Jamaica to Introduce Electronic Know Your Customer Database in 2024
Boosting Competition in Commercial Banking Sector
Kingston, Jamaica - The Bank of Jamaica (BOJ) has announced plans to introduce an electronic know your customer (e-KYC) database later this year to boost competition in the commercial banking sector. According to BOJ Governor Richard Byles, the World Bank is assisting the bank in setting up a central e-KYC depository that will work alongside a national identification system.
Simplifying Account Opening Process
The e-KYC database aims to simplify the process of opening an account at another commercial bank by allowing customers to easily port their KYC information from one institution to another. Currently, each bank has its own determination on accepting the KYC of a customer, making it a laborious process for customers who want to switch banks.
Benefits of e-KYC Database
- Simplifies account opening process
- Allows customers to easily port KYC information between institutions
- Fosters competition and empowers customers to select services that work best for them
Deposit Portability to Foster Competition
Byles emphasized that the introduction of deposit portability will foster competition and empower customers to select the services that work best for them. “When Bank of Jamaica’s policy rate goes to 7 per cent and customers are content to stay with a bank that pays less than 1 per cent, it says something,” Byles said. “One is that it’s very hard to move because of ‘know your customer’ requirements. So, if we can get a central depository of e-KYC established, customers could move quickly from one institution to another.”
Introducing Digital Banks
The BOJ also plans to introduce digital banks, sometimes referred to as neobanks, in the next three years to disrupt the traditional banking space and force greater innovation. Byles believes that these digital banks should be more efficient and possibly able to attract a larger market of customers from traditional banks.
Concerns about Deposit Portability
However, some banking executives have raised concerns about the proposed idea of deposit portability, citing that most retail customers have savings accounts and not chequing/current accounts. They highlighted that the nature of banking built on liquidity planning around deposits would be put under pressure if the proposal goes through.
Expected Impact
The introduction of e-KYC and digital banks is expected to address the issue of dominance by two institutions - National Commercial Bank Jamaica Limited (NCBJ) and the Bank of Nova Scotia Jamaica Limited (BNSJ), which control 60 per cent of the market share. The move is also expected to improve the monetary transmission mechanism, which has resulted in interest rates on savings accounts and credit options among deposit-taking institutions remaining static.
Conclusion
The BOJ’s plans to introduce e-KYC and digital banks are expected to bring about significant changes in the commercial banking sector, increasing competition and innovation, and ultimately benefiting consumers.