Sat | Nov 17, 2018

Only one application so far for agent banking

Published:Friday | February 9, 2018 | 12:00 AM

The Bank of Jamaica (BOJ) says it has received only one application from a banking institution to conduct agent banking services, although the regulations have been gazetted since December 2016.

At the same time, the Jamaica Bankers Association (JBA) said smaller banks seeking to expand their footprint and customer base are now developing the relevant cost-benefit analysis for the agent model, and that the roll-out, including application to the BOJ, will be driven by the results of those analyses.

The central bank said the regime for the agent banking model has been in effect since the gazetting of the legislation.

The Standard of Sound Practice on Agent Banking and related guidance to the industry to facilitate the implementation were published on the BOJ's website on July 10, 2017.

"So far, we have received one application from a DTI to conduct agent banking services," the BOJ said in response to Financial Gleaner queries. A DTI, or deposit-taking institution, covers the different types of banking operations, inclusive of commercial banks, building societies and merchant banks.

The central bank declined to name the applicant, citing its policy regarding non-disclosure of information on specific licensees.

Asked if the one application to the BOJ was an indication that banks were not interested in conducting business through agents, or whether there are other underlying issues with which the institutions are not fully satisfied, the JBA said smaller banks may be more interested, but were in the process of assessing feasibility of the agent structure.

"The agent banking model, in its current form where new accounts cannot be opened on site, is most suitable for banks with high volume who would like to offer their customers an alternative to the traditional and, at times, imposing brick-and-mortar banking," the bank lobby said.

"Given that the larger banks have a solid footprint of branches and ATMs across the country, this model, in the first instance, may appeal more to the smaller banks who seek to expand their footprint and customer base. These institutions are developing the relevant cost-benefit analysis for the agent model, and the roll-out, including application to the BOJ, will be driven by the results of these analyses."

The JBA said it is supportive of agent banking, particularly the aim to bring the unbanked and underbanked into the financial system.

It noted, however, that the account-opening requirements would need to be amended by the regulators in order for that financial-inclusion objective to be met.

"There is no indication that potential customers will reject the agent banking model," the JBA said. "The agent banking model has been rolled out in other countries successfully and we expect the same for Jamaica."

Agent banking allows regular businesses to offer banking services on behalf of commercial banks, such as deposits and withdrawals; payments of bills and loan repayments; electronic transfer of funds; account balance inquiries; and collection of know-your-customer and customer due diligence documentation.

Agents are not allowed to levy a fee or charge for the banking services they provide, nor to undertake banking services in their own name. They are also prohibited from opening bank accounts, granting loans on behalf of deposit-taking institutions, or subcontracting another body to carry out agent banking services on its behalf.