Banks suffering from years of negative interest rates are turning the screws on customers who still rely on branch networks to obtain essential banking services.
Maltese banks are slowly, but surely, adopting the operational strategies of other European banks by closing branches, reducing the staff that serve customers in person and hiking fees.
Bank of Valletta and HSBC, Malta’s largest banks, benefit from a dominant market position. Despite their commitment to embedding ESG – economic, social and governance – standards in their strategies and operations, they are providing an inadequate level of service to a substantial minority of the community for whom online banking services is not a feasible option.
Older customers and lower-income households are more likely to be impacted by bank branch closures.
Moreover, the long queues that one sees waiting in front of bank branches are causing concerns at local councils and the national political level.
Valletta mayor Alfred Zammit and MP Adrian Delia have expressed concern about the long time it takes for customers to be served in local bank branches.
In a social media post, Delia argued that while he disagrees with the principles of government intervention on commercial issues, he would consider supporting government action “if banks continue to be stubborn and treat people like animals”.
Face-to-face banking is still a vital component of the financial services sector and must be preserved.
The banking industry has justified branch closure and reduction of teller services by pointing to the increased use of online and mobile banking. However, they appear to dismiss the fact that large sections of society still rely on bank branches to carry out their banking needs.
Face-to-face banking is still a vital component of the financial services sector and must be preserved
Occasional IT failures within banks confirm the inability of financial service providers to serve their customers digitally when those glitches occur within the system.
This provides strong justification for 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 professing that they take their social responsibilities to the community seriously.
If the financial services sector is unwilling to innovate to halt branch closures or provide an adequate level of service to all customers, including those for whom online banking is not a real option, market intervention by the local regulators, or even the government, might be necessary.
Such intervention might include forcing banks to provide an adequate physical network for consumers as a condition of being granted a banking licence.
Some would argue that the government should not intervene in commercial decisions that are made. However, the protection of minority rights is a duty and obligation of any administration. If moral suasion by regulators fails to guarantee fundamental banking rights to all those who need and qualify for them, then other interventions must be considered.
The process of opening accounts needs to be speeded up by putting pressure on international banking regulators and supervisors to promote more risk-based practices for assessing the eligibility of applicants, as we argued in a leader last week.
However, local in-person branch services like the encashment of cheques, deposits and bank transfers must also be improved and adhere to a set of minimum service standards.
The government should also do its part. It could guarantee fundamental banking services to all the community by using part of the tax it earns from banking profits to help banks defray the costs of providing in-person branch services.