Jamaicans pinch on debit card use
Published:Friday | February 4, 2011 | 12:00 AM
Bad economy, higher fees caused drove prudence
Avia Ustanny, Gleaner Writer
With their incomes pinched by a bad economy and faced with rising costs for such transactions, Jamaicans made fewer trips to automated banking machines (ABMs) last year, as well as kept a lid on the use of their debit cards to make purchases, just released data suggest.
In fact, on both counts, the value of ABM transactions - the 6.9 per cent rise in point-of-sale debits, to $30.04 billion, and 3.6 per cent increase to $50.54 billion withdrawn at teller machines - lagged behind inflation.
"The effects of the global recession (and) local economic conditions had an impact on the 2010 results," said Edmundo Jenez, general manager of JETS, the company that runs the MultiLinknetwork that links ABMs in Jamaica.
The system links 10 institutions with more than 530 ABM machines and over 8,000 point-of-sale locations. About 370,000 unique debit cards are used on the network.
In recent years, as Jamaicans increasingly traded cash for plastic and as financial houses sought to lessen crowds in their banking halls by driving customers to ABMs and other forms of online banking, the use of debit cards has been on the rise.
But the economic situation of many Jamaicans have taken a battering in recent years with the economy having fallen into a three-year recession.
Nearly 100,000 people have lost jobs, pushing the official unemployment rate of approximately 11 per cent to its highest level in four years.
Additionally, with the Govern-ment rescheduling more than $700 billion of domestic debt by sharply lowering rates on its instruments and extending their maturity periods, banks have attempted to recoup some of the lost interest income by hiking service fees. ABM charges have been among them.
Not long ago, a simple withdrawal via an ABM would cost a few dollars. Now, they range between $8.80 and $42.55.
Analysts suggest that such higher costs would have helped to influence how customers used their debt cards last year - more frugally than in recent years.
For example, their 17.13 billion debit-card transactions in 2010 represented more than 243,000 or 1.4 per cent fewer than the year before.
With regard to the use of debit cards at shops, stores and other business places, the 7,114,308 swipes by consumers was just a bit over 5,000, or less than one per cent more than in 2009. Their spend was 6.9 per cent higher than 2009, while inflation was nearer to double digit.
In other words, the additional $1.95 billion consumers spent using debit cards last year would have delivered less than in 2009 .
When it came to withdrawing cash from teller machines, banks customers did this nearly 249,000, or 2.4 per cent fewer times than in 2009, although the average value of each transaction was higher.
"The average ABM withdrawal amount for 2010 was $5,045 compared to $4,750 in 2009, this being a 6.21 per cent increase in average demand," Jenez said. "For POS [transactions], the averages were $4,223 in 2010 versus $3,953 in 2009, a 6.78 per cent increase."
Jenez's assumption was that customers were withdrawing, "a little bit more, perhaps in response to inflation, while keeping their usage patterns consistent with the prior year".
The average number of transactions by ABM customers last year was between five and six a month, from up to eight in 2009.
What was not clear, though, was whether people kept closer to their own banks' ABMs, rather than doing cross-network transactions, which would mean higher costs.
"The activity on the network is only for inter-institutional transfers, that is, when a customer uses their card at a terminal of a financial institution other than their own," Jenez explained. "When a customer uses a terminal of their own institution, that creates a proprietary transaction, which does not come through the network."
But he had little doubt about the broader factor that affected the use of debit cards.
"Customers basically seem to be holding strain with the impact of the recession and local economic issues," Jenez said.