“Financial inclusion not only offers advantages for banks by increasing their business figures, but there is also broad consensus that it contributes to the economic development of countries by improving resource allocation. It also seems beyond doubt that access to financial services improves people’s quality of life and opportunities.” Financial Stability Review of the Bank of Spain, number 13.
The term financial inclusion can be understood as society’s use of banking products and services. It also reflects the intensity and impact that the banking network, considering the various existing channels, has on the economy and the degree of progress of the country’s financial system. Banks are involved in all important economic decisions: purchasing a home, acquiring durable consumer goods, managing retirement savings, obtaining the credit needed to create a company, expand a market, or simply operate it, and using an efficient payment system integrated into citizens’ lives. A society without finance would be an impoverished and archaic society.
The activity of banks is based on establishing stable and extensive relationships with their clients, regarding a wide range of available financial services. Spanish banking, for example, offers its clients a greater variety of products and services, many of them free, and generally at a much lower price than the European average, accessible from multiple platforms. Adapting to the digital transformation demanded by clients improves accessibility and transparency, while reinforcing the already high competition in the sector. Furthermore, regulatory changes implemented in recent years have favored the emergence of new technological competitors in the provision of financial services. We all benefit from competition, provided it occurs on a level playing field. Regulation should not be a burden on innovation, but neither should it penalize banks simply for being banks. For the good of the client, competition itself, and financial stability.
It is erroneous to consider financial inclusion as an obstacle to the diversification of financing sources for the economy. It is said, for example, that the North American economy is more oriented towards the capital market compared to the European one, and is therefore less banked. The assets of North American banks relative to GDP are lower, which is true, although this is due, among other factors, to the fact that the North American mortgage market relies on a securitization system with public guarantee that removes a significant portion of granted mortgage loans from banks’ assets. This reduces credit risk and thereby increases the lending capacity of institutions. If we also consider other variables such as cost, margin, efficiency, and even the number of banks, the assertion of lower financial inclusion in the North American economy is highly questionable.
Diversification of financing sources in Europe, within a single capital market, is a goal we all share and from which we will all benefit when it finally happens. Currently, 70% of the financing for European companies and households is banking-based, while alternative channels for risk diversification are shallow, fragmented, and tend to shrink further when they are most needed. Under these conditions, banks are the solution to any threat that may restrict the supply of credit and the continuity of financial services. The sector is more robust after adjustments in non-performing loans and unproductive assets derived from the crisis, achieving good results in annual stress tests and subject to demanding rules and strict controls by authorities. The benefits of financial inclusion are evident when we speak of a strong financial system, serving families and businesses, and continuously adapting to a changing social and financial reality.
José Luis Martínez Campuzano, Spokesperson for the Spanish Banking Association
