Thousands of Irish customers are scrambling to open new current accounts as KBC and Ulster Bank leave the country – with more than 400,000 people believed to be changing. But those looking for an alternative bank will hardly be spoiled for choice.
Only three physical banks based in Ireland will remain once the two banks close their Irish operations, far fewer than even the smallest countries in the EU.
In fact, Buzz found that Ireland will now have fewer traditional retail banks relative to its population than any other country in the European Union. Leaving aside digital rivals like Revolut and N26, there will be just one traditional bank for every 1.6 million people in the country – the highest ratio in the EU.
Ireland also has fewer bank branches per person than the EU average, with just 15 per 100,000 people, according to the CSO. Banking experts warn that this sharply reduced competition could lead to less innovation and poorer customer service.
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Retail banking in the EU
The average EU country has 25 retail or universal banks headquartered there, or one for every 546,000 people, according to lists on TheBanks.eu. Italy’s population of 60 million has the most choices, 77.
However, even residents of smaller countries like Malta, Cyprus and Latvia have far more choice when it comes to retail banking than Ireland. For example, Estonia’s population of 1.3 million has a choice of 10 retail and universal banks, or one for every 133,000 people.
In Denmark, with a population of 5.8 million, there are 56 such banks. No other EU country has fewer than 10 retail banks.
Only Poland, France, Spain and Germany have more than a million people per bank, but each has dozens more to choose from.
Does it matter?
“Competition is essential in the marketplace and any restriction or reduction of competition can never be a good thing as individuals and businesses face less choice and there is less innovation in the marketplace,” he said. said Colm Lyon, chief executive of Fire, a digital company. banking platform for businesses, told Buzz.
Lyon believes the drying up of traditional competition will have a “dramatic effect” on Irish consumers as people lose their long-standing credit card and overdraft arrangements. “It can be very troubling because these facilities have been built over many years by having a relationship with the bank.”
A study by the thinktank Social Market Foundation in 2017 found that weak competition in consumer banking in the UK led to higher fees and deteriorating investment in the services. SMF Chief Economist Scott Corfe said in a statement, “Consumers and the economy are in for a bad deal because free markets aren’t free enough.
“Therefore, [big companies] can charge more and invest less, which means a less productive economy and worse off customers. The negative effects of a lack of competition in consumer markets also fuel public dissatisfaction with the economy and distrust of business.
Traditional Irish banks have often been criticized for being slow to embrace digital, with their joint Synch mobile payments app only gaining approval this week.
The dramatic growth of digital-only challenger banks, to which masses of Irish are flocking, could alleviate some of these problems. According to a government report, more than 20 companies offer different financial services in Ireland.
More than 1.7 million Irish residents now have Revolut accounts and N26, Bunq and Money Jar are all competing for former KBC and Ulster customers.
However, few of these competitors offer the range of services offered by traditional retail banks, such as credit cards, mortgages and Irish IBANs. Additionally, Revolut employs only 50 people in Ireland, compared to 22,000 who work in Irish retail banks.
But Ireland may just be ahead of the trend. The European Central Bank estimates that by 2030 the EU banking sector as a whole will be “smaller, employ fewer people and operate less through branch networks”, as customers turn to digital bank.
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