The Future of Banking in Malta

• Future of banking being shaped by rapid digitalisation, increasing competition from non-traditional players and an ever-evolving regulatory landscape
• Banks must secure viability and stability to continue to support Malta’s households and businesses and accelerate the economy’s green transition
• Demand for tech and data skills soaring as banks compete for talent

A new report on the future of banking in Malta, published by EY with support from the Malta Bankers’ Association (MBA), finds Malta’s banking sector at an inflection point driven by rapid transformation in customer needs, the regulatory landscape and technological advancements. 

The primary challenge for the sector is to run its core functions in a way that achieves its own objectives while meeting the needs and expectations of a plethora of stakeholders in parallel. In meeting this challenge, the report elaborates how the future of Malta’s banking sector is observed through four mutually reinforcing pillars which EY’s research and experience sees as the essential pillars for a healthy banking sector in the future: Purpose-led, Viable, Safe & Stable, and Progressive.

Purpose-Led

A purpose-driven banking sector revolves around implementing strategies that generate sustainable long-term value and have a positive impact on society, the economy and the environment. In turn, this strong sense of direction and robust culture commands trust and loyalty from customers, employees and other stakeholders. In the years ahead, local banks can stimulate a purpose-driven agenda by adopting a more customer-centric operational approach that is responsive to customer needs, fostering a culture where employers and employees are aligned to deliver the highest possible value, and playing a key role in the transition towards a greener economy.

Viable

Malta’s banks remain heavily reliant on interest income to drive their revenue and profitability. This places the spotlight on the limited diversity in the revenue streams of Malta’s banking sector, especially when compared to other banks in the EU and other markets. Cost optimisation is another key avenue to secure sustainable profitability. Many banks are pursuing large scale transformation strategies which not only seek to redesign for more customer-centric operations, but also to leverage the latest technologies to be able to streamline, reengineer and automate processes, where possible, for greater efficiency and accuracy.

Safe & Stable

Malta’s banks have proven to be resilient over the years as a result of relatively conservative operating models. This stability is being further augmented with the implementation of new regulatory requirements. Looking ahead, it is likely that the regulatory agenda will be sustained across an increasingly diverse range of priorities including the green agenda, financial crime, cybersecurity, operational resilience, and the traditional areas of focus of governance, credit risk, capital adequacy, liquidity and broader prudential reforms. Juggling these competing priorities while balancing the significant investments required by these regulatory mandates will continue to present a key challenge for the local banking sector.

Progressive

Digitalisation of banking operations was accelerated during the pandemic and banks will need to continue transitioning to more automated and efficient operations. Digital transformation journeys represent a significant undertaking for the local banks as it requires significant investment of resources. Strategic partnerships with FinTechs may also provide an accelerated avenue to the latest technologies, innovations and solutions, while white-labelling fintech products such as lending platforms, customer onboarding processes or digital payment processing platforms may be an efficient way to enhance a bank’s service offerings. To thrive in the digital age, banks will need to train, reskill and reorganise their human capital to align with the requirements of modern banking.

Commenting on the report, EY Malta Strategy & Transactions and Banking Partner Grace Camilleri said: “This report, which draws upon invaluable insights from local industry leaders, shows that in today’s dynamic banking landscape, innovation and customer-centricity are increasingly converging to shape seamless, personalized and inclusive financial journeys. Against a backdrop of heightened regulatory scrutiny, the continued focus on transparent and resilient business models is key in driving sustainable profitability, navigating the complex challenges ahead and nurturing trust among stakeholders.”

Also remarking on the report, MBA Secretary General Karol Gabaretta highlighted the significant challenges facing the banks, such as, ongoing and future prudential requirements, competition from the tech industry and resource constraints. In light of these challenges, the MBA welcomes the publication of the topical and timely report which was compiled with the contribution of several of its member banks who participated in the discussions which have shaped the report’s insights. The Association considers this report as a tangible example of its drive to form knowledge partnerships with stakeholders of the banking sector and looks forward to fostering other forms of collaboration which would aim to shed a more comprehensive picture on the role of banks within the local society and economy.