There has been a shift in the Irish Banking sector as in the span of just a few weeks NatWest-owned Ulster Bank announced it was shutting down operations while KBC Ireland entered talks to sell off its loan book and make for the exit. This now leaves just three banks to serve the country of almost five million, the two major players in Bank of Ireland and AIB, and Permanent TSB. This has many people raising serious questions about the state of competition in the country.
All this is taking place while financial technology companies flush with cash from venture capital firms, like Revolut and N26, have continued to gain pace in the market. Revolut boasts around 1.3 million users in Ireland, while N26 has around 200,000 users.
Adrienne Gormley, the chief operating officer at Germany’s N26, which is a fully regulated bank itself, is cognizant of the drastically altered market and told CNBC this, “Number one we view it as an opportunity. While the Ulster Bank news was probably on the cards for some time, I think people were taken by surprise at the KBC announcement.”
She was also asked; what challenges and problems are so prevalent in the Irish market that two major banks would wash their hands of it and leave? Ms. Gormley replied, “While we’re assessing what’s happening and why others are leaving, we still have to look with very clear eyes at our customers and focus on what is the customer need in the market. Obviously, we have to look and see well, why are others leaving? Is it because they have to hold too much capital?”
It would hard to deny that the emergence of digital banking hasn’t played a major role in the landscape being altered. Bank of Ireland announced earlier this year that it planned to shut over one hundred branches across the country with CEO Francesca McDonagh saying the shift to online services was a major driver in that decision. The dynamics of the Irish banking market have shifted but serious questions linger over the state of competition and what that means for consumers.
Irish banks have definitely showed some fight with a consortium of Irish banks — AIB, Bank of Ireland, Permanent TSB, and KBC for now at least — attempting to win some clients back with their own digital application called Synch. The app would allow for instant payments between accounts at each of the banks.
You may believe this would be great for consumers but Michael Dowling, a professor of finance at Dublin City University, said that the prospect raises some warnings on competition. He added the Synch app looks like a closed shop where the banks “want to set up a system where they can essentially exclude” others from this payment network. Continuing by saying mechanisms like SEPA Instant already exists for banks in Europe to make instant payments.
Synch is currently with Irelands Competition and Consumer Protection Commission as an initial filing by the banks was rebuffed by the regulator due to lack of details. A second filing was made shortly afterward.