Making the move to plastic
The merits of non-cash transactions

By Bebe Buksh
Stabroek News
December 10, 2000

The use of Automatic Teller Machines (ATMs) and Debit Cards have revolutionized banking services. They afford conveniences to consumers in the deposit and withdrawal functions and in the payment for purchases through debit points of sale at retail outlets.

According to the American Bankers' Association website, the first ATM was installed in the US in 1971 by the Citizens & Southern National Bank, in Atlanta, Georgia. Since then the number of ATMs has grown to 708,555 worldwide in 1999, with 32 per cent located in Asia/Pacific, 31 per cent in North America and 25 per cent in Western Europe as the areas of major distribution.

Transactions using `plastic', as the ATM cards are called, are relatively new in Guyana, particularly as they relate to debit points of sale. They are stymied by a non-electronic central clearing house and huge costs associated in deploying individual machines.

However, the volume of transactions has become an overriding concern for the banks and they have gone ahead with ATMs despite these limitations. The lack of an intense public relations exercise on the advantages of non-cash transactions, customers' cultural hang-ups, their fear of the technology, or preference for personalised services, have been attributed to their reluctance to use the service.

All but one of Guyana's seven commercial banks--Bank of Baroda-- have ATMs or Automated Banking Machines (ABMs), but only three are providing debit card points of sale --Demerara Bank Ltd (DBL), Guyana Bank for Trade and Industry (GBTI) and National Bank for Industry and Commerce (NBIC).

Bank of Nova Scotia launched its 24 hour ABM service in 1996, with a total to date of six, and is moving to launch its first off-site facility at the Guyana Sugar Corporation's (GUYSUCO) LBI East Demerara Estate shortly. But the bank is faced with the challenge of convincing rural residents to utilise the ABM.

Workers in the agricultural industry--rice and cane--comprise a huge portion of the commercial banks' customer base. The custom of collecting an envelope of cash is embedded in many and because the technology is new, especially considering the country's developing status, for some people making the change is difficult, explains Scotia Bank's Sales and Marketing Manager, Dennis Bahadur. "It takes ongoing education," he said.

And, although it has not opened a debit point of sale, its international merchant acquisition programme enables it to accept major international credit cards such as Master Card and Visa Gold.

Networking Bahadur says two major drawbacks for his bank in not having a debit point of sale facility are cost inefficiency and a non-electronic clearing house.

Because of the high cost of deploying ATMs and their associated maintenance costs, most financial institutions belong to one or more ATM networks. ATM networks allow consumers to use their debit cards (cirrus cards) at any ATM location displaying the logo of the ATM network to which their bank belongs. A convenience fee (surcharge) is charged for this service. In the US this fee varies between $0.86 (for ATMs on university campuses) to US$2.33 (for ATMs in casinos). An ATM network, acts as a clearing house for transactions conducted by customers of its members in much the same way as the central bank acts as the clearing house for customer inter-bank transactions. The ATM network further acts as a clearing house for point of sale participants.

Pointing out the cost for banks having individual point of sale, Bahadur posits a cirrus card would be cost efficient and beneficial to all the banks. He explained that the cirrus card, visitors would not need to walk around with foreign exchange.

The Scotia Bank official added that ABM cards were issued free upon customers' application for a passbook. However, the lines in his bank continue to exist and often his staff have to encourage customers to use their cards. Dual purpose cards Demerara Bank Ltd (DBL) issues dual purpose ATM cards, which customers could use for point-of-sale transactions, and at merchant outlets--some 55 to 60 and increasing. But the merchant outlets are primarily in Georgetown, because the bank only has one office which is based in the city, Yugisther Mohabir, a supervisor at the bank said.

He said that having out of town ABMs need branches to support them and referred to a Bank of Guyana policy which stipulates this.

Only about 60 per cent to 65 per cent of this bank's customers have debit cards for which they pay, and Mohabir said the customers have a choice of having a passbook or a debit card.

But he feels that given the devaluation of the currency, especially with the highest denomination being $1,000, more persons might be encouraged to used the debit card.

In terms of card use trends among his bank's customers, Mohabir said, the elderly prefer a personalised service, and "this will always remain". But as for the other segment of his customer base, he said, the rate of receptiveness for cards was not growing as fast as the bank would like.

These sentiments were also similar to those expressed by Guyana National Cooperative (GNCB) Bank Operations Manager, Francesca Butts. However, this bank, with a single point of sale in Georgetown does not offer facilities for merchant use because of high cost.

About 75 per cent to 80 per cent of Citizens Bank customers use the card for which they pay. Manager of Operations and Bank Administration, Denise Thompson, said that the bank did not see the sense in providing debit points of sale because of high cost as the spending power was not there to support the required volume of transactions.

The bank is flexible on rates for its wage earners' service which deals with payroll for companies such as Banks DIH Ltd, which is the majority shareholder. Citizen's Bank has five ATM vestibules--three in Georgetown, one in Parika and one in Bartica.

The National Bank of Industry and Commerce (NBIC), has the largest customer base in the country and the bank is pleased with the five per cent rate at which card use is growing. Operations Manager, Keith Johnson, said this has exceeded the management's expectation. NBIC offers a dual purpose card as well, and has ten points of sale around the country-- six in Georgetown and one each at the University of Guyana, Corriverton, New Amsterdam and Linden. Johnson strongly believes that a shared system of processing electronic transaction is greatly needed for cutting cost. He said this would also be advantageous to the customer because of convenience of use at any point of sale. Clearing house

Most of the banks interviewed will be moving shortly towards tele-banking or e-banking transactions. However, on the user charge for cards, the international debate has favoured banks absorbing the costs. The charge is free in the US, but in Guyana it varies from $20 to $25 for every transaction. Limits on withdrawal also vary from $45,000 to $150,000 representing one or a series of transactions within a 24-hour day; settlement by merchants is immediate.

As regards fraud prevention, every card is activated by a personal identification number (PIN), and customers are allowed up to three tries. If these fail, the machine secures the card, until the customer goes to the bank. But in instances of technical or mechanical faults, every machine has a 24-hour call service, and banks service their machines often.

Stabroek News spoke with Head of Research at the Bank of Guyana, Dr Gobind Ganga, on the concern raised by bankers on the non-electronic clearing house. Dr Ganga assured that the central bank was continuously upgrading. He said this would take time because of the need for the latest electronic equipment which were always being updated and information technology. He said this was a matter which the central bank will have to discuss with the commercial banks. The current manual clearing house system takes from two to three days to complete, and for out-of-town zones up to one week.

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