In its latest financial stability journal, the Bank of Spain includes an interesting article titled: “Bank branch closures and access to cash in Spain.” The consolidation process of the banking sector during the crisis and the digital transformation demanded by customers explain the adjustment in the number of branches carried out in recent years. This is a process similar to that observed in the rest of Europe, with the difference that Spain continues to have the highest density of branches per inhabitant among the main Eurozone countries. The supervisor’s article also reflects the enormous effort made by our entities to strengthen access to cash in small municipalities and rural areas through mobile branches, ATMs, and commercial agents.
According to a recent survey also by the Bank of Spain, 53% of the population prefers to pay in cash, while 41% choose to do so via payment card. The narrow difference in preferences between both payment methods is due to reasons of convenience, spending control, and even cost. Smaller payments continue to be made mostly in cash. However, the increasing digitalization of society increasingly favors payment via mobile and digital means. In 2017, 39% of payment transactions were by card, above the 16% for transfers and 44% for direct debits. Although in terms of amount, 73% of payments last year were made via transfers, compared to 1% with cards.
Access to cash is important. But internet access is becoming increasingly so. Customers demand a multi-channel approach to their bank: in-person, remote, or by telephone. The traditional branch remains and will continue to be important, although complemented by the best mobile and digital offering that banks can provide. This requires a high investment in technology by entities to improve customer service and undertake their internal transformation. Digitalization is a priority for banks in their vocation to serve the customer according to their preferences. The customer chooses how, where, and when they receive attention from their bank.
The vast majority of the Spanish population is concentrated in municipalities where there are more than five bank branches. Only 2.7% of the Spanish population lives in municipalities without a traditional bank branch. This percentage drops to 1.96% if other measures of access to cash alternative to the physical office are taken into account, such as mobile branches, ATMs, and commercial agents. This population lives in remote rural areas with infrastructure problems and risk of social exclusion. It is the authorities who must ensure that basic services reach this population. And among them is internet access. Through their increasing digitalization, banks ensure that financial services reach all municipalities, no matter how remote they may be. They also invest in developing increasingly simple platforms and in the necessary training so that their customers can benefit from the many advantages offered by digitalization. These advantages are not very different from what customers ask for in their daily lives: ease, agility, convenience, transparency, and security.
Spanish banks face the same challenges as the rest of European financial entities: profitability, regulation, and digital transformation. The first and last challenges are related, since profitability is key to continuing to improve efficiency in the provision of services and products that customers want. The changes carried out in regulation over the last decade have focused on strengthening customer protection. Customer protection and satisfaction are thus the foundation of the banking business.
