Online banking: Are we getting less but paying more?

Branch closures, increased fees, and now the banks have launched revamped banking apps which may offer less service than before.

Yes, the advent of new smartphone apps is the latest move towards digitalisation among Ireland’s retail banks. But are they just another example of people paying more for a lesser banking service?

Reduction in services

There is no doubt that many of us are both driving and embracing the increasing digitalisation of retail banks. Figures from Bank of Ireland’s recent annual report, for example, show that last year, six out of 10 of its everyday banking products such as current accounts or personal loans were delivered entirely digitally. And it predicts this figure will increase to more than eight out of 10 this year.

But there is also no doubt that we are being nudged in this direction. One example is the increase in branch closures which has lately stepped up a notch, with the announcement from Bank of Ireland that it will close more than 100 branches this year. And even in branches that remain open, there can be a diminution of services available: Permanent TSB, for example, is set to withdraw cash services from 44 of its outlets this month.

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Fewer branches, or reduced services, means more transactions online.

Or consider the experience of the humble cheque. Back around 2014, banks started imposing significant charges on their usage. Bank of Ireland, for example, levied a €0.20 per cheque charge/€5 for a book of 25 cheques. Unsurprisingly then, their usage plummeted, with figures from the Banking & Payments Federation showing that such payments halved in the four years to end-2020.

In part this was due to changing habits, but banking customers were also “nudged” in this direction by the high charges.

Smartphone apps

Now the latest innovation on the banking front is the arrival of new "mobile" banking apps. Unlike online banking apps of old, the focus from the two main pillar banks, AIB and BOI, is now very much on smartphones.

However, while they may offer greater security – and in some cases better services – coming, as they do, on the back of European regulations known as the Payment Services Directive (PSD2) – which require payment service providers to improve customer authentication processes – they have also created a further layer of complexity for banking customers.

Firstly, the new apps can only be used on certain devices. AIB for example, requires you to have an android phone, at least version eight or higher, or an iPhone on iOS 11 or above.

Bank of Ireland’s app needs Android version 6+, but an iPhone using iOS 12 or above, with tablet devices of similar modernity supported later this year. And as newer Huawei phones don’t come with Google apps like the Play store, you won’t be able to use the BOI app if you have this phone.

Secondly, you can only access the apps with your smartphone, even if you want to use your PC or laptop to do your banking. This is because to access banking this way, you need to activate a push button on your phone. Once you do this, you can then get into your account on your computer.

But what if you don’t have a smartphone or it’s out of date? Well, then you can still access your bank account online, but first you will need to get the bank to send you out a little digital security device, a little bit like a mini calculator. Bank of Ireland calls it a physical security key (PSK), while at AIB it’s a “card reader”.

So, someone who was happily accessing their details on a laptop now needs to apply a new tool to the process. Yes, the rising tides of digitalisation don't lift all boats. As a spokeswoman for advocacy group Age Action says, the issue of digital exclusion in banking is raised time and again with their membership.

But if there is a risk of people being left behind in the digital world, there are also dangers for those who embrace it.

Smartphones are lost or stolen, broken and damaged, every day of the week. Previously, if this happened to you, you had the security of knowing you could still access your online banking account on another device should you lose your phone.

Now if you don’t have your phone you’ve also lost the “key” to your account, so will either have to get a new phone and reinstall the app, or get a security device to access your bank online, of if you’re with AIB, you should be able to access “limited”services online. While the security of your account hopefully won’t be compromised by such misadventure given the additional security, its accessibility will.

Yes, with both AIB and BOI you also have access to a branch or telephone banking; but you used to also have easy access to online banking.

Increased costs

The real issue is perhaps, that customers are now paying more, not less for these services. Bank of Ireland, for example, has a €6 monthly fee as standard, which comes to €72 a year, while AIB charges €4.50 a quarter, as well as additional fees. As a result, Bonkers.ie estimates that an account with the bank will now come to about €87 a year – one of the most expensive in Ireland.

Not only that, but the bank has indicated that while its card readers are free for now, they will incur a fee thereafter (€5.50 for a replacement reader). Best maybe to order one now just in case then.

Now, even in the days of “free banking”, whether or not you got a bill at the end of the month or not, banking services always cost you – you just maybe didn’t realise this. But nonetheless, charges have risen sharply in recent months.

And with competition not just scarce, but in active decline, the only expectation is that Irish banking customers may have to get used to paying more for less.