Irish banks in a deathmatch with Revolut

Anyone with even a passing familiarity with the clunky banking apps on offer from the Irish banks could be forgiven for thinking they have already lost the battle when it comes to competing with “neobanks” like Revolut.

Take the basic task of logging into their apps. In the case of my bank, it requires several steps: first you get a screen saying the device is being verified, then you tap a button on the screen to continue after which you have to input a five-digit pass code and tap again. Revolut works on facial recognition and opens immediately.

The explanation is of course that Revolut and its peers are creatures of the digital age and were designed to take advantage of the opportunities afforded by smartphone technology to offer a much better banking experience. They are banks built around their users which is about as far away from the traditional Irish approach to banking as you can get. Remember that banks here only started opening at lunchtime in the late 1990s and only then after the Australian owned National Irish Bank broke the mould.

AIB and Bank of Ireland both introduced their own smartphone banking apps in 2011 and 2012 respectively. The technological challenge was considerable, but the cultural challenge was equally big. Both banks had been taken over by the State in 2009 on foot of their property debts and were making huge losses. It was not exactly the moment to take a big punt on user friendly online banking and the post-collapse regulatory regime was unlikely to be very supportive.

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It wasn’t that they didn’t see what was coming down the road in banking. David Duffy, who jumped ship from AIB to Clydesdale in 2015 and then merged it into Virgin Money saw the writing on the wall. The fatal misstep here was not to follow the UK’s lead and introduce a fast payment system similar to the one that was brought in there in 2008. It cut interbank transfers from days to seconds and put the banks on a more even playing field with Revolut and its peers.

Revolut stepped into the gap here. It launched in 2015 and now claims 3 million Irish users of which 429,000 are under 18. We are its most successful market in terms of penetration although the UK operation – with 11 million users - is the largest in absolute terms.

AIB, Bank of Ireland and Permanent TSB are now playing catch up and are going to bolt on some of the bells and whistles offered by Revolut to their existing apps including instant transfers. The service, called Zippay, will allow customers send, request and split payments instantaneously using the mobile numbers of contacts who are also using the service.

The technology will be provided by Nexi, a Milan based payments company, that was behind a stand-alone payment’s app planned by the Irish banks that was abandoned two years ago. Even if Nexi can meet the “early 2026” deadline for the launch of the new service it is hard to see it as being much more than a pale imitation of Revolut rather than a serious competition. Can you see yourself laboriously logging into the AIB or the Bank of Ireland app to send someone a tenner when it takes seconds on Revolut?

Revolut would seem to have all the advantages in terms of penetration, technology platforms, business culture and branding. So why even bother competing unless you are not going to drastically change your business culture and model to match?

As things stand, most people are happy with the status quo. Most Revolut users in Ireland see it as nice to have. But when it comes to where you want to get your salary paid into and who you want to hold the deeds of your house, the bricks and mortar banks win out. And that is where the money is made, not in facilitating seamless interbank transfers at no cost.

What worries the banks, one suspects, is the half a million Irish customers of Revolut under the age of 18. They are the workers of tomorrow and it’s going to take more than a bag of goodies for opening an account during Freshers Week to buy their lifetime loyalty and in time be their mortgage lender. The big banks must do something to be stop Revolut and its fintech peers eating their lunch.

The paradox is that despite everything the post-crash conservative, risk adverse, highly regulated nature of the Irish banks means they still enjoy a high level of trust. There is a risk of throwing the baby out with the bathwater if they chase the fintechs too hard but if they are not committed to taking them on, they might as well not bother.