Ireland's banking sector has invested heavily in trying to persuade customers of the merits of cashless banking. Like their peers across Europe, cutting costs is a priority and handling cash is bad news for banks' bottom lines.
The multi-year campaign received a major boost with the arrival of chip and pin credit and debit cards, followed shortly after by the appealing and hassle-free concept of “contactless” transactions for small payments by card and electronic phone wallet.
And it is working. A recent survey found that half of all Irish adults use digital banking or contactless payments more often than they use cash, with two thirds making digital payments multiple times every week.
Where one people used to reserve card payments for large transactions, younger generations, more comfortable with new technology, have happily turned to card for everything from individual cups of coffee upwards.
Figures published by the Central Bank on Tuesday show that point of sale spending on debit cards jumped 18.5 per cent over the 12 months to December 2019, to over €4.8 billion. Credit card spending over the same period was 8.4 per cent higher at €1.1 billion.
In the earlier survey, 43 per cent of respondents said cash was on the way out.
A key part of the appeal for consumers was that paying this way attracted no charges. Until now.
On the very day that the Irish banks were virtue-signalling their commitment to offer "relief" to customers hit by coronavirus, AIB became the third Irish bank to announce it was going to start charging for contactless payments.
Apart from the crass bad timing, the decision sends all the wrong signals to customers. Now that consumers have got into the habit of using contactless technology, the bank is betting that inertia will see them continue to do so while allowing the bank to profit on something that ultimately saves them money.
But the decision could prove short-sighted. Digital banks like Revolut are a gathering force, especially among the young, digitally-savvy consumer base that legacy banks will rely on for future profit and survival. The move by AIB – and before them by tech laggard Bank of Ireland and by Ulster Bank – could accelerate the growth of these challenger banking options.
