Editorial: Securing Essential Banking Services
Banks suffering from years of negative interest rates are turning the screws on customers who still rely on branch networks for essential banking services.
Maltese banks are slowly but surely adopting the operational strategies of other European banks by closing branches, reducing staff serving customers in person and increasing fees.
Bank of Valletta and HSBC, the largest banks in Malta, enjoy a dominant position in the market. Despite their commitment to integrating ESG – economic, social and governance – standards into their strategies and operations, they provide an inadequate level of service to a substantial minority of the community for whom online banking is not a feasible option.
Older customers and low-income households are more likely to be affected by bank branch closures.
In addition, the long queues seen in front of bank branches worry local councils and the national political level.
Valletta Mayor Alfred Zammit and MP Adrian Delia have expressed concern about the time it takes for customers to be served at local bank branches.
In a social media post, Delia argued that while he disagreed with the principles for government intervention on trade issues, he would consider supporting government action “if the banks continue to be stubborn and to treat people like animals”.
Face-to-face banking remains an essential component of the financial services industry and should be preserved.
The banking sector justified the closing of branches and the reduction of counter services by pointing to the increased use of online and mobile banking services. However, they seem to ignore the fact that large sections of society still depend on bank branches to meet their banking needs.
Face-to-face banking remains an essential component of the financial services sector and must be preserved
Occasional computer outages within banks confirm the inability of financial service providers to serve their customers digitally when these problems arise in the system.
This strongly justifies the argument that banks cannot rely on online and mobile channels to entirely replace their physical presence through branches.
A balanced click and brick strategy must be the bedrock of customer service for banks claiming they take their social responsibilities to the community seriously.
If the financial services industry is unwilling to innovate to stop branch closures or provide an adequate level of service to all customers, including those for whom online banking is not a real option, a Market intervention by local regulators, or even government, may be necessary.
One such intervention could be to require banks to provide an adequate physical network to consumers as a condition of obtaining a banking license.
Some will say that the government should not interfere in the business decisions that are made. However, the protection of minority rights is a duty and an obligation of any administration. If the moral suasion of regulators fails to guarantee basic banking rights to all who need and are entitled to them, then other interventions must be considered.
The account opening process needs to be expedited by lobbying international banking regulators and supervisors to promote more risk-based practices for assessing applicant eligibility, as we argued in a leading la last week.
However, in-person local branch services like check cashing, deposits and wire transfers also need to be improved and meet a set of minimum service standards.
The government should also do its part. It could guarantee basic banking services to the entire community by using part of the tax it collects on bank profits to help banks cover the costs of providing in-person branch services.
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