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Yaneek Page ABM crisis: Urgent solutions needed for micro and smallbiz

Over the past two months, some micro and small business owners and their customers have found themselves in the firing line of a deepening cash crunch and automated banking machine dilemma, brought on by the violent and deadly attacks on members of the private security firm hired to service ABMS, which are the primary banking interface for most customers in this cash-dependent society.

To date, limited solutions have been publicised from the umbrella body for bankers, the Jamaica Banker’s Association, regarding how the public should navigate what one major bank mildly described as “inconvenience and frustration”.

The Gleaner reported that scores of bank customers have been struggling to conduct important business since the recent spate of robberies and sinister attempts related to ABMs. These reports have been corroborated by social media users across all major platforms, complaining bitterly of difficulties in accessing ABMs due to long lines, extended wait times, unreplenished machines, and feeling unsafe while doing business within such facilities.

In 2018, the Inter-American Development Bank (IDB) estimated that a whopping 95 per cent of all transactions locally were cash-based. Cash is the main method of payment for transportation, lunch money for schoolchildren, food and refreshment, personal care services and other offerings from small operators, such as small restaurants, corner shops, bars, wholesalers, markets, barber shops, hair salons and nail technicians.

Over 60 per cent of Jamaican workers are still paid in cash.

While the COVID-19 pandemic deepened inroads into digital payments adoption, and the current crisis likely presents further opportunity to advance the cashless agenda, Jamaica lags major trading partner, the United States, where only 26 per cent of transaction payments are cash-based, and is a far cry from the world leading cashless standard set by Sweden where only nine per cent of all transactions are settled via cash payment.

Financial exclusion

The World Bank, the IDB, and local academics and advocacy groups have bemoaned financial exclusion plaguing the country as less than 40 per cent of Jamaicans have formal financial accounts, and many lack access to basic financial services. Most micro and small businesses still have limited formal business banking relationships and lack of digital payment facilities. This is underpinned by a crisis of confidence with an estimated 50 per cent of Jamaicans lacking confidence in the ability of financial institutions to meet their needs.

To further compound the problem is that the most common alternative to paying in cash in some businesses is consistently unreliable, thus driving the demand, and in some cases the absolute necessity, to keep cash on hand in anticipation of the typical ‘Card Machine Down’ sign that has become synonymous with point-of-sale gateways across Jamaica. Also, customer complaints against licensed banking institutions have increased dramatically with the Bank of Jamaica reporting in its 2022 annual report a near 80 per cent jump, driven predominantly by account concerns related to the increased use of electronic banking.

Bankers have warned consumers to brace for inconvenience, disruption and possibly the removal of ABMs as they grapple with criminality preying on their facilities.

However, the Jamaica Bankers Association, which promises on its website’s homepage to promote “a safe, secure, and vibrant banking industry to support Jamaica’s economic growth and development”, has not signalled to the public how it will address widespread deficiencies in alternative banking systems that continue to disrupt business and drive the demand for cash.

They have also not outlined new strategies and timelines to address financial exclusion, particularly of micro and small business enterprises.

Possible solutions

Hopefully, they will consider some potentially low-hanging solutions to this crisis such as:

1. Point-of-sale reliability: urgent and effective action to remedy common POS failure and unreliability;

2. Website and app resilience: resolve challenges plaguing alternative banking options such as online and mobile banking which continue to cause distress and dislocation to businesses and individuals;

3. Expansive financial inclusion: advance Jamaica’s National Financial Inclusion Strategy, which calls for a coordinated approach to drive digital payment solutions and expanded access for MSMEs to point-of-sale gateways; and

4. Point-of-sale cash-back service: participating vendors offer the option, facilitated by standard POS options, for customers to receive cash back with a purchase made by debit card. This allows customers to withdraw cash without needing to visit ABMs. It is not to be confused with the current loose and discretionary approach of a few vendors who may allow select customers to ask permission for the cashier to ‘run their card for extra’. There is a well-established system operating in the US and Canada, for example, that appears to not have been formally piloted here, a point I sought clarification on from the Jamaica Bankers Association, without success.

President of the MSME Alliance Donovan Wignall has thrown full support behind these prospective solutions, noting that licensed banks have a responsibility to create, even in the interim, alternate measures to ease the burden on the public given that their ABMs are currently compromised as safe means of banking.

“This is paramount given the strategic approach taken by banks to reduce operations and personnel in branch and direct customers to ABM channels, etc,” he said.

Wignall also shared that his association has not been engaged by the Jamaica Bankers Association regarding solutions to the current challenges. He described the POS cash-back solution as a “no brainer, win/win for businesses”, which could reduce the cost of transporting cash, add value to customers, and earn transaction fees at the register.

I contacted the bankers association with the hope of learning more about their solutions to the current crisis and specifically their position on options such as cash back at the register. They declined to provide a comment or contribution for publication at this time. Hopefully, micro, small, and medium-sized businesses and affected individuals will hear from them soon.

One love!

– Yaneek Page is the programme lead for Market Entry USA, and a certified trainer in entrepreneurship.

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