Banking exodus poses challenges for Irish retailers

Banking exodus poses challenges

A DECADE ago, Moville in County Donegal had three banks: AIB, Bank of Ireland, and Ulster Bank. In 2012, AIB closed the local branch. Four years later, Ulster Bank shut its doors. Now BoI has announced its intention to close its premises, leaving Moville without a bank. Paddy Gillen, owner of Gillen’s Gala supermarket on Moville’s Main Street, has become accustomed to driving 19km to Carndonagh when he requires banking services from AIB. BoI’s departure will be felt by everyone in the town, he told Retail News: “It’s another empty building. It’s a big loss to the town.” In Co. Wexford, on the other side of the country, Alan Murphy of Murphy’s SuperValu, Rosslare Harbour, feels much the same. BoI’s decision to close its Rosslare branch will leave the area, which has a busy post-Brexit shipping port, without a bank. “Wexford Town will be our nearest bank, whether it’s AIB or Bank of Ireland, and it’s a 20-minute drive to get there,” said Murphy. “That’s very inconvenient. It’s a big blow for the area. Rosslare was on the up.” Retailers all over Ireland are in a similar position, following Bank of Ireland’s decision to close 88 branches around the Republic. The announcement came on foot of Ulster Bank’s decision to withdraw entirely from the country, closing all its branches, possibly as early as this year. This comes as no great surprise, however. “The BoI in Rosslare has been cashless for the last couple of years,” said Murphy. “They weren’t doing much. It was on the cards.” According to Neil McDonnell, ISME CEO, the decline of the Irish banking sector has been foreseeable for a long time: “This predates even the previous crash, yet we have not strategically invested in another arm: whether it be the credit union or post office networks.” Retailers are understandably worried. Ulster Bank offered decent rates for cash lodgements and played a big role in the Irish market in terms of commercial lending. “Where those loan books are going to end up is a concern to a lot of our members,” said McDonnell. Not only do retailers now have to travel further distances to deposit cash, but a decrease in competition will push up banking charges. Around 40% of ISME members banked with Bank of Ireland; another 40% are with AIB, and 14% with Ulster Bank. “If Ulster Bank’s share migrates to the other big two, their market domination would be in excess of 90%,” continued McDonnell. “It’s effectively a duopoly. There’s no real price competition in the Irish market for retail banking. We’re grossly over-dependent on our pillar banks.” “Less competition is not going to help,” agreed Alan Murphy. “We’re don’t exactly have the cheapest banks as it is.” The vibrancy of rural communities will also take a hit. “Having an active bank in the town was an important draw to a town centre,” said Tara Buckley, Director General of RGDATA. “If we push everyone online, we forget about the need for footfall drivers and town centre services.” Bank of Ireland has blamed mobile banking for its closures. The pandemic has accelerated the move toward a cashless society. Murphy’s SuperValu in Rosslare noted a 25% increase in card usage over the last year and their ATM has less usage now.

“Younger people aren’t using cash,” agreed Paddy Gillen. “They’re all using cards. It happens for everything now, even €1.50 purchases.” But consumers are yet to entirely jettison cash and retailers predict a return to coins and notes post-pandemic. “There’s a significant cohort who use cash that nobody will be able to shift,” said Vincent Jennings, CEO of the Convenience Stores and Newsagents Association (CSNA). “Older people, for example, depend on cash. They withdraw pensions in cash; they go to the post office and live off their €248 for the week. That’s how they structure their lives. It will take a generation to go cashless. So there is still a need for bank branch networks.” While mobile banking might be popular among consumers, businesses require branches. “So much clearing and lending activity for businesses takes place through the pillar banks,” said McDonnell. “E-banking doesn’t enter the equation at all where cash is concerned.”

Tara Buckley, RGDATA Director General.