INTERVIEW: JACQUELINE SHARP - Scotiabank rolls out tech-driven strategy; eyes chip cards, agency banking
Scotia Group Jamaica will close another branch in a matter of weeks. The Premier Plaza location in Half-Way Tree will be the 10th to be closed within the past decade as the bank continues its rationalisation programme.
Over the years, new branches have also opened - a financial centre at Fairview in Montego Bay last November and another on Constant Spring Road in Kingston a few years before. But reducing the branch network by around a net of eight has helped the financial institution keep its productivity ratio - expenses as a proportion of revenue - below the international benchmark of 60 per cent over the years.
Yet, Scotia boasts far more touch points now than it did 10 years ago. The banking group added more than 80 automated banking machines (ABMs) to its network, bringing the total to 240 - the largest ABM network in Jamaica.
Perhaps more importantly, the bank has been expanding its sales force - total employee count numbered 400 persons, or 20 per cent more at the end of 2014 than in 2005 - and it has been using technology to get closer to its customers. For example, more than a quarter of its ABMs are now full service.
"We are looking at all our distribution channels," President and CEO Jacqueline Sharp told the Financial Gleaner in an interview at Scotia Group's downtown head office on Monday.
Brick-and-mortar channels, such as branches and ABMs, are bolstered by online banking, debit point of sale, and even the contact centre - since 2009, customer care representatives have played an active role in driving outbound sales.
"We are improving the functionality of those channels to give customers the ability to do a wider variety of transactions," she said. "For example, online banking added the ability to purchase foreign exchange and the ability to transfer funds from one account to another within Bank of Nova Scotia."
The enabling of cross-bank online transfers is being targeted for implementation by yearend, Sharp said, while adding that Scotia is looking at opportunities to create new channels, such as the rolling out of agency banking next year, providing that its model aligns with regulations, which are yet to be established.
"We are looking at opportunities to finding partners with high retail traffic, that we will be able to leverage to do basic transaction services for us," she said.
The bank already departed from strict in-branch operations back in 2010, when it piloted its non-branch sales initiative. The non-branch sales team now has 75 sales agents who pursue motor vehicle financing and credit card sales opportunities within the corporate area.
Scotia says it plans to extend the services into other regions in Jamaica, while the successful testing of a pilot project in Peru might see non-branch sales agents being able to complete loan applications and other transactions on site, without having to go to any physical branch.
"We are giving sales agents iPads to complete sales processes at the customer," Sharp told the Financial Gleaner.
She reckons that fast-changing technology is quickly changing how banking is done, and how funds are being used to settle transactions and how products are sold.
This is why Scotia is switching over its credit cards to Europay, MasterCard and Visa (EMV) chip technology by next year with a view to rolling out debit cards that can do transactions with just a tap of the card.
"The EMV/chip technology credit cards are moving from electromagnetic strips to chips, which facilitate near-field communications that will allow customers to go to point of sale and do transactions with the tap of the card," Sharp explained. "It reduces the level of fraud. It is very difficult to do the type of fraud that is possible with magnetic strips."
The banking group's card business has become increasingly important to its Jamaican operations, which used to focus mostly on lending to government and corporations - loans to government and businesses represented 70 per cent of its loan portfolio a decade ago.
Since then, personal loans and credit card receivables quadrupled to $63 billion, or 43 per cent of Scotia's loan portfolio - which is roughly the same as loans owed to the bank by the Government and businesses as at October 2014. Residential mortgages also grew from $3.2 billion in 2004 to $21 billion last year.
As a result, Scotia's retail banking arm has been the major driver for growth over the years, especially since it has not undertaken any major acquisitions since it bought a majority stake in Dehring Bunting and Golding (DB&G) in 2006.
Retail banking revenue grew from $9.3 billion, or 37 per cent of operating revenue 10 years ago, to $15 billion, or 42 per cent of revenue last year. The division contributed 44 per cent of Scotia's operating revenue during the six months to April 30.
Scotia's insurance business has been on a recovery path since a lower interest rate environment set on by a government debt exchange in 2010 dragged down operating revenue over the following two years.
But the bank won't likely expand beyond its life insurance business anytime soon. It actually liquidated Scotia Jamaica General Insurance Brokers in a members' voluntary winding up in 2008, marking its exit from general insurance. The broker had $22 million in net assets on its books at the time.
"We are always looking at opportunities to expand our business by ensuring that the business that we partner with, or acquire, aligns with our model," Sharp told the Financial Gleaner. "We looked at general insurance and it didn't fit with us."
The bank's strategy now is to focus on increasing the number of products its customers take up across its various business lines.
"We have a large and loyal customer base," she said. "A lot of them are not aware of the breadth of products that we offer. So if we can create greater awareness, we will be able to build 'share of wallet' across retail, wealth management and insurance."
Culturally, Sharp wants to see her organisation become even more customer-centred.
"Where we can do even more is have greater focus on our customers; helping them to be financially better off; getting better at the advice that we give; and we can do a lot better in telling customers how to reduce fees because there are ways and means of doing it," she said.
"The quality of advice that we want to give, and the way we deliver advice and solutions, making it more convenient for the customer, is something that I want to try to instil and even add greater focus within our culture."