Does AIB know what it is for?

AIB’s decision to shutter 70 branches – at least in terms of providing cash services – around the country has provoked predictable, and entirely justified, howls of outrage from various rural politicians of all stripes. In that outrage, the politicians are of course correct. The state, not very long ago, considered these banks so vital to people that they poured in untold billions to save them from collapse and make sure people could get their savings. Now, it turns out, the banks don’t see themselves as vital service providers at all.

But in some ways, the bigger story here is being missed. AIB removing its branches from various rural towns does not mean, for example, that AIB customers in those towns cannot access cash. AIB cards will still work in Bank of Ireland cash machines, or permanent TSB ones, or in those little independent ATMS that feature in many shops, these days. Supermarkets and so on will still offer cashback services to customers. Some will, of course, complain that those ATMs charge an extra 25c or so per transaction, but really? Is that the hill we’re all going to die on?

The bigger story, really, is that the so-called “pillar” banks, which we invested so much money into saving and propping up, are not really “pillars” of anything at all. It is telling, for example, that so much of the outrage about this decision is focused on its impact on the elderly. Nobody has seriously tried to argue – at least not that I’ve seen – that this decision will impact the young or the middle aged. That tells its own story. Traditional banking is dying out.

You might think, then, that the branches were the last major selling point for the traditional banks. Why should I, for example, keep my money in AIB, rather than Revolut? Up till now, the answer to that question might plausibly have been “well you can walk into your AIB branch and talk to a real human about your mortgage”. Increasingly, that’s not the case. Which makes you wonder why these banks are so eager to divest themselves of their one major advantage over their emergent digital competitors.

If anything, the branch network is why the major Irish banks were the pillar banks to begin with. There’s a reason why AIB and Bank of Ireland dominate the Irish mortgage space, and that reason is not that they always offer the best deals. It is because they have always had, unlike their competitors, a presence in the community. When you pare that back, you also, inevitably, pare back the loyalty and connection people have to those banks.

This is an example, frankly, not of some great conspiracy to do away with cash, but of a bank making a short-sighted business decision. Yes, undoubtedly, on paper, this decision will save money. Keeping cash on premises is expensive: It is also a security risk. People from the border counties, like me, know for example how many ATMs have been industrially liberated in the middle of the night in recent years. Fewer services means fewer staff, and better margins. If you are looking at this like an accountant, or even a banker, the decision makes sense in the immediate term for AIB’s bottom line.

But that’s not how they should be looking at it. A much bigger threat to AIB’s bottom line over the coming decades is the increased competition from the likes of the above mentioned revolut, and other digital services. It is not beyond the realms of possibility, for example, that big tech giants like Amazon will also break out into personal banking.

The question then becomes this: What does a relative minnow in global terms like AIB have to offer Irish people that a revolut or an amazon cannot?

If the answer to that is not “a local connection and good relationships with your local bank branch” then…. What is it?

I’m not a massively well paid bank economist, paid to make these decisions, of course. I’m just an AIB customer with a modest and insignificant impact on their bottom line. I can’t speak for their long term welfare. I can only say that without a local branch, I may as well take my custom elsewhere. And I suspect that many others, in the decades ahead, will conclude similarly.

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