Digitalization and Financial Exclusion: Two Challenges Beyond Banking

Tribune by Alberto Aza

The author reflects on the challenge facing the sector, which actually affects society as a whole in addressing the challenges of the new economic model.

In recent weeks, citizen initiatives have gained particular notoriety, highlighting the difficulties faced by older individuals when accessing financial services. In a prolonged context of adjustments in the banking branch network, this group warns of a potential risk of financial exclusion and calls for more personalized and less digital attention.

In response to these claims, banks have announced a decalogue of emergency measures that will be operational within a maximum period of six months. Among these are extended branch hours, specialized training for branch staff, preferential treatment for senior clients both in-person and via telephone, improved usability of digital channels, and financial education actions to digitally empower older individuals. This is a self-regulation code that banking entities are required to comply with and which will be periodically monitored by the Ministry of Economy and the Bank of Spain to assess its effectiveness.

The ambition of these measures and the agreements reached for their implementation demonstrate the commitment of the entities to ‘senior’ clients in understanding that improving service quality must be the only way to understand the banking business.

However, although this emergency plan will help strengthen services for older individuals, the underlying problem goes beyond the banking sector’s scope of action. As with other essential services, the access of older individuals to banking services is a complex issue involving multiple factors and interdependencies, and therefore cannot be reduced solely to a sectoral problem. Even less so in a country like ours, where the transformation of banking in recent years has enabled us to achieve one of the highest levels of financial inclusion in the world.

In fact, in Spain access to financial services is guaranteed thanks to the efforts of entities to diversify their customer service channels. It is pertinent to enumerate them here because their number is significant: physical offices, mobile banking, online banking, telephone banking, ATMs, mobile offices, financial agents, and non-banking agents. In total, eight distinct, integrated, complementary, and secure channels, far from the sole option that clients had a few years ago when attention was focused exclusively on physical offices. Furthermore, some of these channels score particularly well in international rankings. Spain is the second country in the Eurozone, after France, with the highest number of offices per capita; a similar scenario exists with the ATM network, comparable in density to Germany and far exceeding the European average; our banking sector also stands out for being the second most digitized in the world.

In light of the above, it seems reasonable to assert that there is no structural problem in the provision of banking services and that clients today have more options for accessing them than ever before. This observation is particularly relevant because, without it, it is easy to fall into the temptation of blaming banking for the risk of financial exclusion when, in reality, the epicenter of the problem must be sought beyond. Specifically, in the unstoppable advance of digitalization in our societies – accelerated after the pandemic – and in the inexorable depopulation of rural areas.

It is known that digitalization brings significant advantages to both users and providers of digital services. For users, it offers the opportunity to access a greater range of products and services in an agile, effective, and comfortable manner, often at a lower cost; for providers, it enriches customer experience, expands markets, and improves operational efficiency. Unfortunately, digitalization also carries costs in terms of the digital divide for citizens lacking the necessary knowledge or technological resources. This is a widespread challenge in all current societies that impacts many sectors, not just banking, and particularly affects older individuals. We are therefore facing a national challenge that requires a comprehensive response from public authorities with the collaboration of the private sector whenever possible.

The depopulation of rural areas, a phenomenon particularly intense in our country, is also at the root of the issue at hand because the municipalities of the emptied Spain predominantly house older individuals. In this case, the lack of digital skills in these populations must be compounded by the difficulties faced by public and private actors in sustaining the provision of essential services, as the unrelenting exodus of clients undermines the viability of the in-person service model. Banking is not immune to this reality, and for this reason, offices are forced to close, just as schools, health centers, or pharmacies have very likely done before. It goes without saying that the challenge of rural depopulation also requires appropriate and ambitious public policies.

In light of everything described so far, it does not seem appropriate to attribute to banking the problems generated by a demographic phenomenon such as rural exodus or to ascribe to it the burden that a technological externality like the digital divide creates among senior clients. In fact, these are structural challenges of the country that must be decisively resolved if we truly wish to preserve the financial inclusion of our older citizens.

In this sense, the implementation of the Recovery, Transformation and Resilience Plan through European funds should be seen as a unique opportunity to advance towards a more inclusive digital society and a more cohesive territorial model. To the extent that public administrations achieve this dual objective, financial inclusion will be assured beyond the palliative measures that banking can implement, now and in the future.