The digitalisation of banking services has caused some severe collateral damage to consumers, especially those that are more vulnerable because of their age or inadequate digital literacy.

Consumer associations argue that it is time for financial regulators to intervene and set caps on the charges that banks impose for providing services that were ‘free’ up to some time ago.

There is little doubt that escalating bank fees are hitting consumers hard in all industrialised countries. In some countries, banks are now reducing the number of ATMs or charging higher fees for ATM cash withdrawals.

The local Consumers’ Association wants the government, the Malta Financial Services Authority and the Malta Competition and Consumer Affairs Authority to investigate BOV and HSBC charges.

Banks almost universally have policies in place that aim to make every service they provide pay for itself. The ‘free’ banking concept is becoming increasingly unpopular because it relied on the cross-subsidisation of banking services. The charges that banks impose to encash cheques most likely just cover the handling costs. Few countries still allow the use of cheques, which have now been replaced by electronic direct credits and debits.

The consumer associations understandably argue that vulnerable consumers do not have a real option of using electronic banking applications to withdraw cash. Therefore, they should not be made to suffer because of the fast-moving and irreversible trend of digitalised banking services.

The increase in bank charges for encashing cheques is not due to a lack of competition in the banking sector. It is more likely due to the increase of regulatory and operational burdens that have to be financed by banks.

Similarly, the increase in ‘bureaucratic procedures’ to open an account, or even to deposit money in one’s account, results from the regulatory intense focus on combatting money laundering.

There is, of course, a case for banks to make some exceptions in their tariff of charges to protect the more vulnerable customers from financial stress. This could be achieved as part of a bank’s corporate social responsibility commitment.

However, it would be hard to justify the regulators tampering with banks’ commercial decisions when, at the same time, they insist on banks adopting prudent lending policies.

A solution could be found if the statutory annual cost-of-living allowance was based on a more refined model. The cost of basic banking transactions for consumers should be included in the basket of expenses that an average household would incur on a regular basis.

The statutory annual increase in pensions and wages should include the cost of conducting basic banking transactions like encashing a pension’s cheque.

It is fallacious to argue that the profits that banks aim to make are bad practice. Most banks are revising their business models both due to more intrusive regulation and other factors like low-interest rates that they cannot control.

Admittedly, low-interest rates are also hitting account holders who often depend on the interest they earn on their bank accounts to make ends meet. The low-interest rates that have prevailed for the last few years are the price that every country is paying to prevent an economic depression.

Rather than financial regulators or consumer associations intervening, the government should develop viable solutions to ensure that vulnerable consumers are compensated for the increase in costs brought about by the fast-evolving trend of banking services digitalisation.