The banking sector and An Post are in negotiations on the development of a universal account aimed at the 30 per cent of the population which does not hold bank accounts.
Discussions this week centred on a system allowing consumers access to their social welfare, pensions' benefits or salary using a plastic card and the existing electronic payment network.
Proponents of the system say rural communities hit by bank and post office closures may be among the main beneficiaries of the proposed system. The card would reduce the need to carry cash and could address the security concerns of elderly residents and local shopkeepers. But there may be fears that it could facilitate further bank branch closures.
The proposal is similar to the British government's plan for a universal bank run by the post office. From 2003, direct payment of British benefits will be made to virtual bank accounts accessible in rural areas through the post office. The British Department of Trade and & Industry maintains that customers are likely to be attracted to the post office's "friendly brand".
According to the Irish Bankers' Federation (IBF), three out of every 10 Irish adults do not have a bank account. The majority of these individuals are social welfare recipients, the elderly or those on low incomes.
The universal account card would effectively be a "smartcard", acting as both a debit and cash withdrawal instrument. Consumers could use it to pay for groceries, utilities and other bills. As with the existing Laser card system, they could ask for cash back during any of these transactions. Physical currency may be obtained using an ATM.
The account would be virtual - not attached to a particular bricks and mortar bank - and would be available to everyone regardless of income or location in the Republic.
The universal account was proposed to Government by the Irish Payments Systems Organisation, which represents the banking sector, as part of the national payment strategy last December.
In the Programme for Prosperity and Fairness (PPF), the Government committed to form a working group to explore this and other e-business issues with the social partners, said a spokesman.
Universal bank accounts do not have overdraft facilities or charges and would therefore operate at a loss. However, banks and the Government stand to benefit from the system as a reduction in paper-based transactions lowers costs and increases efficiency.
The Republic is lagging behind other European states in terms of an electronic payments infrastructure. Whether An Post plays a role in the proposed system here remains to be seen, but loss of the social welfare account would significantly hit its bottom line as the contract generates more than £35 million (€44 million) in fees a year.
More than 40 per cent of all transactions occurring in a post office were social welfare and pension related, said An Post's Mr Declan Byrne. The postal service was already part of the social banking system and planned to increase its transactional role in the future he said.
Two weeks ago, the Minister for Public Enterprise, Ms O'Rourke, signalled Government support for this stance in the Dail. "The Cabinet has taken an informal Government decision to seek meetings with the banks to ascertain how some of the services they are abrogating in favour of moving to more central locations can be transferred to the post office network," she said.
If An Post does not participate, communities affected by the withdrawal of banking and postal services may not be convinced that technology alone is an acceptable substitute for person-to-person services.
