THE Government is completely phasing out the payment of social welfare in cash, meaning virtually all of Ireland's 800,000 'unbanked' welfare recipients will have to open accounts or take payments electronically.
Though more than half of people in receipt of social welfare were paid in cash as of January 2012, by 2017 the State wants that figure to drop to 3pc. The Department of Social Protection said this "is aimed at removing the very high levels of cash usage in the Irish economy and will contribute to improved national competitiveness", as part of the new National Payment Plan.
By 2017 the Department of Social Protection wants three quarters of all social welfare payments to be paid directly into accounts in financial institutions, with most of the remainder to be paid electronically into a prepaid card or via a mobile phone. Irish Postmasters Union (IPU) secretary general Brian McGann said paying social welfare into accounts could mean overdrafts, account fees and direct debits might be prioritised over spending on basic necessities like food.
"Most of the country's 'unbanked' could open an account – only the homeless have real problems – but financial inclusion shouldn't be about having a bank account," he said.
"It's about access to money. And people who manage small amounts always want to do so in cash."
A recent pilot scheme showed that most people without bank accounts are not interested in opening one, regardless of whether they are free or not.
AIB, Bank of Ireland and Permanent TSB were told to provide basic free accounts for the 'unbanked' as part of their bailout by taxpayers.
But only 155 accounts were opened in eight months, during a pilot project in Tallaght, Tullamore and New Ross.
Consumers Association chairman Michael Kilcoyne said the pilot scheme, which finishes this month, was a flop. But the Department of Social Protection said this would not stop people receiving social welfare.
"There can be no question of the department not paying social welfare entitlements to people solely because those people are not in a position to accept payment through electronic means, regardless of the reason why this is so."
An Post currently holds the rights to pay social welfare in cash. However, this year the Department of Social Protection invited new bids for this service. The winning bid will be partly judged on the ability to bring customers over to electronic payments.
A second tender process for e-payments will also begin later in 2013. An Post does not currently offer this service. But a spokesperson for An Post said "we will most definitely be competing for all aspects of the tender – traditional and non-traditional", meaning the post office will most likely provide an electronic payments service soon. The IPU estimates the average postmaster would lose 35pc of gross income if An Post were to lose the welfare contract, making half of the country's post offices unviable.