More branch closures to follow move towards online banking
Published 12/01/2013 | 05:00
ONE of the biggest trends in 2012 was the embrace of the internet by Irish banks.
The first and most dramatic move was made by the former National Irish Bank in June, with the announcement it would shut two-thirds of its branches and let 100 staff go as it continues to grapple with the collapse of the banking sector and a move towards the internet.
The Danish-owned bank, which has already done away with cash and cheques in all branches and now calls itself Danske, is now effectively an online bank, with 160,000 customers.
Danske (which provided most of the data used in our graphic) has also been the most enthusiastic exponent of the internet and is quite open about wanting to force customers to move online. To this end, it has brought out a series of apps for smartphones and iPads, which have even picked up the odd award.
Ulster Bank, which also recently announced 20 branch closures, is also turning to the internet as well as smartphone apps and text alerts to warn customers when funds are running low. While Allied Irish Banks and Bank of Ireland are also closing branches, their embrace of the internet appears more tentative.
It is no coincidence that foreign-owned banks are quick out of the traps when it comes to banking online.
Their parent banks often face much more intense pressure back home and have been forced to develop internet banking faster than Irish-owned banks, who grew smug during the boom and then lost their heads during the bust.
Analysts are forecasting substantial sell-offs of high-street branches in countries such as the UK as the rise of internet banking continues.
Analysts at London-based Bernstein said recently that Lloyds, Royal Bank of Scotland and Barclays could improve their earnings per share by 7pc, 5pc and 4pc respectively if they got rid of one in eight branches this year.
"UK branches have been in long-term decline since the 1990s and we expect that the adoption of online banking and mobile banking will accelerate the decline," the analysts said.
"Data shows that countries with higher internet penetration have greater internet banking usage and in turn lower branch intensity. If the UK follows the Nordics in increased internet usage, it could lead to at least a 10pc reduction in branches."
While the internet offers the prospect of savings for banks, it could eventually threaten their business model, just as the internet has challenged the business models of other industries such as the media.
The 'New York Times' reported recently that Australian software engineer Josh Reich set up his own internet bank after he got fed up with his bank's overdraft fees and poor customer service.
Mr Reich and a co-founder, Shamir Karkal, created Simple, an online banking start-up company based in Portland, Oregon, that offers its customers free checking accounts and data-rich analyses of their transactions and spending habits.
The company now has 20,000 customers and has processed transactions worth US$200m.
As Irish banks force customers online, they must suspect in their hearts that something similar could happen in Ireland, where distrust of the banking system remains rife.
Whether this happens remains to be seen, but one thing is clear – we will all be using online banking sooner rather than later.