The Department of Finance in Ireland is voicing concern over the move to a more digital world with decreasing cash services and the disappearance of bank branches, in its Retail Banking Review. The review states that “a stable and viable retail banking sector is essential for a modern economy to support the wellbeing of society as a whole”.

The way consumers and SMEs engage with and use banking services has changed rapidly in recent years as people are going more digital, a trend that accelerated as a result of the Covid-19 pandemic. However, a survey from the European Central Bank shows that even if there’s a big move into digital banking, a majority of people still want to have the option to pay in cash.

Retail banking

Pascal Donohoe, Ireland’s Minister for Finance, addressed the importance of the retail banking sector and how crucial it is for the functioning of the economy. Over the last decade and a half, the number of banks serving the retail sector has reduced from 12 to three, as banks were closed down, or amalgamated or as foreign owned entrants exited the Irish retail market.

Donahoe said that “the legacy of the global financial crisis is still being felt in our retail banking sector in the form of higher capital costs and the banks and citizens still dealing with the issues arising from long term mortgage arrears”.

To keep access to cash, the Department proposes a legislative framework to support developments and maintenance of a sustainable and resilient cash system for as long as cash is needed. And the report also identified the key role cash has as a safety net, especially in the event of electronic outages or cyberattacks.

“The objective of this framework must not be to reverse what has occurred or seek to maintain cash usage at its current level but rather to manage further decline in an orderly way,” states the report. “It is important future changes in the cash infrastructure do not outpace the expectations or needs of society.”

Closed 30% ATMs

Today, the number of bank branches per 100,000 of Ireland’s population is 8.63, down from 12.93 in June 2020. That can be compared to UK 10.4; New Zealand 21.4; Netherlands 7.0; Portugal 32.8; Finland 4.0; Canada 20.2. It is notable that many of the branches in the other countries include firms that are akin to credit unions, and some may be cashless.

The total number of ATMs per 100,000 people in Ireland is 62, compared to the UK 79, New Zealand 54, the Netherlands 36; Portugal 165, Finland 37; and Canada 210.

“It is important future changes in the cash infrastructure do not outpace the expectations or needs of society.”

Pascal Donohoe, Minister of Finance

Between 2017 and 2020, 30% of Ireland’s ATMs were removed, an effect of closing branches or banks going cashless. That was also the third highest decrease in the EU after The Netherlands (62%) and Belgium (34%). However, the Dutch and Belgian reductions came after the implementation of utility type models of ATM provision, and therefore occurred under a structured framework. The closing of ATMs in Ireland came after independent decisions of individual providers.

National Payment Strategy

Providing cash services comes with a high cost, and as digital banking rises, banks are incentivised to move away from providing cash services. This makes the current cash system now rely on a small number of Cash-in-Transit firms and ATMs owned and operated by unregulated non-bank providers.

The report recommends that such firms should be brought within the regulatory perimeter of the Central Bank. It also advocates forming a National Payment Strategy to set the goals for future development of the entire payment system.

The review says that the work should be done in early 2023 to be able to finish in 2024.

“The strategy should take into account developments in digital payments, the use of cheques and other issues, and guide how future changes should be made to the legislative Access to Cash criteria.”