Bank of Ireland's hasn't been impacted by challenger bank competition - yet

The bank is investing in technology in a ‘competitive environment’.

By Laura Roddy Reporter, Fora

BANK OF IRELAND hasn’t been hit by new tech savvy challenger banks on the block just yet, but it is aware of the increased competition and is responding with investment in technology.

At the announcement of the bank’s results in Baggot Street Plaza yesterday Francesca McDonagh, the bank’s chief executive, said new fintech companies “represent competition” but “are not undermining our key revenue streams right now”.

Bank of Ireland reported an underlying profit before tax of €758 million for 2019, a drop of 19% on the €935 million reported the previous year, despite a 3% rise in new lending volumes and a 4% reduction in net costs. 

The Irish market has seen an influx of challenger banks like Revolut, N26 – and now Netherlands-based Bunq and German Raisin – grab the attention of customers. Revolut claims to have 310,000 users in the country. 

McDonagh said Bank of Ireland has made it easier for a customer to set up a bank account in direct response to the offerings of challenger banks

“Their account opening is sometimes very slick, slicker than a traditional bank and that’s informed some of the changes we have made into personal current account opening,” she said. 

The bank now offers a customer open an account “with a selfie” in ten minutes and where an IBAN and BIC number is sent on the same day. McDonagh said the company is rolling this out with biometrics to increase scale. 

“It’s a response to what customers want but it’s also looking at the competitive environment,” McDonagh added. 

A new version of the app will roll out to customers beginning in March this year, with 10,000 of the company’s employees currently using it. It was originally planned that the app would launch in July 2019.

McDonagh said she had “hoped it would come out sooner” but with half a million customers using the app every day and one million on peak days the delay was necessary for the app to be “absolutely ready”. 

She said the new app will not mean the bank will have the best one in the market but the bank is “progressing to being more competitive”. 

“It has a 50% higher level of functionality. It’s not the end state and I’m not saying we are done… We built a platform where we can add in functionality and version up in response to what’s important to our customers. It will be an ongoing journey,” she said. 
€1.4 billion had been earmarked to be invested in restructuring and updating of technology at the bank – including the app. 

Cautious optimism for SMEs

The bank announced its underlying pre-tax profit fell 19% but intends to increase cost-cutting exercises and sell off distressed mortgages.

McDonagh said that a low interest rate environment and Brexit uncertainty has made  for a “more challenging” operating environment compared to when the bank’s original targets and strategy were set out in June 2018. 

The results show that the firm has made €215 million in savings since 2017 through “simplifying our organisation, sourcing strategically and ways of working”. 

With regards to drawdowns from the bank’s €2 billion Brexit Fund, McDonagh said Irish SMEs are “still quite cautious about taking on new debt”.

She did not have an exact figure on the amount  drawn down, but said it was much less than she expected. She added that this year, the firm has seen an increase in applications, but said SMEs had “cautious optimism. We’re not out of it (Brexit uncertainty) yet.”

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