The announcement by AIB last month of the withdrawal of cash services from 70 of its branches across the country came as a hammer blow to the towns and communities impacted. The subsequent reversal of that decision, following a huge public outcry and significant political pressure, will not in any way have assuaged the concerns of those affected.
Not alone was there a lack of consideration of and consultation with the communities affected, to make the decision to withdraw these services at a time when the Department of Finance is carrying out a comprehensive review of the retail banking sector is bewildering. The Retail Banking Review report is due to be presented to the Minister for Finance in December 2022.
With the pending withdrawal of KBC and Ulster Bank from the Irish retail banking landscape, there is a clear lack of competition within the market. The three remaining “pillar” banks are a powerful force – some would say a triopoly – and are in a position to be selective in relation to both the services they provide to their customers and the manner in which they provide those services. It goes without saying that the maximisation of profits for their shareholders will be the key determinant in both regards with little consideration, if any, of the needs of their personal, small business or farming customers in towns and communities across the country.
The direction of travel of the banking sector is clear. It is away from the community – physically, ethically and culturally – thereby forcing customers to go online to carry out their day-to-day banking and to apply for loans.
There is, however, a real alternative. One which aims to serve the needs of all, including the most vulnerable. One which, by its ethos and culture, acts in the best interests of its customers and the communities it serves. One which supports its customers and local communities by being physically present and available to them on a daily basis.
Credit unions have been around for over 60 years and are an essential part of the financial and the social fabric of the country. As member-owned, community-based, not-for profit financial institutions, credit unions are ideally positioned to play an enhanced role in providing a wider range of services and supports to consumers and SMEs throughout Ireland.
Across the country, in more than 470 locations, credit unions are working collaboratively to enhance the services they provide. They continue to not only “digitise” their current services, including the introduction of full online membership and loan application solutions, but to also introduce new services such as mortgages, “green” loans and full-service current accounts. There are now over 70 credit unions across 220 locations offering current accounts and an internationally recognised debit card. The recent announcements of KBC and Ulster Bank withdrawing from the market have resulted in 50,000 new credit union current accounts being opened since January.
While responding to members’ needs by enhancing their digital services, there is a clear understanding among credit unions of the critical importance of retaining “face-to-face” engagement and in delivering the unrivalled member service and excellent customer experience for which credit unions are famous. In the “tech versus touch” debate, Irish consumers still favour interacting in person. The 2021 CXi report found “Digital interactions are predominantly transactional and provide little opportunity to create the emotional connections required to develop and sustain long-term customer relationships. Getting the balance right between digital and human is key.” Credit unions already possess this balance as evidenced by their long-term relationships with their members.
One would imagine there would be huge political support for credit unions, particularly given their ethos and the “service”, or lack of, which Irish banks are offering to their customer base.
There certainly has been some progress in this regard. The commitment in the programme for government to “enable the credit union movement to grow as a key provider of community banking in the country” is most welcomed. The appointment of the first Minister for Credit Unions and the work being led by junior minister Seán Fleming, including the current credit union review, are steps in the right direction.
These measures are a welcome start provided they are a prologue to the transformative move, as committed to in the programme for government, of credit unions being platformed as community banks, based on the credit union ethos.
For credit unions to bring additional choice to the retail banking sector, they need a more flexible, enabling legislative and regulatory framework. An overhaul of the regulatory requirements, including lending limits, liquidity limits and regulatory capital requirements, is required to enable credit unions realise their full potential and bring much-needed choice for consumers.
Credit unions offer a clear alternative of democratised, community-based finance. It is imperative that their essential role in Ireland’s socioeconomic fabric must not only be protected and preserved, but it must also be unleashed to its fullest potential. Irish consumers and local communities deserve no less.
David Malone is chief executive of the Irish League of Credit Unions