the UK’s Post Offices to conduct regular banking transactions like payments, withdrawals, and balance checks. This aims to ensure that even those who can’t access digital banking can still be financially included(10).
- More control over money and customisation
Customers like being in charge of their finances and being able to customise their products. A significant feature of digital banking services is that it gives individuals full power over their money and transactions. Transactions can happen real time, letting customers control, access, and get the financial services that meet their needs. As more customers value ease of access and speed, banks are working toward having a stronger online presence. For example, in Trinidad and Tobago, ANSA Bank has an easy-to-use website with different functions that allows customers to create accounts, transfer money, and complete applications. The bank also has a Virtual Contact Centre where customers can get assistance whenever they need it, which keeps them from going into the Branch. However, there are accessible branches to help those who prefer to bank in person. In the same way, Scotiabank is changing how it does business locally and regionally to meet the rising demand for digital banking services, making its services more efficient and easier for its customers to access.
- Possibilities for more people to use new digital financial platforms
According to the National Financial Inclusion Survey Report (2023), 25% of people in Trinidad and Tobago do not have access to bank accounts. There is an opportunity here for digital banking to make a difference by offering new, creative and cost-effective services to those who haven’t been able to access and use traditional banking. So far, the growth of financial technology (FinTech) companies has created new products like mobile wallets as well as more efficient and responsive services. Locally, five fintech companies were registered locally under the Electronic Money Issuer Oder 2020. These are Paywise, Pesh Money, My Cash, Widit and WamNow with the first two providing mobile wallets. Soon there will be more FinTechs coming on board to offer customers more options. At the same time, banks that offer electronic money and credit/debit card services have been improving their offerings and/or lowering their costs(11).
As the largest user and merchant of electronic payments, the Government of Trinidad and Tobago has been crucial in supporting the development and adoption digital financial products and services. The Government prioritises digital transformation, urging Ministries, Departments, and Agencies (MDAs) to accelerate their digital payment initiatives and embrace digital financial products. For instance, the TTIFC works with different Ministries, Departments, and Agencies (MDAs) and the Treasury Division to introduce new methods like the Housing Development Company’s (HDC) omnichannel payment platform, which allows residents to easily pay through cashiers and online debit and credit cards. The Judiciary is also widening its Court Pay platform to include the National Lottery and Control Board’s (NLCB) network of more than 1,700 cashiers. This will make it easier for people to pay for any court service in T&T.
Continued improvements and considerations for digital banking
As the digital banking sector progresses, there are aspects that must be worked on and developed by these financial institutions. These are as follows:
- The shift to digital banking involves a detailed process of digital innovation. For financial institutions to make the necessary changes, there must be sufficient resources and a well-thought-out plan to successfully implement these changes. Also, financial regulations in different countries still require banks to have a physical presence, even if agents are used, like with the UK’s Banking Hubs through Post Office outlets. A gradual roll out of digital services is recommended as potential clients may need help with opening accounts, and current customers will need assistance to address their challenges
(12). - Cybersecurity and protecting against fraud still pose challenges for financial companies. Based on a worldwide poll by EY in 2023, it was found that cybercrime is the biggest threat to the world’s banks(13). To protect their clients’ personal and financial information from cyber threats, banks need to invest in strong digital banking infrastructure. This includes technology like encryption, multi-factor authentication, and real-time tracking.
- Trust from customers is important for digital banking as customers have less access physical branches and will rely on helpful customer service tools. The National Financial Inclusion Survey Report (2023) found that older individuals were hesitant to use digital banking services, especially if the applications are difficult to understand and navigate. Financial institutions will need to offer reliable, easy-to-use tools that are built around best practices. They also need to offer thoughtful customer service and clear ways to communicate.
While digital banking is still a relatively new idea, it is helping to make financial services better for everyone. As more people desire faster and easier access to banking services and financial transactions outside of physical branches, digital banking remains necessary in today’s fast-paced world. In time to come, new developments in Cloud Computing, Data Management, and Artificial Intelligence will make digital banking even better and more flexible. Moreover, as the financial system becomes more connected, more people will be empowered to access banking services and so, increasing financial inclusion.
- McKinsey & Company (2024) The State of Retail Banking – McKinsey & Company. Available at: https://www.mckinsey.com/industries/financial-services/our-insights/the-state-of-retail-banking-profitability-and-growth-in-the-era-of-digital-and-ai
- Forbes (2021) What is Digital Banking. Available at: https://www.forbes.com/advisor/banking/what-is-digital-banking
- Batiz-Lazo,B. et al (2020) All About The State – Fifty Years of Innovative Technology to Deliver an Inclusive Financial Sector. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3664177
- Central Bank of Kenya, Kenya National Bureau of Statistics and Financial Services Department of Kenya, 2019, 2019 FinAccess household survey.
- Suri, T and Jack, W, 2016, The long-run poverty and gender impacts of mobile money. Science (online). Available at: https://science.sciencemag.org/content/354/6317/1288
- Newsday (2024) Trinidad and Tobago adopts India’s UPI real-time payment system. Available at: https://newsday.co.tt/2024/09/27/trinidad-and-tobago-adopts-indias-upi-real-time-payment-system/
- Poverty Action Lab (2024) Digital financial services to improve formalized access and inclusion. Available at: https://www.povertyactionlab.org/policy-insight/digital-financial-services-improve-formalized-access-and-inclusion
- Keron Rose (October 2024) How The Banks Perform Digitally in Trinidad and Tobago. Available at: https://keronrose.com/how-the-banks-perform-digitally-in-trinidad-and-tobago/
- EU Central Bank (2024) The Changing Landscape of Bank Offices in the Euro Area. Available at: https://data.ecb.europa.eu/blog/blog-posts/changing-landscape-bank-offices-euro-area
- The Sun (2024) Closing Time: The 45 Bank Branches Closing in January including in London, Liverpool and Birmingham. Available at: https://www.thesun.co.uk/money/32194353/full-list-bank-branches-closing-january-london-birmingham
- Alvin Hilaire, Governor, Central Bank of Trinidad and Tobago (2024) – Journey into Fintech. Available at: https://www.central-bank.org.tt/sites/default/files/page-file-uploads/presentation-journey-into-fintech-october-2024.pdf
- AFI (2021) Policy Framework on the Regulation, Licensing and Supervision of Digital Banks. Available at: https://www.afi-global.org/wp-content/uploads/2021/11/DFSWG-framework_FINAL.pdf
- EY (2023) Cybersecurity is number one risk for global banks, but geopolitical risk tops European banks’ concerns. Available at: https://www.ey.com/en_gl/newsroom/2023/