After a span of almost two years, the islands continue to navigate a pandemic along with an economic downturn in the islands. Top level executives who do business in the regional finance and banking sectors share their insights on how this has impacted their clients.
As the islands of Micronesia continue their journey through the pandemic, the financial service sector has implemented various changes in technical services.
As to 2022, executives will see what the year brings, they say.
By Jenelyn Abinales
GBM: What are your thoughts on the past year at your organization? What has been your major concern?
Deliquina
Gener F. Deliquina, CEO of Coast360 Federal Credit Union: Economically, we continue to see the negative impacts of the COVID-19 pandemic on our island, primarily on our tourism industry. At Coast360, we strive to assist our members thrive financially during these challenging times. We have been successful in managing our members’ expectations throughout the pandemic by implementing a progressive, adaptive and responsive business continuity plan. The year 2021 was a great year for Coast360 overall. Our major concern is basically the uncertainty of it all. The market remains highly volatile, making it very difficult to project and plan ahead, short-term and long-term. Inflation and recession are major concerns too. We remain optimistic towards brighter days for all and stay focused on delivering service excellence to our members and community.
Valdez
Peter Valdez, senior vice president, BankPacific: Stimulus measures early in the pandemic and through 2021 injected massive amounts of liquidity into the economy. Meanwhile, businesses feeling the uncertainty of the market have opted to park that money at their banks.
The question of what banks are to do with this glut of deposits and whether this means they may actually turn away future deposits has been a challenge for all banks.
Cruz
Gerard R. Cruz, president and CEO of Community First Federal Credit Union: We entered 2021 optimistic that with the vaccine we were near the end of the pandemic, but by September we switched our thinking to making adjustments within our organization in order to live with this virus.
Our major concern going into 2022 is that many have yet to transition their organizations to the reality that this virus and its mutations are here for a while.
Untalan
Edward G. Untalan, executive vice president and Guam-CNMI regional manager: As with all businesses, the pandemic has been the major concern – how to keep our staff, customers, and families safe. A second concern is the recovery of the economy.
Schaumann
Clarke Schaumann, CEO, ANZ Guam Inc. and regional country head: I have been so proud to see how the employees of ANZ have adapted and shown grit in the face of so much uncertainty. We have provided solid service to our customers throughout 2021. My major concern is that a reliable resolution to the uncertainty continues to stay out of reach.
GBM: In general, how have your clients been doing? Have you seen some small businesses close or encounter significant difficulties?
Deliquina: I feel that our members are managing their finances as best they can, perhaps by less spending and more savings. We have provided assistance to them in the form of loan deferments during the height of the pandemic and now see that they have resumed regular payments, which is a very strong sign of our members’ financial well-being and priority towards their credit health. We have a small percentage of business members and have not experienced significant difficulties with them. Most were very cooperative by working with the Credit Union to ensure they continue to meet their obligations. We participated in the U.S. SBA’s Paycheck Protection Program, which helped our members cope financially against the pandemic’s impact on their revenue stream.
Valdez: During the early stages of the pandemic, BankPacific has offered financial assistance programs to help customers in Guam, Saipan, and Palau that may be facing financial hardship, primarily due to a drop in tourism, with loan deferment programs. This has allowed many of our customers to navigate through disruptions in employment due to the pandemic.
Cruz: In general, federal government pandemic monetary support, payment leniency by many lenders and local government support helped to keep many families and businesses from economic disaster. But as we are now seeing (nationwide), many people are now slow to return to the workforce. We think this is a short-term effect but an example of an unintended consequence that is partly contributing to the inflation we are feeling.
For small business, clearly, some industries fared far worse than others. Local businesses that supported tourism, entertainment or other social activities were affected severely, and many in these industries could no longer hold on. Despite government support, we saw the closure of several businesses that were operating fine, pre-pandemic.
Untalan: While some businesses have not fared well, many are doing okay with the help of the federal and local government and depending on the industry. Also, many of those businesses who have continued to its operation have adapted to a new way of doing business using technology.
Schaumann: Clients who have fared well tend to fall into two categories: larger corporations who are well capitalized with strong risk management disciplines, or nimble companies who were willing and able to quickly adapt to the new environment. There have been many small businesses who have either closed or significantly changed their business model.
GBM: Have federal and local loans helped them?
Deliquina: Definitely yes. We have seen an exponential growth in deposits among our members during the pandemic which can be attributed to the federal and local financial assistance programs, such as the stimulus and pandemic unemployment assistance funding. These programs helped our members stay afloat with their financing needs and have learned to save more. In the case of businesses, the SBA PPP and Rental Assistance Programs have definitely helped them survive financially.
Valdez: The Paycheck Protection Program and the Economic Injury Disaster Loan has helped small businesses and non-profits on Guam and Saipan to remain open, maintain payroll, and make adjustments to operate safely during the global pandemic. Despite the early challenges in delivering PPP, this important federal lifeline has assisted many struggling small businesses. Other programs that continue to assist businesses include the Guam Economic Development Autority’s expanded participation in the State Small Business Credit Initiatives program, which BankPacific actively participates in.
Cruz: Yes, federal loans helped, to a degree. However, for some businesses, it simply delayed the inevitable.
Untalan: Absolutely. Not only loans, but grants, so a lot of free money. In addition to the subsidies, we must remember that construction activity resulting from the military realignment has also been a great benefit. Without the federal government, we would have been in a worse position.
Schaumann: These loans have delayed immediate impacts of the pandemic – which allowed the nimble companies to adapt – but companies who did not change have not fared well.”
GBM: What industries make up your client base and roughly what percentage are business clients?
Deliquina: Currently, the Credit Union has nearly 50,000 members; only about 3% are businesses.
Valdez: Between Guam, Saipan, and Palau the primary industrial make up of these markets are driven by international tourism.
Cruz: About 30% of our members are businesses, organizations, associations, etc. Collectively, they make up for more than 40% of our deposit base.
Untalan: FHB is a retail bank. So, we have customers in practically every industry on the Island and we service both the consumer and commercial banking segments.
GB: How has uptake of internet banking and financial services been at your organization?
Deliquina: We continue to see a consistent increase in the use of our online and mobile banking services of about an average of 11.51% annually since 2019.
Valdez: The need for BankPacific to support our local customer and power economic growth is stronger than ever. Credit remains one of the most powerful tools to accomplish this. Whether for individuals buying cars and home or for entrepreneurs financing capital improvements they have been holding off. The way we lead our lives has changed. Choices have opened, creating new possibilities in how we spend, borrow, and save – even as our physical world has shrunk.
During the pandemic, we all learned how much we could do remotely. Homeowners refinanced mortgages, e-signing their way to lower interest rates. Small businesses found emergency relief on digital platforms created overnight. The banking industry worked around the clock to make it all happen.
Cruz: On-line account access has been part of our product offering since 2001. Over the years we’ve continued to enhance our product and expand its features to include the launch of a mobile app and the ability to make deposits using a picture of a check. As a result, we’ve had a steady growth in users in our on-line channel. Since the onset of the pandemic, however, the number of users of our mobile app increased more than 80% and the number of on-line users has increased 48%.
Untalan: Technology has been evolving over the years. It’s the way of the future where everything will be done digitally. While the bank had already been making significant “upgrades” over the years, the pandemic accelerated our plans (like I am sure everyone else’s). Digital banking addresses safety issues and is a tool of the future.
GBM: A small number of financial institutions are moving to accept cash deposits at ATMs. Is yours one of them?
Deliquina: Our ATM units at the member centers (branches) have accepted cash and check deposits for more than 13 years now.
Cruz: We think the more relevant question is “who still uses cash anymore”? In our business we’ve have actually seen a steady reduction in hard currency orders over the last few years and an explosion in electronic payments. In the last two years, electronic payment transactions have grown to more than 90% of our total payment and fund flow transactions. Aside from the traditional debit and credit networks and Paypal, there now is Pop Money, and Venmo and others. Even WeChat is accessible here. So, we are seeing that more and more people are being paid through a direct deposit and using their debit card or other electronic payment app (Paypal, Applepay, Googlepay etc.) to make purchases or payments, and never needing actual currency.
Untalan: Yes. Our ATMs located at all our branches take cash and check deposits, without a deposit slip. The branch ATM will automatically count your cash, scan your checks, and provide you a total. You can also print a summary breakdown or even a scanned copy of all the checks you deposited.
Schaumann: No. Less cash is the better way forward.
GBM: How long will it take before long lines at financial institutions are significantly reduced as more people bank remotely? A decade?
Deliquina: Individuals who prefer the personal touch experience will continue to visit the financial institutions when able to, regardless of their access online and mobile banking. Long lines can be minimized through effective allocation of resources to address the consumer’s preferred way of banking.
Valdez: The banking industry is in a state of change. Traditional banks are at risk of losing their competitive advantage if they cannot meet customers with the service they expect wherever they are, and this is everywhere. Mobile. Tablet. ATM. By Phone. In-person. Some call this a hybrid model, combining the human touch with digital efficiency. Whatever it is called, this model is the most powerful of all. Even Amazon, the original standard for seamless virtual customer care, is testing physical stores to meet customers wherever they prefer. To compete effectively, banks must be able to bring their physical relationship model into the connected digital era.
Cruz: Remote banking is only a part of the solution to the long lines seen at “other” banks. Clients come in because they need service. They stand in line because they aren’t being served. Even with on-line banking, which has been in the market for at least 20 years, some clients still need to go to the bank. So, the other part of the solution to this problem is to address the reason why clients aren’t being served.
Untalan: As I mentioned, I think it’s a generational thing. Because our island is small, driving to the bank is not an issue. Our island people are social creatures – older customers, especially the manamku would also use it one way to get out and interreact. Bank visits are not all about convenience but also about relationships that keep customers and engaged in the community.
Schaumann: When we stop using checks.
