Scotia Centre, Downtown Kingston.
-File photo
Susan Smith, Staff Reporter
SOME BELIEVE that with financial market deregulation, commercial banks are now poised to grab a sizeable chunk of the market share now held by credit unions.
"We are not encroaching," said one commercial banker who requested anonymity. He told Sunday Business that his customers had the freedom to decide where to conduct their business.
"All the customers have choices," the banker said. They can choose not only between commercial banks and credit unions but also from among building societies, unit trusts and other financial institutions.
Dennis Hickey, marketing manager for the City of Kingston Co-operative Credit Union, said he now sees the banks trying to lure away the credit unions' most profitable customers.
"We never saw ourselves in the early years as aggressively competing with banks," Mr. Hickey said.
Studies show that each financial entity has its merits, said Raymond Pryce, information director of the Consumer Affairs Commission (CAC).
FRIENDLIER
"Credit unions are friendlier to ordinary Jamaicans based on their historical values and the reception people get when they walk through the doors," the CAC director said. Banks want individuals to prove that they qualify for loans, while credit union members feel they already have the right to the loan and are borrowing their own shares.
"The kinds of collateral the credit unions require for loans are easier to access by the 'small man' than those required by commercial banks," Mr. Pryce said. "More persons are likely to be in possession of this collateral."
Consumer Knowledge Behaviour and Attitude (KBAP) pattern studies carried out in 2003 reveal that there is a large gap between people's knowledge of loans and their behaviour towards them. Mr. Pryce said consumers are not getting the proper information on loans and are ignorant of the conditions and penalties.
"Application forms for credit cards are not clearly explained and consumers could get trapped by the details in the fine print," Mr. Pryce said. This problem occurs more frequently among commercial bank customers.
"Credit union loan officers spend the time to provide information on the loans," the CAC executive said. "They are trained to deal with people and accommodate those from a different educational background. The commercial banks are not spending this much time." But a spokesperson from the Royal Bank of Trinidad & Tobago (RBTT) told Sunday Business that consumers are making their choices based on what they see as being best for them.
INTEREST RATES
"Our interest rates on loan products are good," the RBTT representative said. "RBTT had a partner plan launched in February of 2003, and a credit union just launched theirs a few days ago".
"We continue to aggressively meet the needs of our customers and we are not focusing on any particular group. We have attractive interest rates and a larger variety of products than the credit unions can provide."
And some loan products work out to be more competitive with the commercial banks for the consumer, the CAC officer said. This is especially the case with car loans.
The entry of RBTT and the resurgence of the National Commercial Bank have had a big impact on financial markets, Mr. Pryce said. This has stimulated, "much of the creativity that we now see" in this sector and it has boosted the level of competitiveness in lending.
"We have more competitors now," Mr. Pryce said. "The change I see is a function of the development of the commercial landscape."
