Faster and still so expensive?

The publication of instant payment fees by the Central Bank should cause consumers in St. Maarten to ask a simple question: what exactly are we paying for? (see related story)

The technology behind an instant transfer is the same basic infrastructure. Money moves between participating banks within seconds. The Central Bank charges financial institutions XCG 0.35 to process such a transfer. Yet what reaches the consumer is remarkably different.

One bank charges nothing for an online instant transfer. Another charges XCG 0.50. Others are around one guilder. RBC charges XCG 6.27, or US$3.50. That difference cannot simply be brushed aside as the cost of banking.

Banks undoubtedly have expenses beyond what they pay the Central Bank. They maintain systems, meet regulatory requirements, employ staff and provide security. But when one institution can offer the same type of transaction free of charge while another charges more than six guilders, consumers are entitled to a clear explanation of what accounts for that gap.

This becomes more important when banking is no longer optional in everyday life. Salaries are deposited into accounts. Bills are paid electronically. Businesses increasingly prefer digital payments. Government itself encourages modernization and reduced dependence on cash. Consumers are being pushed toward digital banking because it is supposed to be faster, easier and more efficient. As such, efficiency should eventually mean savings for the customer too.

The Central Bank has already reduced what it charges financial institutions for instant transactions, citing increased transaction volumes and recovered operational costs. Consumers should therefore reasonably ask whether lower infrastructure costs are being reflected in what they pay.

Transparency by the CBCS is a good first step, but publishing the numbers cannot be the end of the matter. Banks with significantly higher fees should explain them, or at least the government should ask them to. The Central Bank should continue comparing charges and encouraging competition. Consumers should also use this information when deciding where to bank.

A few guilders may appear insignificant when viewed as a single transaction. Multiply that by several transfers every month, across thousands of households and small businesses, and banking fees become another recurring cost in a country already struggling with the cost of living.

Modern banking should not merely move our money faster. It should give consumers better value as well.

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