Mr. Brian Hayes:

I thank the Vice Chairman and members for the opportunity to address this pre-legislative scrutiny of legislation on access to cash. I will not reintroduce my colleagues. We are happy to be here to take any questions on the heads of the Bill. We also submitted to the committee a consultation paper we had as our submission on the national payments strategy. We thought it useful to send that to the committee in advance in order that the whole issue of access to cash, which we deal with in the consultation, is also properly scoped in.

The payment landscape in Ireland and globally has changed significantly over the past ten years, with a huge shift to digital payments and online banking as many consumers and businesses embrace the new and innovative payments methods and services available to them. The recent pandemic has driven an even greater step-change in this transformation. The most recent Central Bank of Ireland figures show the value of ATM withdrawals has fallen by almost one third since the pandemic, with the volume declining by almost 45%. Conversely, industry data shows that the number of contactless card payments more than doubled between 2019 and 2022. In December 2023, the value of payments via mobile wallets such as Apple Pay and Google Pay was higher than the value of cash withdrawals, according to the Central Bank. Despite this societal shift, the BPFI and our member banks recognise the vital relevance of cash for many consumers and small business operators who continue to rely on cash in their daily lives. It is especially important for the most vulnerable members of society and, as we work our way through the current cost-of-living challenges, for many people who use cash for budgeting and managing their household finances.

In this context, the banking industry is fully committed to maintaining reasonable access to cash both now and in the future, in accordance with consumer demand.

We are supportive of the introduction of a flexible framework to manage this access. We do, however, have a number of significant concerns regarding the proposed framework as currently set out in the general scheme. We are very grateful to have the opportunity to address these particular concerns with the committee.

There are seven core concerns. One of the core purposes of the proposed legislation, as outlined in the scheme is to "manage future changes in the access to cash infrastructure in a fair, equitable and transparent manner". As matter stand, we believe that the current provisions within the scheme are neither fair nor equitable and, more critically, pose a very real risk to the current and future competitiveness of the Irish retail banking sector. Under the proposed provisions, it is the three retail banks - the three pillar banks - that will have sole and legal responsibility for maintaining the prescribed levels of access to both ATM and cash access points or counter services. This is despite the fact that they only control around one third of the general infrastructure. All other providers who make up the remaining cash access infrastructure, including An Post, independent ATM providers and credit unions, are excluded. In a scenario where any one of these providers withdraws an ATM or a bricks-and-mortar counter service that leads to a breach of the cash access criteria, under the current proposals, it will be the responsibility of the retail banks to replace this service, even in circumstances where that is not commercially viable.

Enacting the proposed legislation in this manner will unquestionably place the retail banks at a competitive disadvantage by creating an unlevel playing field among existing and perhaps future market participants. Additionally, it will almost certainly lead to an increase in new and unquantifiable fixed costs for retail banks, which could ultimately increase the cost of everyday banking services. In the current environment where our banks are once again profitable this may be sustainable but given the cyclical nature of the sector and the business underlying the sector such costs could pose challenges into the future.

Furthermore, the current provisions raise the very real risk of creating a significant barrier to entry for new retail banks that might choose to come into the Irish market considering the potential costs involved. Following a year in which we have seen the exit of two retail banks from the State, one of which closed its doors after 175 years, this prospect poses even greater challenges for the retail banking sector left in Ireland. It is within this context that we are calling for a number of important changes to certain provisions within the general scheme.

On the question of shared industry responsibility, first and foremost, it is imperative the scope of the designated entities criteria be broadened beyond the retail banks. The Irish cash landscape is made up of a host of market players including An Post, credit unions and digital banks. In order to create a level playing field among all market players, the provision and cost of reasonable access to cash must be a shared industry responsibility across all current and future providers of cash and current accounts.

In the context of unquantifiable costs, much of the debate on access to cash up to now has focused on the availability or otherwise of ATMs. This point came out in the committee's first session, when the focus was nearly exclusively on the question of ATMs. Under the current provisions, as well as being responsible for maintaining specified levels of ATMs, retail banks - based on December 2022 levels - will be responsible for ensuring that at least 99% of the population live no more than 10 km from a cash service point where cash can be deposited as well as withdrawn and where in-person assistance will be available. In restating our commitment to maintaining reasonable access to cash levels within the retail banking sector’s network, under this provision, banks are facing the prospect of replacing bricks and mortar counter services in the event of a withdrawal of such a service from other providers. This has the potential to impose unquantifiable costs on our banks which, as already outlined, has significant implications from a competition and cost to consumer perspective. This provision as it relates to cash service points should be revised, with the geographical radius increased to 15 km in line with An Post’s geographical commitment.

In the context of creating an independent revision process, under the current provisions as proposed the responsibility to vary the access to cash criteria resides with the Minister for Finance of the day. As the designated competent authority in charge of supervising the financial services sector in Ireland and for regulating other aspects of the cash landscape, we believe this function should instead reside with the Central Bank of Ireland and should be fully independent. It is also important to note that an EU regulation on cash as legal tender is currently under discussion and that any measures introduced domestically should be aligned with this proposed regulation.

On ensuring a dynamic and agile review system, alongside the access to cash criteria, the general scheme also sets out the triggers that will prompt this particular review. This is proposed to take place at the request of the Minister within 12 months post-census or in the event cash demand drops by 12% year on year. Given the continuing and rapidly evolving nature of the payments landscape and the need to introduce a flexible framework to manage the decline of cash, we believe the proposed review triggers need to be amended significantly. This includes the reduction of the review period to a mid-census timeframe or every 30 months and a move to a point where a maximum of a 10% reduction from the set December 2022 baseline should trigger a review. This should be monitored separately across the eight geographical regions set out in the scheme and not across the State as a whole. Other triggers, such as an exceptional event, should also be considered in addition to providing for the banking industry itself to invoke a review, subject, of course, to the review process by the Central Bank of Ireland.

On the question of cashback services, we believe that it is important that the definition of the access to cash points is broadened and should include retail branch locations, branch ATMs, An Post locations, independent ATMs, credit unions and cashback services. The BPFI is aware of the upcoming proposed changes to the EU’s payment services directive 3, which will enable retailers offer cash back without a purchase. This will allow consumers easier access to cash across multiple locations where retailers support this facility.

Our final essential point is on the imperative of providing clarity on local deficiencies. An as yet undetermined but significant part of the general scheme relates these deficiencies. These are cases where although an area meets all of the access to cash criteria, certain localised deficiencies arise. In areas where such deficiencies are deemed to exist, it will be the responsibility of the retail banks to address them. While the scheme sets out that guidelines will be published by the Central Bank on this, no timelines are provided. With limited detail on how these deficiencies will be assessed, this poses a significant challenge to our members in terms of the potential costs involved. It is critical that more information is provided on this process both in terms of the assessment and the implementation timelines. To this end, we believe a consultation process, facilitating engagement and input from the industry, should be established by the Central Bank to ensure transparent procedures are put in place, which can then be subject to regular review.

As demonstrated by the Department of Finance’s own assessment of the landscape here in Ireland as of December 2022, there is ample provision of cash access across the State. The banking industry is committed to playing its part in maintaining this access as well as responsibly managing its decline. This responsibility must be shared across all relevant market players working within realistic, responsive and objectively measured parameters. The proposals, as currently presented, are of concern as they exclude key organisations from this remit, raise concerns in terms of their impact on competition, and have a genuine cost impact that is not quantifiable, with the knock-on potential that banking in Ireland may be more expensive in the future.

We welcome the opportunity to work with the committee on this pre-legislative scrutiny to improve the general scheme. We will be happy to answer questions.