First Active's announcement this week that it will close down 25 branches - almost a third of the total - and cut 176 jobs came as no surprise.

Increasing pressure on profit margins following the arrival of more aggressive competition from Britain made it inevitable that First Active and its peers would have to cut costs.

The import of First Active's initiative is that customers - and not only First Active customers - are going to have to get used to a different form of banking - predominantly conducted by phone, ATM, direct debit and Internet. Quite simply, supporting a comprehensive branch network is a luxury few, if any, financial institutions will be able to afford.

The challenge for the banks and building societies is to ensure that people do not get shut out of the banking system, although the presence of and an enlarged role for credit unions will help. In Britain, various studies have shown that 10 to 20 per cent of people do not have access to the banking system. It's hardly a statistic we want to repeat over here.