If you’re a Jamaican without a bank account, then it’s likely that you’re spending considerably more than those who do have a bank account. That’s the finding of a recent study conducted by the Caribbean Policy Research Institute (CaPRI).

The study, titled ‘Cheque In: Increasing Access to the Formal Financial System’, found that unbanked Jamaicans were paying more to complete everyday tasks. At the same time, most of the unbanked, which accounted for approximately 17 per cent of the Jamaican population, are from low-income and low-middle income households and may be earning minimum wage. This means that the additional cost of being unbanked is making financial circumstances tighter for these groups of people.

To put things into context, the study found that “one of the most costly tasks for the unbanked is interacting with the formal banking system”. It highlighted that having to encash, rather than deposit, a cheque costs unbanked individuals, on average, $318 per encashment (the bank’s fee).

As for those who earn based on the amount of time spent on the job, “it takes about two hours of work time for a minimum wage earner to change money from cheque to cash. There are transportation costs of both money and time when people have to physically go to a bank to encash a cheque; these costs are higher for persons living in remote areas.”

In addition, financially vulnerable people are paying more for basic services such as bill payments when they do not have access to formal financial services.

The CaPRI study also found that in Jamaica, only about 10 per cent of bill payments are done online or by telephone. Most payments are made in person, even though in-person transactions are costly.

“On average, the unbanked and underbanked lose J$6,825, or a week’s work for a minimum wage earner, each month they pay their bills in person.”

The study revealed that this cost includes the time it takes to travel to bill payment locations; it takes approximately 18 minutes for travelling and 21 minutes to complete a regular bill payment transaction.

“Outside of productive time lost, paying bills in person at multi-transaction agencies incurs a per transaction fee, whereas payment online is either free or less costly. Paymaster and Bill Express, the two most dominant such entities in Jamaica, charge J$55 per in-person bill payment.”

But the study also noted that there are barriers to opening a bank account in Jamaica. For example; “Approximately half of the unbanked either do not have any form of identification, or if they did, were unable to prove their address, which was insufficient to fulfil the KYC requirements; this disproportionately affects low-income individuals.”

Moreover, “about 50 per cent of the population either do not trust the Government or financial institutions, or are at best neutral towards them, impacting the usage of formal savings. Consequently, informal savings mechanisms remain prevalent, such as partner schemes or storing money at home, with a family member, or friend,” the study found.

With that said, banks and other financial institutions are being encouraged to revisit “know-your-customer (KYC) requirements, low levels of trust in governing institutions, and suboptimal financial literacy [which] impede the adoption of formal savings products.”