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The Irish banking landscape is changing

A woman walks past Bank Of Ireland ATMs in Dublin city center.

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DUBLIN – The face of Irish banking has changed dramatically.

In just a few weeks, Ulster Bank, owned by NatWest announced that he was shutting down his activities while KBC Ireland has started talks to sell its loan portfolio and withdraw.

These measures could ultimately leave only three banks in the Irish market – the two main players of Bank of Ireland and AIB, and Permanent TSB – sound the alarm on the state of banking competition in the country.

Meanwhile, fintech (fintech) start-ups well off with venture capital funding, like Revolut and N26, have been gaining momentum in the market. Revolut has around 1.3 million users in Ireland, while N26 has around 200,000 users.

Adrienne Gormley, COO of Germany’s N26, which itself is a fully regulated bank, is aware of the drastically changed market.

“Number one, we see this as an opportunity. While the news from Ulster Bank has probably been on the cards for quite some time, I think people were taken by surprise by KBC’s announcement,” he said. she told CNBC.

This may present opportunities, but it also raises the question: What challenges and problems are so prevalent in the Irish market that two big banks would wash their hands of it and leave?

“While we are evaluating what is going on and why others are leaving, we should always look at our customers with a very clear eye and focus on what the customers need in the market. Obviously, we have to look well and see. , why is it the others because they must have too much capital? “

The emergence and popularity of digital banking services have played a significant role in changing this landscape. Earlier this year, Bank of Ireland announced plans to close 103 branches in the country. CEO Francesca McDonagh said the move to online services was a major factor in the move.

Digital banking and the arrival of fintech competitors have changed the dynamics of the Irish banking market, but serious questions remain about the state of competition and what it means for consumers.

Synchronized banks

Fintech operators, or neo-banks, have taken over from instant payments and have left many incumbents attempting to reclaim market share.

A consortium of Irish banks – AIB, Bank of Ireland, Permanent TSB and KBC for now at least – are trying to win back some of that customer base with their own app.

Provisionally titled Synch, the application would allow instant payments between the accounts of each of the banks.

The banks involved have been quiet about the project, but Michael Dowling, a finance professor at Dublin City University, told CNBC the prospect raised warnings about competition.

Dowling said the Synch app looks like a closed store where banks “want to set up a system where they can basically kick” other people out of that payment network.

He added that mechanisms like SEPA Instant already exist for banks in Europe to make instant payments.

The bank synchronization proposal is currently before the Irish supervisory body, the Competition and Consumer Protection Commission. A first deposit from banks was pushed back by the regulator lack of details. A second deposit was made shortly after.

The Banking & Payments Federation Ireland, an industry group that coordinates synchronization efforts with banks, declined to comment, citing the CCPC process.

The future of competition

Instant payments may be something fintech companies have cornered, but question marks continue to hang over the future of long-term loans and mortgages in the country.

N26 turned to lending in other markets, but did not bring these services to Ireland.

“We are a fully licensed bank so it is of course interesting for us to understand what a suite of products could be that could work in this space in the Irish market,” said Gormley.

“Obviously, with the news from Ulster Bank and KBC and the very dramatic change in Irish banking, we have to consider how and what we would deliver to the Irish market. “

Dowling said the prospects for competition in Ireland’s banking sector looked bleak as the number of banks dwindled. Bank of Ireland.

“I don’t think there is a real possibility that another bank will appear,” Dowling said, adding that other European banks are unlikely to be attracted to the market.

He added that regulation is needed to prevent monopoly behavior among the remaining banks.

“It’s that longer term borrowing where we’re stuck, there’s no competition. There are three banks and that’s it. This is the time when regulation needs to step in and think creatively. to how we solve this problem, ”he said.

“This is the change we need because there will be no external savior. Maybe some of the FinTech companies could grow in due course, but what we really need is d ‘forced competition. “

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