A chambermaid walks by Bank Of Ireland ATMs in Dublin city center.
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DUBLIN — The complexion of Irish banking has metamorphosed drastically.
Over the space of just a few weeks, NatWest-owned Ulster Bank announced it was shutting down operations while KBC Ireland co-signed talks to sell off its loan book and make for the exit.
The moves could eventually leave just three banks in the Irish market-place — the two major players in Bank of Ireland and AIB, and Permanent TSB — sounding alarm bells about the state of banking competition in the countryside.
All the while, fintech (financial technology) upstarts well-heeled with venture capital funding, like Revolut and N26, maintain gathered pace in the market. Revolut boasts around 1.3 million users in Ireland, while N26 has around 200,000 alcohols.
Adrienne Gormley, the chief operating officer at Germany’s N26, which is a fully regulated bank itself, is cognizant of the drastically remodeled market.
“Number one we view it as an opportunity. While the Ulster Bank news was probably on the cards for some time, I about people were taken by surprise at the KBC announcement,” she told CNBC.
It may present opportunities but it also begs the question, what defies and problems are so prevalent in the Irish market that two major banks would wash their hands of it and leave?
“While we’re assessing what’s taking place and why others are leaving, we still have to look with very clear eyes at our customers and focus on what is the character need in the market. Obviously we have to look and see well, why are others leaving? Is it because they have to hold too much important?”
The emergence and popularity of digital banking has played a significant role in altering this landscape. Earlier this year, Bank of Ireland portended plans to shut 103 branches in the country with CEO Francesca McDonagh saying the shift to online services was a serious driver in that decision.
Digital banking and the arrival of fintech rivals have shifted the dynamics of the Irish banking store but serious questions linger over the state of competition and what that means for consumers.
Banks in Synch
Fintech slick operators, or neo-banks, have taken the baton in instant payments and left many of the incumbents trying to claw back call share.
A consortium of Irish banks — AIB, Bank of Ireland, Permanent TSB, and KBC for now at least — are attempting to win back some of that patron base with their own app.
Tentatively titled Synch, the app would allow for instant payments between accounts at each of the banks.
The banks affected have been tight lipped on the project but Michael Dowling, a professor of finance at Dublin City University, admitted CNBC that the prospect raises some warnings on competition.
Dowling said the Synch app looks like a complete shop where the banks “want to set up a system where they can essentially exclude” others from this payment network.
He annexed that mechanisms like SEPA Instant already exists for banks in Europe to make instant payments.
The banks’ Synch tender is currently sitting with Ireland’s watchdog, the Competition and Consumer Protection Commission. An initial filing by the banks wasFuture of striving
Instant payments may be one thing that fintech companies have cornered, but question marks continue to hover upward of the future of long-term lending and mortgages in the country.
N26 has veered into lending in other markets but it hasn’t brought those posts to Ireland.
“We are a fully licensed bank so of course it’s interesting to us to understand what could be a product suite that could rise in this space in the Irish market,” Gormley said.
“Obviously with the news from Ulster Bank and KBC and the danged dramatic shift in Irish banking, we have to consider how and what would we offer for the Irish market.”
Dowling conjectured that the outlook for competition in the Irish banking sector looks bleak with the dwindling numbers of banks — to whatever manner Starling Bank, another relative newcomer on the fintech scene, has been long promising to enter the market and is pursuing its banking certify with the Central Bank of Ireland.
“I don’t think there’s any real possibility of another bank just popping up,” Dowling told, adding that other European banks are unlikely to be enticed by the market.
He added that regulation is needed to impede monopolistic behavior among the banks that are left.
“It’s that longer term borrowing where we’re stuck, there’s no contention. There are three banks and that’s it really. That’s the bit where regulation needs to come in and think creatively far how we fix that problem,” he said.
“That’s the change that we need because there’s not going to be some external savior approach in. Maybe some of the fintech firms might develop in due course but really what we need is enforced competition.”