Lowry’s Bar in Clifden, Co Galway has been a customer of AIB for the past 15 years. Recent proposals to make some bank branches cashless would have resulted in business owner Damien Joyce having to travel 65km to the nearest fully operational unit.
However, AIB on Friday announced it was abandoning plans to make 70 of its 170 branches cashless due to what it described as “customer and public unease” over the decision. The reversal has been widely welcomed by businesses and those living in rural Ireland.
Mr Joyce said he felt abandoned and unimportant when the cashless proposals emerged. During the tourist season, the bar’s income is normally 60 per cent card, and 40 per cent cash, while during offpeak times, when it’s mostly locals, the proportion of bills paid with cash is much higher.
“We were told we could do our banking in Westport, which is over an hour away. You were looking at a two-hour round trip and by the time you wait in the bank, it’s probably three hours,” he said.
“This reversal is hugely welcomed and a huge relief. We all realise that the retail banking landscape is changing and it needs to evolve, but it kind of beggars belief that AIB thought this approach was going to be workable. This is a huge relief, would cut down on the extra administrative work, and time and effort.”
The original announcement by AIB was in response to what it described as reduced demand for cash services, adding that post offices would be able to provide access to cash for customers who want it. However, Mr Joyce said for businesses like his, the solution of post offices filling the gap was “unworkable”.
“A coin withdrawal from a post office is capped at €1,500 a week, and has to be pre-ordered. Cash lodgements are capped at €5,000 per week. We would have figures in excess of that in the on-season,” he said.
There was considerable backlash following AIB’s announcement, eventually resulting in the U-turn
The AIB proposals were not the first change proposed for the banking sector in recent years. Branch closures have become increasingly common, most predominantly affecting rural Ireland.
There were 240-245 AIB branches in 2012, compared with the 170 that remain open in the Republic a decade later. Bank of Ireland had 274 branches in 2012, that is now down to 169 branches.
Permanent TSB had 92 branches in 2012, which is down to 75 today, though that is set to increase following the acquisition of the Ulster Bank retail, SME and asset finance business in the Republic.
These changes are not unique to Ireland. Recent research from the European Central Bank (ECB) said if these financial trends continued, the EU banking sector in 2030 “could be smaller, employ fewer people, and operate less via branch networks”.
The reasons for these changes mostly come down to two things: profitability and viability.
A 2021 report from the Banking and Payments Federation of Ireland (BPFI) found the combination of low-interest rates, one of the lowest levels of customer loan to deposit ratios in the EU, and negative net lending growth has negatively affected Irish retail banks’ profitability.
However, the AIB Group saw a return to profit last year of €645 million after tax, according to its full-year results.
Over-the-counter transactions in Irish retail bank branches fell by more than 45 per cent in 2019-2021, the BPFI said. In contrast, overall digital payments rose by 65 per cent during the same period.
Despite this, there was considerable backlash following AIB’s announcement, eventually resulting in the U-turn. Taoiseach Micheál Martin had summoned the bank bosses to a meeting in Government buildings next week, while politicians from all parties called on the corporation to appear before the Oireachtas finance committee.
AIB had defended its decision on Thursday, stating bank customers wishing to access cash could do so locally at any of the country’s 920 post offices.
“The average distance to a local An Post office from a repurposed branch is less than 350 metres,” it said.
A day later, the bank said it was in the context of an “evolving banking environment” that AIB took the decision to remove cash services from 70 of its branches.
“However, recognising the customer and public unease that this has caused, AIB has decided not to proceed with the proposed changes to its bank services,” it said.
“The bank continues to retain its 170-strong branch network in its entirety and will also continue to offer banking services through its relationship with An Post at its 920 post offices nationwide.”
Mattie McGrath, Independent TD for Tipperary, described the initial announcement as the latest in a long line that seeks to increase automation and online banking, which he claims is driving away customers in his constituency.
“We don’t have the infrastructure of good broadband. There’s a good heart of people who are unable to use online operations. They’re happy to do their transactions in cash, rather than card payments,” he said.
“And more importantly, they have no faith in these things [online services]. After the cyber attack on the HSE, cyber attacks here, there and everywhere, they are afraid of going online.”
He said rural Ireland was particularly being affected, a sentiment reflected by many, including Leitrim GAA team Ballinamore Seán O’Heslin’s, which called on the GAA central council to immediately remove AIB from the sponsorship of the 2022 club championships if the decision was not reversed.
The move towards digital banking has been a long time coming but was exacerbated during the Covid-19 pandemic. A recent survey from the Department of Finance found digital channels were the main form of contact between an individual and their bank for 70 per cent of people, while 23 per cent said branch visits were their main form of contact.
The department’s research shows that while debit cards are the most popular payment method, one in five adults expressed a preference for cash, with the number being highest for those aged 55 and over.
The banks have completely and utterly changed. There was a time there when you always knew who worked in the bank. You had a relationship with the bank manager. You go in now and all you’re faced with is machines— Rose Mary McDonagh, of the Irish Farmers’ Association
Celine Clarke, head of advocacy and communications at Age Action Ireland, said this showed the importance of in-person banking for older people.
“There are one million older people aged 60 or older in Ireland, 65 per cent of those people experience digital exclusion, meaning they either don’t have the adequate skills to conduct their business online or they don’t have access to devices,” she said.
“In rural Ireland, in particular, it’s difficult when branches close because people have to travel further to access their cash. People are beginning to lose their independence in relation to managing their financial affairs. It puts people at risk of financial elder abuse.”
“Businesses don’t have any negotiating power. This means it’s a seller’s market so the consumers, whether they’re small businesses or ordinary citizens, are left with a [choice to] take it or leave it,” he said.
Farmers, in particular, have expressed frustration with the changing sector. A 2022 Irish Banking Culture Board’s report said trust in banks among farmers was incredibly low, with many citing a belief that the services banks delivered did not reflect an understanding of their specific needs.
Rose Mary McDonagh, of the Irish Farmers’ Association (IFA), said the provision of bank services was a “huge pressure point” for the industry.
“The banks have completely and utterly changed. There was a time there when you always knew who worked in the bank. You had a relationship with the bank manager. You go in now and all you’re faced with is machines. You’re told to go home and do it online or through the phone,” she said.
The long-term solution, according to Seamus Boland, chief executive of Irish Rural Link, which campaigns for sustainable rural development, is the establishment of a local public banking network, which previous estimates put at a cost of about €170 million.
“It basically is not connected to the corporate banking system, that’s the beauty of it. It’s a bit like an elevated credit union system,” he said.
“Our argument is that Ireland needs a different banking system, and the sooner the better. Ireland’s banking system is dysfunctional, being led by the corporate sector and we said years ago that most of them will go.”
This idea has been supported by John McGuinness, chairman of the Oireachtas finance committee, who called for a public system similar to that in Germany.
An Indecon International Economic Consultants report on community banking in 2019, submitted to the Department of Finance, said there was no business case for the State to establish a public banking system in Ireland.
Despite the conclusion, Mr Boland said: “A public banking system, because it has no obligation to shareholders, its main job while yes is to make a commercial profit, but the main thing is to concentrate on the SMEs and allow the kind of banking system that is more suitable to SMEs than what we’re hearing about now.”