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Analogue banks blind to fintech revolution

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Retail high-street banks in Cyprus seem to be struggling with the aftermath of the 2012-13 fallout, cautious of taking risks and sitting on bundles of cash with little direction of what to do.

And this, because their primary source of revenue, in the present low-interest environment, comes from charges and fees, which in some cases have reached exorbitant levels.

They have been granted low-cost loans from European institutions, such as the European Investment Bank, with little indication whether this money, destined for small to medium-sized enterprises, actually ended up with real SMEs.

The general perception among the public is that these funds were used to roll-over loans held by developers and large creditors, or to restructure non-performing loans to make them perform.

With real companies drained of working capital and constantly burdened with accumulating charges, penalties and interest, it is no wonder that distrust in the institution of banking is growing rapidly.

Not just among small businesses, but retail clients too, many of whom are frustrated depositors or pensioners, with little choice of what to do with their money.

This is why the Cyprus Central Bank governor warned at a conference earlier this week that the banks need to be more imaginative and to discover fresh sources of revenue, mainly through efficiencies and new products.

With the staff and admin cutbacks continuing unabated, and no end in sight as banks continue to shrink their operations, little has been done to bring Cyprus banks into the new field of digital services and fintech.

In one of his first comments to the Financial Mirror back in 2014, Bank of Cyprus rescue-investor Wilbur Ross spoke of the need for new products, new fields of activity (energy, tourism) and transition to high-tech services.

Since then, the island’s primary lender has upscaled its online banking platform and recently introduced an eWallet — hardly a novel service nowadays.

Instead of offering real incentives for customers to turn to online services, local banks are punishing their existing old-tech clients, yet not providing anything of substance, with the charges having no other purpose than to sustain their bloated payroll of unproductive staff.

This is where fintech companies are fast gaining ground, providing competitive services such as epayment systems – electronic means of making payments – taking advantage of low overheads the fraction of what it costs to sustain a bank branch in Cyprus.

Some of the banking giants internationally have embraced fintech, while others are contemplating making this move.

However, in Cyprus, registering a company, opening a bank account or subscribing to utilities has become a time consuming and nerve-wracking experience, demanding unbelievable amounts of paperwork to support data that probably already exists on file.

The fact that the government’s economic advisor has said that a new model is being devised is hardly convincing.

There never was anything wrong with the Cyprus economic model, which has evolved from the 1970s, sometimes misguidedly.

The problem has always been implementing that model properly.

Our slow pace of reforms, lack of cooperation from civil servants with endless streams of yellow tape, and back-door efforts by those favoured by politicians to unfairly write-off debts or embezzle the taxpayer’s funds by way of favourable terms for public contracts.

We don’t need a new economic model.

Let’s fix the one we have by introducing efficiencies, speed and transparency. Only then can Cyprus become competitive again.

In the meantime, consider fintech services for your everyday needs. At least you don’t have to face grumpy people at bank branches, and it will probably cost you less.