By 2010 few people will have any reason to visit their local bank or building society and will be conducting their daily banking transactions at the supermarket, through their mobile phone and on the Internet. The days of suffering long queues and rushing to make the bank will be long gone as will thousands of the bank staff who currently deal with customers' basic financial needs. Indeed, many of the financial institutions which are now household names may also be consigned to history. The next decade will be one of the most challenging periods for Irish financial institutions as they strive to contend with increased competition and more demanding customers. It is conceivable that within 10 years the main Irish banks will be part of a bigger multinational group while small building societies, such as the EBS and Irish Nationwide, will have been absorbed by another institution.
Merger mania and the pressure to make it more convenient for the public to use bank services are driving radical changes across the sector.
For many bank staff, this transformation will result in job losses with some analysts suggesting that the total workforce employed within this sector could fall by thousands in the next five to 10 years.
Substantial numbers will also be retrained to either operate telephone banking services or as specialist savings and investment advisers.
Customers will also have to adjust to the frantic pace of change. Mr Pat Waldron, head of marketing at Bank of Ireland warns that there will be many who will be frustrated by the transition. "In 10 years I believe most customers will be using the Internet to conduct their day-to-day transactions. In the interim more and more customers will switch to using the telephone banking services instead of visiting their branch." Irish people are relatively conservative when it comes to dealing with banks. "There are really two segments to the Irish banking market, one which is completely taken with technology and another which doesn't want that kind of convenience."
The challenge for the banking sector is to pitch the right mix of services at its growing customer base.
"We have become a society with more wealth but less time to devote to banking transactions. Time pressures are particularly evident in urban centres especially in Dublin," says Mr Waldron. "People are spending more time in traffic, working harder and convenience is definitely their preference when it comes to banking."
Bank of Ireland and AIB have both introduced telephone and Internet banking services in recent years which are proving popular with their customers.
Bank of Ireland's Banking 365 unit currently handles around 400,000 calls a month and expects to have signed up a further 5,000 customers to its Internet banking service by year end.
"This is where we are seeing huge growth. The surge in demand for these services is similar to the increased usage of mobile phones in the Republic in recent years, although the rate take-up of such new banking options will be slower," Mr Waldron says.
"Customers are increasingly using the phone and Internet to pay a bill, order cheque books and move money into different accounts," he says. "All of this business is likely to move to the Internet ultimately, but in the interim, probably within the next five years, much of our day-today banking will be done over the phone."
The banks will also have to be mindful to keep their more conservative customers happy in the coming years. Mr Waldron explains that just 10 per cent of customers outside of the main urban centres use the bank's Internet and telephone services, preferring to transact their daily business at their local branch. The financial institutions will be relatively slow to change radically this structure for fear of losing business in the short term. However, within five to 10 years the concept of the type of transactions that are completed within a branch will be altered.
"In 10 years the whole landscape will have changed. The focus will be on using the branches less and less for daily transactions and will become more like specialist outlets offering savings-and-investment advice and mortgage products for instance," says Mr Waldron.
From the banks' perspectives, their branches should end up working more effectively. The atmosphere will be more relaxed with customers likely to be invited to sit down with staff over a cup of coffee to discuss their investment and other needs. Supermarkets and other retailers are also beginning to eat into the banks' core business. To date, Superquinn and TSB Bank have joined up to offer an instore banking service to customers and Tesco has also considered introducing its range of financial products to the Republic.
Tesco says it has no immediate plans to introduce financial services here, although in the longer term it remains an option. Last year, it commissioned a report on the viability of offering customers facilities for savings, loans, pensions and mortgages here. The report concluded that Tesco would find it difficult to compete with existing providers in the Republic. The consultants told Tesco it would take a long time for Irish consumers to associate supermarkets with banking services. In Britain, Tesco offers a range of banking services and recently announced plans to launch online banking services linked to its fast growing Internet home-shopping service. Tesco Personal Finance is a joint venture with Royal Bank of Scotland which will allow customers to view their account balances and transfer money over the Internet. It has in excess of one million customers with more than 80 per cent of applications for personal finance products coming directly from customers in Tesco stores. Marks & Spencer, among other retailers, also operates a financial services division at its UK stores and over the Internet and given its huge success in the British market to date it can't be long before it is made available to Irish customers.
So many of the changes are already well under way and the challenge for the financial institutions and their customers will be to keep up with the pace.
