Financial institutions in the Caribbean are typically small, lack deep pockets for major technology overhauls and are fragmented across the region's more than 7,000 islands and 25 territories. Yet, with tough Central Bank mandates, the desire to meet growing customer needs, and serious concerns about fraud, money laundering and natural disasters, banks are now aggressively embracing new technologies.
Over the past year, the Eastern Caribbean Central Bank (ECCB), which regulates the subregion's financial institutions, has helped drive banks toward integration and technological innovation. Banks are shelving proprietary technologies for open solutions. "There is a push is for indigenous and international banks to share resources," says Warren Nesbitt, senior manager of management information systems at St. Kitts-Nevis-Anguilla National Bank Ltd. He notes that most institutions' ATMs "don't speak to each other," but by sharing networks they will grow transaction volumes.
The ECCB is not only spearheading ATM interoperability, but also the move to an automated clearinghouse (ACH) for checks and electronic payments to create a fully-integrated payments area. "It would make the whole process of interpayments between institutions a lot cheaper if settling became electronic rather than almost manual," explains Nesbitt. Regional interconnection stretches to the Western Caribbean, where banks in Trinidad and Tobago, Barbados and Jamaica already have ATM networks and ACHs in place. These three nations have led the region in conforming to mandates from the Caribbean Community and Common Market (Caricom) that set forth objectives for a Caricom Single Market and Economy (CSME). The remaining 11 Caricom members must conform to the goals by December 31, 2005, to achieve the regionwide launch of the CSME on January 1, 2006 that will, among other things, enable all firms in Caricom to operate in any Caricom country.
"In the United States when we travel state to state we expect our bank to be in the state where we are going, and in the Caricom they are going to face that same demand" from island to island, says Kevin Vericker, sales manager for the Caribbean and Andina countries for SAS, which provides analytics software, including anti-money laundering solutions and fraud monitoring, detection and prediction.
While banks are building alliances across countries for compliance purposes, they also are adopting new core banking systems-due to their old systems' high cost of maintenance-and other technologies to better compete in the new "borderless" environment. This includes implementing sophisticated customer relationship management systems to serve customers throughout the Caricom.
The case of FirstCaribbean International Bank, which has operations across the Caribbean, illustrates the move by institutions to hone regional strategies. The bank contracted the firm Fiserv CBS Worldwide to help it integrate four distinct technology platforms into one holistic platform across 15 countries and 26 islands and convert 16 databases from three different software vendors. FirstCaribbean's new software infrastructure generated cross-country efficiencies and improved services and response times, according to Joe Barreto, the bank's COO. "The new system allows us to tailor products and services according to island differences and offer our customers 24/7 access to accounts and a full range of monetary functions," he says. "Our branches and customers are no longer restricted by individual island's banking hours."
The RBTT Financial Group, which owns 10 commercial banks in the Caribbean, also opted to replace its legacy core banking system to enhance service delivery, accelerate regional expansion and stave off large players. This September it chose Temenos T24, a solution from the Geneva, Switzerland-based supplier Temenos Group AG. With RBTT's local expertise and new technological infrastructure, it "will be in an excellent position to fend off competition from global players, many of which still work with legacy fragmented systems," explains Andreas Andreades, CEO of Temenos.
Low-Cost Solutions Bank technology innovation in the region has sometimes been hamstrung by financial constraints. Consequently, companies like Fujitsu are exploring new low-cost alternatives. For instance, the Tokyo-based supplier has partnered with the Long Beach, Mississippi-based manufacturer Triton to offer low-cost, Web-enabled ATMs that allow banks to advertise promotions and customize screens on ATMs.
STP, Inc., was established in 2003 to become the first ASP model in the Caribbean, says Lambert Lewis, the firm's CEO. He says it reduces bank costs from 30% to 60% for customers like Antigua Commercial Bank and Antigua Overseas Bank Ltd. because they no longer have to buy hardware or software. The St. Johns, Antigua-based company has partnered with iflex to provide business-to-business and data processing services.
While STP is locally-based and has brought a low-cost option to market, it faces major challenges that other vendors share. For one, it is highly-dependent on service providers, particularly in telecommunications, since it aims to provide outsourcing services to countries divided by the sea. Additionally, the company model challenges convention. "Banks have always had proprietary systems in-house and it is very difficult to get them to accept this concept of outsourcing," says Lewis.
Nesbitt notes that some Eastern Caribbean institutions lack the ability to invest in solutions commonly implemented elsewhere because of the local exchange rate (the Eastern Caribbean dollar is pegged to the U.S. dollar at 2.7 to 1) and limited customer growth potential. "We would like to be able to function similar to U.S. banks, but our volumes tend to be lower," says Nesbitt. "You are not going to be as efficient as a U.S. bank because the equipment will cost the same."
Yet, in spite of the obstacles, banks do take the plunge for new technology. For instance, compliance technology and disaster recovery and business continity systems are in high demand (see the sidebar for more). Nesbitt says his bank is considering automating additional processes-for processing checks, for example-to reduce manpower and expedite operations. The supplier Jack Henry and Associates Inc., which has 18 financial institution customers on 10 different islands in the region, has found multicurrency products to be very popular among Caribbean banks, an indication of the importance of tourism to the region, says Ron Moses, manager of the firm's product, Core Director.
Banks also are exploring the use of diverse delivery channels. Internet banking applications are expected to become increasingly sophisticated (iflex, for one, has introduced electronic bill payment and presentment), and since cellular phone penetration vastly exceeds Internet penetration, mobile banking should experience even greater popularity, says Bill Zayas, senior vice president and general manager in the core systems group at Harland Financial Solutions, which has seven Caribbean bank customers.
Such remote solutions recognize, in part, the Caribbean's large diaspora, who expect access to their accounts anytime and from anywhere, says Lewis. Similarly, technology solutions that can cash in on the significant fund transfer volumes to the Caribbean may win over bankers. Caribbean and Latin American workers living abroad sent a record $45.8 billion back home in 2004, up from $38 billion in 2003, according to the Inter-American Development Bank's Multilateral Investment Fund. "Remittances are becoming an important part of the economic landscape," says Vericker. This could usher forth low-cost money transmitting solutions, as well as AML technology because AML laws require banks to identify those who send money through them.
Yet, many vendors will only enter the region when they believe they can achieve economies of scale. A spate of mergers and acquisitions among financial institutions-particularly in the region's larger countries--has meant there are simply fewer potential bank customers to target (though this has augmented work for systems integrators). And the lack of big players discourages some vendors from the region. "They will be very receptive to requests for proposals (RFPs), but they don't have the bandwidth to focus on the region because of the size of the banks down there," says Alenka Grealish, manager of the banking group for Celent, a Boston, Massachusetts-based research and consulting firm. "It's too small for most vendors to stake out the Caribbean, if you look at gross national product (GNP) and population."
Sponsored by Fiserv CBS Worldwide and Temenos
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