Central Bank Anniversary Lecture -Technological Innovation Changes Driving Financial Services Opening Address by President James A Michel 18 November 2011
Mon, 21 November 2011
Central Bank Anniversary Lecture
Technological Innovation Changes Driving Financial Services
Opening Address by President James A Michel
Governor of the Central Bank,
Mr. Arun Jain, Chairman and CEO of Polaris Software Lab,
Ladies and Gentlemen,
The theme, Technological Innovation driving Financial Services, chosen by the Central Bank to mark its seventeenth anniversary is both timely and opportune. Like many of you I have followed with much interest the fascinating innovations that have occurred over the years in the development of financial services, as a result of technological advances.
Our economy has made tremendous progress in recent times despite or, perhaps, because of, the enormous challenges that we have faced. My Government and the Central Bank have made significant strides to improve the regulatory framework in which financial institutions operate. We will continue to ensure that our institutional and legal frameworks remain up to date with the financial innovations.
I have no doubt that all of you present here today share my appreciation of how important the financial sector is to our economy. In Seychelles this sector directly contributes 4.2 per cent to Gross Domestic Product. This makes it one of the key sectors of the economy after tourism and fisheries. The sector today employs over 1,100 persons, that is, 2.4 per cent of Seychelles’ workforce. Tax revenue from the sector in 2010 amounted to R137 million, which was 17 per cent of total tax revenue. These are not insignificant.
Ladies and gentlemen, in this day and age everything revolves around technological innovations. Failure by any business or market player to appreciate this fact is at their own peril. We have all witnessed, time after time, how long-established, reputable businesses have been left behind or failed by virtue of being too slow to grasp the benefits of financial innovation. Fully aware of this, a number of recent ventures and enterprises in Seychelles have shown acumen by better adapting to technological advances.
I applaud the efforts of our public institutions which have grasped technological changes, and which have already brought about significant improvements in the delivery of their services. On the occasion of its anniversary lecture, I take the opportunity to congratulate the Central Bank for being one of our institutions that has adopted technological advances to its benefit. The recent investment of the CBS in its integrated CORE banking platform was a major breakthrough for the Bank. This solution has allowed the Bank to, among other things, increase the volume of transactions it processes, reduce risks associated with a multitude of computer software, minimize security risks, provide real-time balances to Government and commercial banks, and enable straight-through processing. I also note with encouragement the various forthcoming projects envisaged by the Bank, including very shortly, its initiative for the automation of cheque clearing, which will mean that the exchange of paper cheques between banks for the settlement of personal and business transactions will soon be a thing of the past.
Today, I also want to recognize the significant contribution that financial institutions, in particular commercial banks, have made and continue to make to our economy. However, when it comes to innovation I cannot say that I am satisfied with what the institutions are offering to their clients. For instance, today not one single bank in Seychelles offers full Internet banking services to their clients! This is unacceptable in this day and age. I am encouraged, however, that some of our banks have indicated that this will be forthcoming. I hope that this will happen sooner rather than later.
I want to take this opportunity to appeal to our financial institutions, especially the commercial banks to do more to help our economy. We, as a nation, are becoming more sophisticated by the day, and the level of services that banks provide is, frankly, not up to expectations. When we ask foreign investors to come to our shores we want quality investors, but they will turn their backs on us if the quality of services that our banks provide are not up to standard. With technological advances the tools are there to improve the quality of services. But having said that nothing can replace the human touch. This is why, as much as we want to promote technology in banking services, banks need to keep investing in their human capital.
Ladies and gentlemen, technological innovation presents us with many challenges but also with exciting and rewarding opportunities. Let us make the most of the great opportunities at hand. They will be significantly enhanced when Seychelles’ submarine cable becomes operational next year. It will provide a major boost to our country’s endeavour to improve our communications capability. The submarine cable will bring Seychelles so much closer to financial innovations through a significant increase in Internet access and speed and higher volumes of e-commerce at substantially reduced costs. This project required significant resources both from Government and the private sector. It exemplifies the type of public-private partnership that is the hallmark of the New Seychelles. Like you all, I look forward eagerly to the completion of this project, and the benefits that it will bring to our country.
Ladies and gentlemen, as we focus on the subject of technological change and how it is driving financial innovation, the world financial system is in turmoil. As many countries, large and small, struggle to cope with the painful effects of this crisis, Seychelles, despite many challenges, remains resilient and continues to cope remarkably well. We have shown that having the right policies and right economic base firmly in place are the most effective tools in facing the harsh reality of such crises. I believe that, similarly, those businesses which invest wisely in technology and in human capital will be better placed to face the challenges of competition, market access, service delivery, sourcing etc. and will stand to gain most through financial innovation.
I cannot conclude without reiterating my wish for commercial banks to do more to develop our economy through provision of more credit, especially to small and medium-size enterprises. We have a duty to empower our people. We have a duty to help them better their situation, to do business, expand and create more wealth, more opportunities¦ But they cannot do so without access to affordable credit. Credit remains one of the fundamental drivers of economic growth. Banks can and must reduce interest rates further. Bank spreads today are higher than they were before we implemented our economic reforms three years ago, one of the only few black spots when we look at our overall performance during that period. So I urge banks, once again, to go back to the drawing board and contribute more to our economy through more affordable lending rates. At the same time let us do more to encourage the savings culture through more attractive savings rates.
Ladies and gentlemen, technological innovation is one of the best things that happened to mankind, and we have to make the most of it. We are part of the process. We have to own it and drive it. We have to be forward-looking - a nation on the march to progress. We cannot afford to be complacent - we have to accept and adopt innovation. It is the key to our survival and progress as a nation.
I thank you and wish you fruitful deliberations.