The process of merging the banking entities has taken a new step forward with the integration of Caixabank and Bankia. Changes will come to banking in this new wave of mergers. Not only in relation to the structure of the banks, but in the relationship with customers and in technological aspects.
The merger of banking entities is something that already began in Spain with the bursting of the real estate bubble. The objective of this type of operation is to create larger, more efficient banks that better resist the ups and downs of the economic cycle.
The economic effects caused by the COVID-19 pandemic have been devastating, which has also been felt in banks. And the fact is that banking is closely linked to the different phases of economic cycles.
We must not forget the impact of bad debts in economic crises. Thus, delinquency rates may increase considerably as a consequence of the economic collapse caused by the pandemic. Therefore, faced with a strong growth in non-performing loans, there is the possibility that many banks will have to carry out refinancing to avoid bankruptcy.
Another aspect that has also had a negative impact on the banking sector is that central banks have made the decision to keep interest rates at zero for a long period of time. All this means that the profitability of the banks suffers significantly.
The road to bank mergers
Thus, the merger between banks is presented as the great response to this drop in profitability in banking. In this way, bank shareholders will see profitability increase while entities adopt larger structures and reduce costs in search of greater efficiency. Precisely, the path to greater efficiency will lead banks to eliminate duplications and seek alliances with other entities and companies in the fintech sector.
But what kind of banks will emerge from the new mergers? Larger entities will be born from this wave of operations, but with a smaller commercial structure. This will imply the closure of offices and, unfortunately, the destruction of employment in a clearly adverse global economic context.
Consequences at the technological level
It is inevitable to talk about bank mergers and ignore the role of fintech companies. The banks that arise from these new integrations are going to make a more than decided commitment to the automation of their processes. Thus, with a society in which technological innovations are imposed, the transformation of banking is inevitable.
In fact, the proliferation of the use of smartphones has been key in the relationship between banks and their customers. More and more users have banking applications on their phones. Let’s not forget the success of an application like Bizum, widely used for small money transfers and without charging fees.
The public is increasingly appreciating these new, easy-to-use applications that allow you to receive charges and make payments at no cost. Therefore, banking will have to reinvent itself and follow the model of fintech companies.
Precisely, the new technologies applied to finance will be a central element for banking. For this, it will be necessary for banks to have user-friendly interfaces and to simplify processes.
Relationship with customers
Beyond the impact of technology on banking, many citizens wonder how mergers will affect their personal finances. Will they have to pay new commissions? Will they be able to go to your usual office? How will it affect your loans? What about your bank accounts?
Let’s start with checking accounts. If the new entity offers better conditions, these will be applied immediately to the client. However, if conditions are not favorable, users of banking services will have two months to cancel banking services at no cost. Regarding IBAN codes, when new banking entities are born, the current account numbers will change automatically, but at no cost to customers.
Surely many clients are concerned about the effects that mergers may have on their mortgages. Well, the new entities will not be able to make changes to the mortgages already signed and negotiated. In other words, the terms of the mortgage loans will remain intact.
The bank concentration brings with it office closures and layoffs. Therefore, many users may have to change branches, as well as changes in the number of ATMs available.
It is more than evident that bank mergers produce changes at all levels. These transformations have consequences in the national and world economy, in the structure of the entities themselves, in the profitability obtained by the shareholders, in the use of technology and in the daily relationship between banks and their clients.