Every industry has its opportunities and risks, in this post we take a look at the banking industry in Malta and examine the associated risks and opportunities within this long-established industry.
Facts about Malta’s Banking Industry
While some areas of Europe are experiencing financial hardship in the banking industry, in the country of Malta it is an industry on the rise. There are over 20 banks in the country, serving both local markets and international markets well as. Over recent years, the banking industry in Malta has been on a continuous rise which has led to an increase in the amount of foreign interest in the local banking industry.
When focusing on just the banking industry aspect, it is hard to ignore the impact of technology upon banks. With a growing and strong local economy customer expectation from banks is increasing, and technology is becoming more and more key to the offering of banks within Malta. In response, the banks are turning to technology to ensure that their customers have better interaction and touch points with their bank, along with enhanced security.
As the global banking industry has changed, so has the Maltese one. Much of the financial services sector’s focus around the world has moved to that of service. This has been the case in Malta as well. Consumers now have more choices, particularly in the retail banking category. Customers are becoming more and more selective around who to give their banking business to, and the level of service provided is an incredibly powerful competitive advantage. With an extremely fast-growing digital sector, the rise of the banking industry and the industry of challenger banks seems to be a trend with real staying power. We can see such an example in the way Revolut entered Malta and disrupted the local retail market in 2019.
The Risks of Banking in Malta
Without a doubt there are certainly opportunities within the banking sector in Malta and these opportunities point towards growth. With that said, as any other country, the Maltese banking industry is not without flaws and potential risks. Regardless of industry, it is always best practice to assess risk before you launch a business in any market. In a recent publication the MFSA (Malta Financial Services Authority) identified a few risks and measures for control. The publication can be accessed here
To share a few risks identified in the publication:
IT Security
Irrespective of industry it is important to understand the incredible amount of IT and security risks that now exist in the modern world. Globally, there is an attempted hacker attack once every 39 seconds. This means that there is literally danger lurking behind every digital corner. This is a problem that Malta will need to continue to address and manage as its banking industry continues to grow.
Staff competence
Banking is simply one industry where employees need to know what they are doing. Banks in Malta need to employ top talent, which means individuals with extensive industry knowledge and relevant educational background.
Compliance
In the financial sector, staying compliant is extremely important. For a country with a growing industry, maintaining and growing operations while following compliance regulations and new European legislation to which Malta is bound to comply with (like PSD2),can be tricky. This will be an ongoing challenge for the industry as it continues to grow.
Lack of Transparency
Banks in particular must be upfront about tariffs and charges, particularly around credit, and this is something that needs work in the local market. Failing to share such information in an accessible and transparent manner is not acceptable and leads to confused customers and a lack of trust in the general banking system.
Money Laundering
Any international banking company will face concerns of exposure to money laundering. Enhanced due diligence has become part of a normal day’s work in any bank in Malta. With that said, Malta is not exempt to AML and CTF risk and there will always be a need to improve processes to avoid such risk. In the world of banking, reputation is everything. Being a law-abiding business is an essential starting point to take your name to the international stage.
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In any business, in any emerging market, there will be inherit risk. This is something that you just can’t avoid. With that being said, you can in fact make every effort to reduce and mitigate risk to the best of your ability using the latest available technology. In the world of banking in Malta, there is risk matched by a certain amount of opportunity.
Understanding the landscape and the potential risks is the best way to avoid these said risks. We hope that this article helps you understand the current landscape of the Malta banking industry. It is clear that there is plenty of opportunity here and this is what Laskaris is working towards.
Reference: Pages 24–28
