Charging for internet transactions

Online banking for private customers - I hope readers agree with me - equals a reduction in physical banking staff as well as outsourcing certain activities related to back-office activities to the customer.

Today, developing an online banking solution using universal standard protocols such as OFX , IBAN, BIC and Swift allows a bank to serve consumers online without all the costs related to the development, distribution and support of specific customer software. Most solutions allow users of Microsoft Excel™ or Money™ and Adobe Reader™ to access statements, pay bills and do transactions.

In Europe two payment systems have developed over the years: transactions by cheque (i.e. the United Kingdom, France, Malta) and the "giro" system (Germany, Holland and Switzerland).

Cheques have been in decline for many years, both for point-of-sale transactions (for which credit cards and debit cards are increasingly preferred) and for third party payments (e.g. bill payments), where the decline has been accelerated by the emergence of telephone banking and online banking.

Many shops in France no longer accept cheques as a means of payment, and Shell announced in September 2005 that it would no longer accept cheques in its UK petrol stations.

Internet banking reduces a bank's costs in two fundamental ways: it minimises the cost of processing transactions and reduces the number of branches required to service an equivalent number of customers. According to the American Banking Association, the average cost for a full-service branch transaction is roughly 60 cents. Since an internet banking transaction links directly to the back-end processing system, an internet transaction costs roughly Lm0.01.

The savings associated with internet transactions are even greater due to the small incremental cost of servicing additional internet customers compared to the large cost of operating and or opening a new branch.

Being paper, cheques (even in Malta) are costly for banks to process in comparison to electronic payments. Overseas, many banks discourage the use of cheques, either by charging for cheques or by making the alternatives more attractive to customers. The rise of ATM machines has also led to an era of easy access to cash, which made the necessity of writing a cheque to someone because the banks were closed a thing of the past.

In Malta the banks - HSBC and Bank of Valletta forming a cartel this way - have decided to be different! Instead of discouraging the use of cheques and making the internet transaction free of charge, they have decided to go the other way and charge for internet transactions.

And to add insult to injury, they confirm those transactions with the statement "we have debited your account with the costs of issuing a telegraphic transfer and then continuing with telex transfer".

I challenge any bank to invite me to visit their "telegraph" as I believe they have been scrapped long long ago! I also believe that banks do not employ any telegraph or telex operators anymore. HSBC and BOV: "Show me your telegraph, show me your telex, please!"