No betting person would tip Irish banks to win a popularity contest voted for by the general public.
In fairness, consumers have a lot to complain about – clunky apps, slower roll-out of digital banking features compared to other countries, some of the lowest savings interest rates in Europe, limited choice of banks, account fees and branch closures, for a start.
This may be why Ireland emerged as a key market for neobanks, becoming one of the top countries in terms of digital bank account holders in 2022.
Bunq has reported a ten-fold increase in Irish sign-ups last year, with the Dutch firm claiming savings at a rate of €1 million per day were put in by Irish users.
Revolut, which boasts it has 2.5 million Irish account holders, has slowly muscled in on traditional institutions by offering Irish IBANS, deposit guarantees, credit cards and now a savings investment product that offers flexible access plus a variable interest rate between 3.50 per cent to 3.95 per cent.
While many signed up to digital players as an easy way to split bills, send cash instantly and travel, as their offerings expand, so does the temptation to leave traditional banking behind completely for some.
But what are some of the pros and cons of switching your banks over to Revolut or another digital financial institution?
Here’s what to consider while sizing up the potential move.
Your needs and habits
Revolut offers very attractive features like no monthly fees on basic accounts, currency exchange with no additional fees plus cashback on accommodation booked through Revolut Stays. The app is slick, tracks spending and offers instant transfer to another user.
But what if you’re someone who prefers dealing in cash and dislikes holidays abroad? Then you might not be benefiting as much as you think, as Daragh Cassidy of Bonkers.ie points out.
“If you have the standard free account, then you can only withdraw €200 a month fee-free,” he says.
“After that, there’s a charge that can rack up quite a lot if someone uses a lot of cash, say if they’re someone who takes out €50 every few days.”
Currently Revolut has a monthly fee-free limit of €200 or five withdrawals on its Standard account. After that, users will be hit with a 2 per cent fee per transaction. For the €8.99 monthly Premium plan that limit doubles to €400, then again to €800 for the €15.99 Metal plan. The Ultra plan for €45 a month gives users a fee-free limit of €2,000 in withdrawals. In comparison, a Bank of Ireland current account charges a flat fee of €6 a month with ATM withdrawals in euro included. So while a basic Revolut account might suit someone who taps their card for every purchase and hates bank fees, it might not be the best option for everyone.
Those who get paid in cash or need to put cash into their bank accounts regularly might also have problems as they can’t lodge cash through a branch or an ATM as they would with other banks. Revolut doesn’t have either, nor do they seem to have any direct way for most Irish users to lodge cash into their accounts just yet.
“Revolut is for people who like to do things online and pay with card,” advises Cassidy.
People who rely on or like knowing they have access to an overdraft on their account need to consider their choices carefully. So far An Post Money, Revolut and Bunq don’t offer overdraft facilities on their accounts. A spokesperson for Revolut Ireland told The Irish Times that its “PayLater product acts as a small limit short term credit facility, which can be less costly than standard overdrafts.”
Revolut’s buy-now pay-later product advertises “a small fee of 1.65 per cent per purchase” but an overdue repayment means “you’ll be charged an annual rate of 12 per cent, paid daily, on the outstanding amount” after the five-day grace period.
As always it’s crucial to read the fine print on any banking or financial product. Particularly when it comes to DIRT – Deposit Interest Retention Tax.
“If you’re earning interest, Irish banks will file at the source,” says Mark Coan founder of mortgage brokers MoneySherpa.ie, but some digital banks don’t do that which means you’ll have to include that yourself when you do a tax return.
Mortgages
While many of the digital banks are catching up to traditional institutions, some of them don’t offer the biggest financial product most of us need at some stage – a mortgage. While Bunq, through a partnership with Dutch platform Tulp, has started moving into this space, Revolut has no mortgage product. Yet.
Revolut is in “the process of building out its mortgage offering, with locally onboarded teams” working on a product for the Irish market, according to a spokesperson.
Meanwhile, will having only digital bank accounts hurt your chances of going for a mortgage with a traditional bank?
It shouldn’t, according to Coan. “If you have only a Revolut or Raisin or Bunq account, that is equally applicable when applying for mortgage ,” he says
Coan says he finds “no real gotcha, no real fundamental drawbacks” between neobanks and traditional banks when it comes to showing accounts for mortgage approvals.
While Cassidy of Bonkers.ie says “one of the biggest misconceptions for first time buyers” is thinking they can’t have a current account with a different bank whether digital or traditional to the lender.
While banking with a digital provider “might have raised a tiny red flag eight or nine years ago”, now the lenders treat those accounts the same as they would a regular bank in applications.
Customer Service and Safety
When we spoke to consumers who had switched over to digital banking, there was a cohort still clinging to a savings account with a traditional bank as backup. The most common reasons for their hesitancy had to do with negative stories regarding frauds and not being able to go into a branch if it all went wrong to get it sorted.
In the past year Revolut had to contend with well-publicised cases of scammers using the bank in their methods to defraud victims. The Irish Times’ Pricewatch revealed back in January the difficulties one couple ran into when their wedding savings were drained from their Revolut account by a scammer and couldn’t speak to a human employee over the phone about it.
A spokesperson for Revolut said the company is committed to protecting customers’ money and analyses “over 500 million transactions our customers make every month for signs of fraud”.
It defended the use of in-app customer support “because it’s the most secure method to communicate with customers”.
It said: “Speaking to us via chat means that our customers can be certain they are connected with a member of our team, rather than a caller who could be a scammer.”
A large number of frauds now involve texts or calls from scammers impersonating banks which, according to Cassidy, means the in-app chat functions of digital banks “in some ways gives an extra amount of security”.
“AI can be really scary, it’s now so easy to fake people’s voices,” he says, arguing it might be easier to avoid fraud if consumers know their bank will never call or text but only make contact through a password-protected app.
A personal preference – “a human touch” – might make traditional banks a better option for some, says Coan with branch and ATM closures, the way they do business is changing too.
“It’s not like old-school guaranteed Irish banks are playing this from a fantastic level of customer service.”
Lastly, it’s important to check with any digital bank that your money is covered under some type of deposit guarantee scheme – required for banks operating in the European Union. N26 guarantees deposits up to €100,000 via the German Deposit Protection Scheme while deposits in Revolut up to €100,000 are insured by the Lithuanian State Company.
However, Coan pointed out that when it comes to digital banks offering an array of everyday banking and investment products on one handy app, it’s important to find out just what this covers.
For example Revolut’s Flexible Accounts – the well-publicised high interest product isn’t covered by the deposit insurance scheme because it’s an investment rather than a traditional savings/deposit account. Funds are covered by an investor scheme with the lower limit of €22,000 instead.
Consumers looking to leave traditional banks completely behind need to be completely across both their own and their digital bank’s situation before they make the big switch.
