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AIB has U-turned on plans to go cashless at almost half its branches, citing “public unease” over its push towards digital-only banking.
On July 19, AIB announced that it would “repurpose” 70 of its 170 bank branches to boost services in areas such as account opening, financial planning, loans, mortgages, savings and investments.
The trade-off was that all cash-based services at these branches would be scrapped, including deposits, withdrawals, cheque services and ATMs.
Three days later, on July 22, AIB followed up with an announcement that it had chosen not to proceed with the proposed changes.
The original plan was part of a €40m investment partnership with An Post, Ireland’s state-owned postal service, that would ultimately shift AIB’s cash-based services out of branches and into post offices.
Billed as "AIB through An Post", the partnership would have leveraged An Post’s 920 post offices, while AIB focused on hiring 500 digital staff and 700 temporary staff to support account opening and other services.
According to AIB, the average distance to a post office from any of the 70 bank branches slated for repurposing would have been less than 350 metres.
AIB said its cashless plans were designed to complement the “dramatic increase” it has seen in the use of digital banking services, while cash and the number of branch visits made by customers continue to decline.
At present, AIB said it processes 2.9m daily digital interactions, compared with 35,000 branch visits by customers.
Over the past five years, AIB has seen a 36 percent drop in cash withdrawals from ATMs and a 50 percent fall in over-the-counter teller transactions.
“With digital usage soaring, the cost of providing cash services has become increasingly unsustainable,” AIB said in a statement.
Bipartisan opposition
Many traditional banks in Ireland, as well as in other parts of the world, have been looking at ways to reduce cash services and their physical footprint.
Although most banks have typically adopted "salami tactics" of gradually removing a slice here and a slice there over time, AIB announced it was making a wholesale change.
It is a move that does not appear to have paid off and other banks will be taking note.
Over the course of last week, politicians from all three of Ireland’s largest parties — Fianna Fáil, Sinn Féin and Fine Gael — had called on AIB to reverse course, largely for the benefit of its older customers.
Fiona O’Loughlin, senator for Fianna Fáil in South Kildare, said she and her rural constituents were “extremely disappointed” by AIB’s plans.
“Cash is legal tender and is a vital aspect of our economy,” she said. “It is especially important for the older and more vulnerable consumers, many of whom may not have the mobility to travel further afield, to access cash services.
“Whilst I do absolutely accept that many people are moving away from the use of cash, to close the cash facilities in small rural towns is utterly wrong.
“Customers have been loyal to the bank for a lifetime. They deserve access to cash-based banking services in their branch.”
Pearse Doherty, member of parliament for Sinn Féin in Donegal, drew attention to the fact that, from 2009 onwards, the Irish taxpayer bailed out AIB at a cost of more than €20bn, and now owns more than 60 percent of the bank.
“Instead of reflecting on this and what AIB owes its customers, the bank has decided to remove cash, cheques and ATM services from 70 branches,” he said.
Even Micheál Martin, Irish Taoiseach and leader of Fianna Fáil, intervened during a state visit to Singapore, noting that a “significant cohort of people” would be affected if AIB went ahead with its plans.
"AIB should reconsider and reflect on this, and consider the people that have been loyal down through the years, particularly the more senior generations," said Martin, as quoted by the BBC.
The cost of cash
Outside Ireland’s political class, one observer who is glad to see the AIB U-turn is Ron Delnevo, chair of Cash and Card Consultants.
Speaking with VIXIO, Delnevo said he was not persuaded by AIB’s reasoning that cash had become too costly for it to handle, describing the claim as “laughable”.
“The banks themselves have made cash more expensive for customers,” he said. “The truth is that the Irish government and banks have been collaborating for more than a decade to eliminate cash from the payment choice menu.”
One such collaboration, as alleged by Delnevo, was the Irish government’s ceding of de facto control over the country’s ATMs to Visa.
“Visa promptly reduced the interchange they paid to ATM operators for transactions at ATMs, undermining the profitability of the machines,” he said.
“The Irish competition authorities refused to investigate this step, which was clearly aimed at further reducing the number of ATMs in Ireland.
“The effect is pretty clear: make cash less available, less convenient and more expensive for businesses and the public alike.”
Going forward, Delnevo said the best way to preserve cash as a method of payment is to pass a payment choice law mandating acceptance of cash for in-person payments.
Many US states have already passed such a law, and Spain passed a law of this kind in May this year.
Delnevo also suggested creating a cash utility, independent of the banks but funded by them, to run wholesale and retail distribution of cash in Ireland.
“The utility would be charged with ensuring cash withdrawal and deposit facilities are maintained in every community with, say, 1,000 or more adult residents,” said Delnevo.
