Crossing the digital divide

News that HSBC will be closing eight branches this year and the next did not come as a surprise for those who have been following developments in the sector.

HSBC has for long now been on a cost-cutting drive, with multiple attempts to drive customers away from costly brick-and-mortar facilities to the online world.

The bank has been scaling down its presence in the community for years, as it filtered its client base to weed out those who are costly to administer and from whom no return is possible.

Nonetheless, the closure announcement has clearly taken many people by surprise: not least, clients who live in areas where HSBC branches will shortly be closing, and who have responded by expressing concern, or even alarm.

At a glance, the move may indeed appear ominous. HSBC branches in Birzebbuga, Cospicua, Fgura, Hamrun, Marsascala, St Julian’s and St Paul’s Bay will all close by the end of 2019; to be replaced by self-service ATM and deposit machines.

Its Balzan branch will also merge with its Qormi ‘flagship’ branch, in a move designed to shift more retail banking services online. This closure, slated for 2020, will make its principal Qormi office HSBC’s largest branch in the country.

The bank also announced “subject to MUBE agreement, a reduction in roles within the organisation on a voluntary basis”.

But while many are concerned that this may portend further downsizing, if not an eventual withdrawal from Malta altogether – a possibility often misleadingly predicted in the past – the reality on the ground paints a different picture.

The latest announcement is clearly a re-positioning of the bank within the Maltese economy. It was definitely not prompted by any profit warning – only last June, the bank announced mid-term profits that were 30% higher than those achieved in the same period last year.

HSBC has described its actions as a response to changing customer attitudes and needs. With more people going online and using their phones to bank and transact in money, running branches becomes an expensive venture.

Instead, the branch closures reflect more investment in digital capabilities for customers. Research conducted by HSBC Group globally shows that 80% of banking transactions are completed digitally, with 45% on mobile devices.

Similarly, data gathered by HSBC Malta indicates that Maltese customers’ use of traditional banking services is decreasing by more than 10% per annum, while mobile usage is increasing by 65% each year.

In the words of HSBC Malta CEO Andrew Beane: “We are delivering enhanced digital solutions, a modernised branch network with new wealth management centres, and more flexible access to a range of self-service solutions. With the closure of some branches, this will all be delivered through a more cost-effective operating model which will help us mitigate the long-term impact of negative interest rates on the bank’s profitability in Malta.”

While branch banking will continue to be a critical part to HSBC Malta’s service, Beane added that “what branches do for their customers and how and when they do it is changing.”

There is a reality here that cannot be ignored. And it is positive that HSBC is responding to this changed landscape. But the truth is also that people are shifting online to those financial services platforms that offer ease of use at minimal or no charges, disrupting the traditional banking model.

Within this context, it is not as though HSBC has announced any form of reduced charges for online users, or cut its commission on card sales made by traders. The loss of HSBC’s physical community presence – which is also a serious inconvenience for many clients, especially the elderly – does not come accompanied by any additional incentives to turn to the digital platform instead.

As things stand, the community has been left to contend with fewer branches, and to deal with unspecified job reductions.

So while HSBC may legitimately claim that the changes are ‘an investment in the future’… they also entail consequences for the present.

There is a social cost to HSBC’s decision to claw back on its branches. In most of the localities targeted, the branches are primarily used by elderly people to cash their pension cheques, and go about their banking requirements the traditional way.

Moreover, the premise of HSBC’s decision overlooks the fact that not everyone, even among younger generations, may be IT literate enough to avail of the new digital technologies. Among European countries, Malta remains on the low side when it comes to general access to the Internet: a fact that should also be taken into account, when imposing such changes onto an unsuspecting public.

The bank, which after all is a commercial enterprise, should not feel beholden to the traditional way by clients who refuse to shift to modern methods of banking. But HSBC is arguably more than just a bank. It is one of two giants that operate in Malta, and so it carries a certain level of social responsibility that goes beyond its pure commercial interest.

HSBC’s dominance, along with that of Bank of Valletta, makes these two banks important economic and social players. It is incumbent on them to make it easier, not harder, for people to cross the digital divide.