Showing posts with label Bank of Ireland. Show all posts
Showing posts with label Bank of Ireland. Show all posts

Tuesday, 2 October 2012

Is Bank of Ireland leading the way for UK banks?



The Bank of Ireland is making some bold moves that the UK banks have to be curious to see whether they are successful. From November customers with the Bank of Ireland will need to maintain a current account balance above 3000 Euros (£2400) to avoid paying charges for banking services. The UK banks will certainly be interested to see how customers react to this, what is essentially an end to free-banking for a large proportion of the Bank of Ireland customers. There are two obvious outcomes from this move. Some customers will simply accept the charges  and some will leave, either for other banks and building societies or will join the ranks of the unbanked. The customers who stay  with the bank will become more profitable, certainly a requirement for the bank to overcome the problems it continues to face as a result of the financial crisis. However will the bank be less profitable as a result of the customers leaving? The majority of the customers who will take their banking relationship elsewhere will be those with low current account balances, arguably some of the least profitable customers they have, so the bank may not be that upset to see them leave. Indeed the Bank of Ireland may actually be delighted to see these customers joining competitors taking up their rivals time and resources.

The second bold move on the part of the Bank of Ireland is to reduce over the counter cash services in 40 branches to only three days a week. In these branches on the days when a teller service is not available customers will be able to use self-service devices. The Bank of Ireland argues that in their successful pilots 80% of over the counter cash transactions can be serviced by other banking channels. When you examine the personal customers that continue to use teller executed cash transactions the vast majority will fall into the low current account balance segment that will be hit by the introduction of bank charges, those who are currently unprofitable and therefore those that the bank wants to either pay their way or are happy to see leave. However it is the business customers who carry out the majority of over the counter cash transactions and these are, generally, profitable customers. It is these customers that the Bank of Ireland will want to retain and hope to do so by persuading them to either use self-services machines, other banking channels or restrict their cash transactions to Mondays, Tuesdays and/or Fridays. Of course ultimately if customers can live without tellers for two days a week the Bank of Ireland must be hopeing that in the end they live without them at all.

The reason that these moves by the Bank of Ireland are particularly interesting for the UK banks are that they are faced with pressure from the Government to end so-called 'free banking', there are too many customers who are simply unprofitable and all the UK banks have too many branches. If Bank of Ireland can prove that the introduction of fees does not result in a significant defection of profitable customers to rivals then it is to be expected that the UK banks will follow suit. If the Bank of Ireland can also demonstrate that business customers can be persuaded to use other banking channels and self-service devices for over the counter cash transactions then UK banks can look at reducing the costs of branches by reducing the number of staff that are employed in them or even closing them.

When it comes to personal customers using teller services all of the major UK banks with the exception of Santander, have signed up with the Post Office to allow their customers to carry out these transactions in the Post Office branches. It doesn't take a great stretch of the imagination to hear the banks make the argument that if there is a Post Office in town then there is no need for a bank branch and for branches to subsequently close. This could lead to the Post Offices processing the vast majority of over the counter cash transactions. The irony of this outcome is that the bank behind the UK Post Offices financial services is none other than the Bank of Ireland.

Thursday, 31 March 2011

Bank of Ireland forced to dispose of UK Operations?

Update: 170511. With the FSA to investigate the claim that the Bank of Ireland's UK operation is a 'sham bank' this could do one of two things either accelerate the disposal of the UK operations or result in the value of the UK operations dropping like a stone if their UK banking licence is suspended.

Shares in Bank of Ireland and Allied Irish Bank have been suspended today (Thursday 310311), pending the publication of stress test results later today. The stress tests are expected to show that far more capital needs to be pumped into the two banks than was predicted at the end of last year. There are rumours that Bank of Ireland may need to be nationalised as a result.

Will one of the consequences of taking additional state funding be that Bank of Ireland will be forced to dispose of its non-Irish operations? Given that toward the end of last year the UK operations were put into a separate subsidiary this would be easier to bring about than it might have been. See http://www.itsafinancialworld.net/2010/11/time-to-break-up-bank-of-ireland.html which posed this question in November of last year.

Adding the Bank of Ireland UK operations to the 600 branches of Lloyds Banking Group, Northern Rock, Yorkshire Bank and Clydesdale Bank and a number of building societies potentially up for sale, the opportunities for new entrants into the UK banking market are plentiful. Bad news for the UK Government and for UK tax payers having such a large number of businesses up for sale is bound to drive prices down.

Wednesday, 8 December 2010

Bank of Ireland follows NAB in systems crash

You might think it was catching, but following National Australia's payments systems crash (which has still to be completely resolved two weeks after ocurring - see "These things happen" says NAB CEO after payments system crashes), Bank of Ireland's systems crashed yesterday preventing customer access to their cash accounts. ATMs and Point of Sales systems were impacted both in Ireland and in Post Offices across the UK. It's reported that the problem has largely been resolved, but that the amount of cash that can be withdrawn from ATMs might be restricted. Bank of Ireland said the problem was due to an "unforeseen technical issue".

We can all take some relief that it wasn't due to a "foreseen technical issue". Of course in comparison to National Australia, Bank of Ireland was able to recover their systems far more quickly and with far less impact on their customers. However should there have been any impact on customers? The criticality of ATM and POS systems and the impact on customers of any failure is such that these systems should be designed and built with a high level of redundancy and the ability to failover instantly without any impact on customers. This clearly wasn't the case for Bank of Ireland.

The Bank of Ireland systems are currently outsourced to Hewlett Packard. Perhaps it is telling that only last month Bank of Ireland announced that that contract was not being renewed and was going to be transferred to IBM.