Analysis: The announcement that Bank of Scotland Ireland (BOSI) is to acquire more than 50 ESB shops was hailed yesterday as both a creative, cost-effective way to spill onto the high streets of Ireland and a precursor to a new era of competitive banking.

The most visible shake-up in retail banking services in recent years, the €120 million deal signals BOSI's intention to repeat the trick it pulled off in the mortgage market six years ago, when its offer of lower interest rates forced other lenders to cut margins.

Next month the bank will launch the first of seven new retail banking products, some of which will bring consumers "considerable savings", BOSI chief executive Mark Duffy promised.

Acquiring the ESB consumer finance book - worth €80 million, the ESB disclosed yesterday - as well as the footfall of over-the-counter billpayers means BOSI will have access to 185,000 customers, or 7 per cent of the adult population, by next summer.

BOSI decided not to bid for National Irish Bank (NIB) when the bank was put up for sale last year.

Its eventual sale, together with Northern Bank, to Danish financial institution Danske Bank, for the much higher price tag of €1.4 billion had been seen as a missed opportunity for BOSI, as the number of likely acquisition targets seemed to have dwindled.

"A lot of people questioned why we didn't bid for NIB. I think they have figured it out," Mr Duffy said yesterday.

Like Danske Bank, BOSI claims to have be consumer-friendly, offering the prospect of longer opening hours, a "buzzy, sales-orientated" atmosphere and a move away from the velvet-rope stuffiness of traditional banks.

Mr Duffy believes BOSI needs somewhere between 50 and 60 branches. With increasing preferences for internet and telephone banking, the need for any more is questionable, he indicated. The bank has already built up 100,000 retail customers, mostly through its network of intermediaries.

"Strikingly innovative" was how Ray Kinsella, professor of banking at the Smurfit School of Business, described the strategy.

"They have identified an entry mechanism which gives them critical mass, a distribution network that is highly branded and also comes with a residual transaction type of business on which they can build."

The Chambers of Commerce of Ireland (CCI) suggested one potential barrier to BOSI's plan to build on the inherited customer base: consumer inertia.

"Its success will depend on people's willingness to shop around and choose their banks based on the best value for money rather than tradition," said CCI head of public affairs Seán Murphy.

However, Prof Kinsella said BOSI's move came at just the right time, during a period of economic robustness and following the introduction of a code of practice on account switching.

Partly as a result of the code, some financial institutions, such as Permanent TSB, have increased their market share. Other smaller competitors have posted healthy profits on the back of the buoyant economy. But the growth of the smaller retail banks won't necessarily eat into the profits of the two big banks, AIB and Bank of Ireland, Prof Kinsella added.

"The consensus is there is more than enough buoyancy in the market to allow any competitive institution with good value propositions to grow."