The debate at the beginning of the year on bank charges, even through its problematic context in Parliament, is a belated step forward for the industry, but it exposes its weaknesses. Banks will soon realize that this discussion should have taken place a few years earlier and that technologically skilled customers may be removed. Because it is not only the banks that have changed their mentality during the years leading up to the financial crisis, but also many of their customers.
At Theophania I bought my traditional donuts from a street shop and paid through the bank application. In other words, I remained faithful to the custom, but both I and the donut maker showed that we have adapted to the new data of the transactions. Otherwise, I would have to look for cash from a cash register or credit card store. I'm not the most technologically savvy customer, however it's not the first time in the middle of nowhere, I've been able to pay through apps and it certainly will not be the last. I take it for granted, as does a huge group of the population, which is familiar with such transactions. If they find that the “application”, banking or not, tries to “eat” one of the donuts through charges, it is more likely that they will look for another, less “greedy”.
In other words, the banking institutions, with the charges, risk losing part of the part of the customers that they would describe as “potential” and becoming the object of populism in the Parliament, in order to gain a few million euros from charges. However, this is not a mistake, nor “greed”, but a sign of weakness. Yes, they bet on customer inaction but even so, the big picture is how much they need the little more euros from each customer. It is an indication of how much their income has been pushed by low interest rates and the pandemic, how low and uncertain things have become and how difficult it is to have profitable trades. At the same time, the charges tell us about the pressure they receive from supervisors on payroll and the investment they have to make in technology. In other words, the banks are obliged to make increases in the charges, at the same time with cuts in the payroll in order to withstand the local and foreign competition and to remain robust.
This debate, however, had to take place a decade ago. In Cyprus, as in many other European countries, the debate was overshadowed by the severe banking crisis. With immediate survival at the forefront, banks did not have the strength to meet the challenges posed by new technologies. Now, with the applications installed on every mobile phone, the increases in the charges are a desperate effort and nothing will be able to stop the significant cost cuts. At best, this money will initially cover part of the cost of the technology upgrade but will soon have to be adjusted to competitors' charges, wherever they come from. The physical presence of the banks and the right to issue a checkbook will not keep the customers nor bring the required income that will balance the large expenses.
Postscript – On the radio show of Politis 107.6 “Show me the Money”, I had said that “I do not know a person under 40 who has or uses a checkbook”. A listener informed me that he is forced to have to pay for home repairs. With the itinerant donut accepting payments from an app, I believe dear listener that if next time you are not ashamed and ask your electrician if he has a way of contactless payments before you take out the booklet, you will probably be pleasantly surprised. Having this experience, logic says that very soon the checks will be used only by those who still ask you for the fax to send you mail and that it is a waste of money for the banking institutions to invest in the better service of the specific transactions.