Part of the backlash to AIB’s now-abandoned plan to go cashless at 70 branches was likely because it is the last bank in some areas.

That’s according to John Kelly, CEO at Lean CFO and associate lecturer in UCD.

He told On The Record: “It’s more probably because they were last man standing.

“The key thing if you’re doing these things, from my banking days, was you didn’t want to be the last financial bank in the town.

“If it’s four banks going to three or three banks going to two, yeah OK.

“But if it’s one bank going to none that’s a problem.

“So you don’t want to the last bank to actually be pulling out… and I suspect in some of those locations, maybe AIB was the last person that was there to offer a cash service”.

Mr Kelly says the reaction to AIB means we’re unlikely to see any new banks enter the market.

“One of the downsides of the reaction that’s happened this week is, for example, Starling Bank – it’s a start-up bank in the UK – headed by a lady called Anne Boden, former Chief Operations Officer in AIB.

“They have pulled their request to go for a full-blown Irish banking licence.

“And I suspect part of it is because of the political reaction to what is effectively an operational decision for AIB.

“You also see Ulster Bank are leaving after 100+ years and KBC are leaving.

“Why: because they feel they can’t make money here – if they could make money here they’d be here.”

Fintechs ‘don’t have the same cost base’

He says the COVID pandemic accelerated the move to cashless.

“The main reason that the banks want to go cashless is – bluntly – there’s not as big a demand for cash as there was.

“COVID was a big accelerator of activity”.

He says this can be seen in statistics around people using ATMs.

“ATM withdrawals in the UK – cause there’s more up to date data for that – they’re down about a third between now and pre-COVID levels.

“People are spending less with cash, so there’s less cash going through the system, and running a cash system’s expensive.

“Bear in mind: back in the early ’80s the banks were installing ATMs at a rate of knots, because they saw it as the future because people wanted the cash service – now they don’t”.

But he points out that even the fintech companies, like Revolut and N26, still rely on banks.

“N26 sent me a new card – the first thing they said to me was ‘Go to an ATM and validate it’.

“It wasn’t an N26 ATM I went to, it was an AIB or Bank of Ireland or whatever machine it was – that infrastructure is expensive.

“So those online-only operations don’t have the same cost base, but they don’t have the same level of service.

“Revolut have 1.7 million customers – they claim – in Ireland… but you’ll probably find most of those customers have accounts with full-service banks as well”.

Main image: Composite image shows AIB head office in Dublin in June 2021, and a person counting Euro banknotes in July 2018. Picture by: KarlMPhotography/Ianni Dimitrov Pictures/Alamy Stock Photo