Dr Lina Klesper is an International Legal Assistant at PKF Malta
The financial landscape in Europe is rapidly evolving, with the rise of FinTech (Financial Technology) dramatically reshaping how consumers interact with banking services. In countries like Germany, France, and the Nordics, FinTech solutions have integrated seamlessly into traditional banking models, offering customers convenience, transparency, and sustainability. However, Malta, despite its reputation as a hub for financial services, seemed to have lagged in adopting these innovations. To not only survive but thrive, Malta’s banking sector needs to accelerate its FinTech adoption and align with the sustainability demands of modern customers.
While the traditional banking model, with its emphasis on face-to-face interactions, remains vital for local banks, particularly to meet the needs of older generations, integrating FinTech’s innovative and digital-only approaches is the way forward. According to the 2024 EY report, “The Future of Banking in Malta,” this hybrid approach has proven successful. Across Europe, FinTech has revolutionized the banking experience. Gone are the days of long queues at physical branches. Today’s consumers, especially younger ones, demand 24/7 access to their finances, intuitive mobile apps, and seamless services that fit effortlessly into their daily routines. Payments, insurance, investments, and loans can now be managed from a single interface — anytime, anywhere.
The rise of embedded banking is one of the latest developments pushing this flexibility to new heights. By embedding financial services directly into non-banking platforms, companies allow customers to integrate banking tasks seamlessly into other activities, whether they are shopping, booking travel, or managing personal budgets.
While this trend is taking off across Europe, Maltese banks have been slower to adopt these practices. Maltese banking apps, for instance, often lack the level of user experience and service integration offered by their European counterparts. This begs the question: why aren’t Maltese banks riding the wave of FinTech innovation, and what needs to change for them to catch up?
At the heart of Malta’s financial sector is a conservative approach. Traditional banks have been slow to embrace change, focusing on maintaining legacy systems rather than innovating. While FinTech companies are gaining ground in Malta, there is still a lack of collaboration between traditional banks and FinTech firms. This hesitancy is holding back the development of new customer-centric services that have transformed banking across Europe. As highlighted in the 2024 EY report on FinTechs, merely digitizing products and services is no longer enough for banks to remain competitive.
In countries like the Netherlands and Sweden, for example, open banking regulations have pushed the sector forward. Open banking allows third-party developers to build applications around the financial institution, encouraging competition, innovation, and, most importantly, a higher quality of service for customers. This is achieved by securely sharing data, enabling customers to easily switch between services or consolidate their banking needs under one roof.
The other major shift occurring in European banking is the increasing demand for sustainable finance. Across Europe, banks are embedding Environmental, Social, and Governance (ESG) criteria into their lending and investment decisions, as customers become more aware of the impact of their financial choices. In markets like Germany, sustainability is now a core part of banking services, with institutions offering green loans, eco-friendly investment funds, and comprehensive reporting on how customer money is used.
Maltese banks have been starting to pick up on this sustainability revolution and are offering green bonds, funds and loans. However, the integration of sustainability into the broader customer journey remains limited. This is particularly concerning as international frameworks such as the EU’s Sustainable Finance Action Plan continue to gain momentum. Maltese banks risk falling behind if they don’t incorporate sustainability holistically into their products and services. Especially by failing to adopt FinTech-driven sustainability solutions, Maltese banks are not only losing ground to their European counterparts but also alienating a growing segment of the market that prioritises ethics in banking.
For Maltese banks to stay relevant, they need to embrace the concept of embedded banking. This isn’t just about adding a few more features to their apps; it’s about rethinking the entire customer experience. Banks need to move from being just financial service providers to becoming integrated platforms that are part of their customers’ daily lives. This can be done by collaborating with FinTech firms to integrate payments, loans, insurance, and investments into a single, seamless interface.
The European banking market has already demonstrated that collaboration with FinTech companies is not a threat but an opportunity. By embedding financial services across different sectors—retail, travel, insurance—European banks have successfully created a more flexible, customer-centric banking experience. For instance, N26 in Germany and Revolut in the UK have shown that partnerships between traditional banks and FinTech disruptors can result in a more innovative, responsive banking sector.
Maltese banks must follow suit, not only to stay competitive but also to meet the evolving demands of their customers. FinTech innovation, when coupled with sustainability, could be the key to unlocking a new chapter for Maltese banking, offering customers more personalised, ethical, and integrated services.