Race against the clock for Spanish banks in small towns

by Lorraine Williamson
bank branches and ATMs

MADRID – Banks still have 4 months to make personal financial services available in municipalities with more than 500 inhabitants that do not yet have this. In doing so, they will meet the deadlines of the financial inclusion plan. 

This plan aims to ensure that all residents, regardless of where they live, have access to basic banking services. Moreover, banks will be required to provide physical access points, such as bank branches or ATMs, in municipalities with more than 500 inhabitants that currently lack financial services. 

Still, 164 municipalities to serve 

At the time of the agreement between the banking associations AEB, CECA and Unacc, with the support of the Ministry of Economy, in October 2022, there were 243 municipalities of this size that had no physical access to the financial system. A period of 12 months was set for implementation. In the last 3 months of 2022, the banking sector had already reached 79 of these municipalities. Therefore, that means 164 municipalities still need to be served before October 2023 ends. 

Three reasons 

According to sources familiar with the process and who have spoken to Business Insider, the banking associations should soon provide data for the first quarter of 2023. But it is already known that “the pace of the first 3 months” of the agreement has not been sustained. 

First, they have already reached the municipalities that clearly needed this service and were organised for implementation. Secondly, they are now reaching municipalities that were not ready for such a rollout. And third, the municipal elections have delayed the necessary public-private agreements. 

Deadlines will be met 

Looking ahead, the challenge lies in the general elections and the summer holidays. However, the sources assure that the tenders are proceeding and all indications are that the deadlines of the agreement will be met. 

Guarantee of service 

Some of the solutions mentioned in the agreement include guaranteeing service through a bank branch, a proprietary ATM, third-party ATMs and even white label ATMs – which will be available soon -, a mobile bank branch or a financial agent in municipalities with more than 500 inhabitants. 

Solutions such as cashback or cash-in-shop for cash withdrawal via advanced point-of-sale (POS) terminals were also considered. And furthermore, the services of rural postmen via the Correos Cash service. 

Cogesa Expats

The banks that signed the agreement with Correos are Banco Mediolanum, Triodos Bank, Evo Banco, BancoFar, Santander, Ibercaja, Banco Sabadell and BBVA, as previously reported by Business Insider España. 

Challenging task 

However, the implementation of the financial inclusion plan is a challenging task for the banks. They must ensure that they set up the necessary infrastructure and allocate sufficient staff to deliver these services. Furthermore, they must also take into account the specific needs and characteristics of each community. 

Disappearance of financial services 

In many small Spanish municipalities, there has been a worrying trend of the disappearance of financial services in recent years. Banks have closed their physical branches and ATMs have disappeared. As a result, access to financial services for residents is severely limited. This has led to a lack of banking facilities, especially in rural areas. 

Cutbacks on physical branches 

There are several reasons for this development. Firstly, many banks have decided to cut costs and increase profit margins by cutting back on physical branches. This has led banks to withdraw from smaller communities where they may be less profitable. 

Rise of digital banking 

In addition, the rise of digital banking and online transactions has seen more and more people do their banking remotely. Therefore reducing the need for physical banking locations. 

Older people are particularly affected 

However, the disappearance of financial services from small municipalities has had serious consequences for the inhabitants. Older people and people with limited digital skills are particularly affected. They struggle to access basic banking services such as withdrawing or depositing cash, paying bills and applying for loans. In addition, the lack of banking facilities can also affect local businesses and hinder economic activity in these communities. 

Also read: Senate investigates closure of banks in Spain without consulting victims 

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