Why don’t customers demand more from their banks?

Cantillon: Bank of Ireland’s cost-cutting works for bottom line but what about customers?

Bank of Ireland chief financial officer Andrew Keating and its chief executive Francesca McDonagh at a press conference to announce its half-year results. Photograph: Cyril Byrne

Bank of Ireland’s new chief executive may be steadily steering the bank on to a profitable path, as evidenced by the group’s latest interim results which saw the bank report a pre-tax profit of €454 million.

However the bank’s cost-cutting strategy, which is, in part, helping to turn around its fortunes, may not offer much cheer to customers as it looks to shift its business further on to a digital platform.

As the bank outlines in its latest financial report, “our customers are increasingly doing their banking digitally”, with the report noting that branch counter transactions fell by 24 per cent in the first half of 2018, with self-service cash lodgement services up by 17 per cent in the same period.

Many customers might argue that this is not by choice but a result of the bank’s move last year to run more than 100 branches on a cash-free, self-service basis, and to cut the opening hours of others.


Consider also some of the innovations the bank deemed to be worth highlighting in its recent financial report. It will now process a change of address request in just one day, down from five days previously, while it is also resolving “more” customer queries “first time” . These are hardly cutting-edge developments.

Miserly return

What about the bank's approach to deposits? The bank is currently paying a miserly return of just 0.25 per cent on its 12-month fixed rate account, which means that someone keeping €15,000 on deposit at Bank of Ireland will earn just €36 a year.

Parsimonious as this offer might be, it’s still better than the zero per cent someone opting for an instant access account with Bank of Ireland will earn. Of course, interest rates are at historic lows, while competition continues to wane, with Leeds Building Society the latest player getting ready to exit the market.

The bank is also one of the few where customers with current accounts can’t avoid charges on their accounts, thanks to a €5 quarterly fee.

The wonder is why more customers aren’t putting pressure on Bank of Ireland to up its game by moving their money?

As Monday’s report shows, retail customer deposits at the bank actually grew in the six months to end-June, up to €46 billion. Rather than pull their money from the bank, deposits stayed steady at €22 billion. Not only that, but the bank also benefited from a jump in the amount of money held in current accounts, up by €1.9 billion to €24 billion.

If customers aren’t prepared to walk, can they realistically expect the bank to offer more?