Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank the Leas-Cheann Comhairle for the opportunity to discuss the future of banking services for the public. I thank the Minister, Deputy Donohoe, for sharing time with me for this important debate. The Minister has set the scene for current developments in the banking sector, whether legislative, EU-driven or resulting from market announcements. All of these matters frame the discussion on the future of banking. I will follow the Minister's comments by updating Members on some key issues which cut across my areas of responsibility in the Department. These include the impact of technology on local services, supporting the economy, digitisation and the role of credit unions.

The banking landscape is changing. The recent announcements of branch closures are disappointing and regrettable. The announcement to close branches is clear evidence of the impact technology is having on banking services and the way the public interacts with banks, credit unions and other financial service providers. There has been a significant change in consumer behaviour recently. Young people have adapted to change in the use of technology as have many older people. This is reflected in increased online shopping and purchases from home and online.

The banking sector is among many businesses that are conducting a greater proportion of their business online. Contactless payments of up to €50 have resulted in many people using cash less, which is evidenced by the reduction in withdrawals from ATMs recently. It is important that those who are not familiar with technology are fully provided for and are not excluded. I am not just talking about elderly people who may not be familiar with modern technology but also about people who may not have access to broadband in their homes or to Internet facilities. Many people still do not have an adequate mobile phone signal in their homes. Without these two options, there is a possibility that some people may be excluded. We have to take that into account. That is why even though it seems a strange debate in which to make this point, the extension of the national broadband plan throughout rural Ireland will help people to ensure that they are not excluded from banking and other services in future.

Many people will still want to carry cash and to do their banking in person. That is many people's choice. It is worth reflecting that the credit union network, which has over 400 branches, is collectively larger than any of our retail banks at present. It has a big footprint in our cities, towns and throughout the country. It is welcome that Bank of Ireland is now entering into a new partnership with An Post. An Post's network across the country combined with the credit union branch network provides a large number of locations where people can conduct their banking in person on a daily basis. This will allow personal and business customers to use their local post office for a range of banking services and not just for depositing cash.

Technology is driven by new services, new ways of banking and greater mobility between service providers. Increasingly, banks and credit unions are competing with technology-driven firms. This impacts not just customers but also staff. Staff must not be left behind in this process. They must be supported and retrained as banks and credit unions increasingly use new digital skills. I stress the importance of that. Many banks and financial companies are technology-driven companies. One major bank in the financial services sector stated that it has more staff working on technology for the bank than Google has working on technology in Ireland. People know that you cannot have a debit or credit card without sound technological support to make it all happen.

When we look to improve the retail financial sector, it is important that we view banks and credit unions as a means to help households and firms to achieve their financial, economic and social needs. Sustainable and responsible competition in the retail financial sector is vital to ensuring that businesses and consumers have a range of banking options and services available when using financial services and accessing credit.

Following the recent announcements, we know that many small and medium enterprises, SMEs, including agri-SMEs, will be looking to refinance away from Ulster Bank. It will also be essential that sustainable businesses and firms will be in place to meet the needs of consumers and the economy when the pandemic has passed and that these firms have access to appropriate credit facilities. To that end, the Strategic Banking Corporation of Ireland has worked closely with the Department of Enterprise, Trade and Employment, the Department of Agriculture, Food and the Marine and the Department of Finance on the design of a number of credit-related support schemes including the Covid-19 credit guarantee scheme.

I believe that credit unions have an opportunity to play a bigger role in providing greater competition in SME and microbusiness lending to many small retailers and sole operators across the country. Many community credit unions already provide such lending. Approximately 19 credit unions are involved in the Covid-19 credit guarantee scheme, which will hopefully be a precursor to credit unions taking a larger role in State-supported lending in the future. I remind people that it is a State-guaranteed loan scheme. Some 80% of the loan is guaranteed by the State so the risk to the financial institution is significantly diminished. That is why I welcome credit unions moving into this area. Since the risk to the financial institution providing the loan is reduced, it can offer competitive rates. I encourage people to follow up on that scheme. They can obtain a loan of up to €200,000 without having to give a personal guarantee because of the State's support of this scheme.

Retail banks and credit unions have had to transform their digital offerings due to customer preference and for cost reasons. This has led to large, increasing numbers of customers transacting digitally rather than in person. This shift to digital has been accelerated by the pandemic but was already under way long before the pandemic began. Banks and credit unions have also had to adapt to new competition from entities which are often digital only. Our policy framework will need to adapt for these emerging digital finance firms. Many people like to get old-fashioned bank statements in the post but many others are quite happy to be able to access it on the Internet or their mobile phone.

Officials in the Department of Finance have been actively engaged in the negotiation of the digital finance package proposals published by the European Commission. The aim of the digital finance strategy is to ensure that financial services rules are fit for the digital age and to stimulate responsible innovation and competition among financial service providers in the EU, while ensuring a level playing field for all. The main components of the package are the Commission's communications on retail payments strategy for the EU and a proposal for the regulation of markets in crypto-assets, MICA. People hear about crypto-assets and cryptocurrencies and any reform or examination of banking in the future will have to be aware of these issues. There is also a proposal at EU level for the regulation of digital operational resilience, DORA.

As we move towards a more digitalised system, it is important that legislation ensures that we protect consumers, put in place a more resilient framework and encourage even greater innovation. Officials are involved in promoting Ireland as a location of choice for financial technology, fintech, development under the Ireland for Finance strategy. While many of these firms could, and do, compete with banks and credit unions, many are also crucial service providers, assisting the financial system in adapting to the needs of customers.

The programme for Government includes a review of the policy framework for credit unions, a review that I am currently progressing. While there are challenges facing the credit union sector, the strengths of the movement cannot be underestimated. Credit unions have the capacity to help communities all over the country to confront the challenges that they face. While the movement is undoubtedly a success, I believe that it has the potential to do much more, particularly in developing the structures and expertise to grow SME, micro lending and mortgage lending.

The Government wants to ensure that banks, credit unions and the wider financial system will effectively contribute to and support economic growth and employment. The acknowledgment of the positive role of the sector is central to any discussion on the future of banking.

Any review must also be forward thinking and forward looking to take account of changing consumer behaviours in the future. I look forward to hearing the views of Deputies on this important topic and the proposals they have to improve and expand the services provided by banks and credit unions in the overall interests of the economy and our people, especially their staff and customers.

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