The preference of Irish consumers for digital banking platforms over traditional banks isn’t surprising given the lack of digital banking features, limited choice of banks, and higher account fees with the latter. This comes amidst the backdrop of Irish banks faring poorly in terms of customer satisfaction due to reasons such as obsolete apps, delayed introduction of digital banking solutions compared to other nations, Europe’s bottom-tier savings interest rates, and bank branch closures.
Given the disenchantment with conventional banking, Ireland has been a booming market for digital banks, making it one of the top nations with a high number of digital bank account holders in 2022. As an example, Bunq, a Dutch digital bank, recorded a ten-fold surge in Irish customers last year, with these new entrants collectively saving at a rate of €1 million per day.
Revolut, a rapidly expanding digital bank boasting 2.5 million Irish account holders, is making strides against traditional players. This bank offers a range of services tailored to the Irish market, including deposit guarantees, local currency accounts (IBANS), credit card services and a variable interest saving investment product. Catering to modern banking needs, digital banks offer desirable features such as instant cash transfers, bill splitting and travel-friendly services which have accelerated the desire to shift from traditional banking facilities.
However, there are certain factors that must be considered before moving to digital banks such as Revolut. For instance, Revolut offers perks like zero monthly fees for basic accounts, fee-free currency exchange, and cashback rewards for accommodation booked through Revolut Stays. While the digital interface on the app tracks your expenditure and maintains an efficient transfer system to other users, it may not be suitable for everyone.
Bonkers.ie’s Daragh Cassidy suggests that those who prefer physical cash and don’t travel internationally may not reap the full benefits of such platforms. He points out that the limit for free cash withdrawal is €200 per month. Above this limit, usage fees can potentially accumulate significantly for individuals who regularly withdraw cash. For instance, a person who withdraws €50 every couple of days would incur significant charges. As such, the decision to switch to a digital bank should always be informed by an individual’s banking needs and habits.
At present, Revolut offers a Standard account with a €200 withdrawal limit or five transactions per month without charging fees. If users exceed these limits, each additional transaction incurs a 2% fee. The monthly limit can be increased to €400 on their Premium plan costing €8.99 and to €800 on their Metal plan for €15.99 per month. Revolut’s Ultra account costs €45 monthly and permits customers to withdraw up €2,000 without additional charges. Meanwhile, Bank of Ireland’s current account levies a standard €6 charge monthly, inclusive of euro ATM withdrawals. Thus, a basic Revolut account may appeal to individuals who regularly make card-based purchases and prefer low banking costs, however it might not be suitable for all.
Those who regularly deposit cash into their bank accounts may face challenges since Revolut, unlike other banks, doesn’t permit customers to deposit money through branches or ATMs. Furthermore, they currently lack a direct option for most Irish customers to deposit cash. As Cassidy remarks, “Revolut appeals to individuals inclined towards online transactions and card payments.”
For people who prefer or require overdraft facilities, Revolut, Bunq and An Post Money currently do not offer these. Nonetheless, a representative from Revolut’s Irish branch informed the Irish Times that they offer a “PayLater product”, which is a low-limit short-term credit option potentially less pricey than conventional overdrafts.
Revolut also promotes buying-now and paying-later with a minor fee of 1.65% per transaction. However, delayed repayments accrue 12% interest annum on the overdue amount, calculated and applied daily after a grace period of five days.
As always, scrutinising the terms and conditions of banking or financial services is essential. Specifically, it’s vital to consider issues related to DIRT (Deposit Interest Retention Tax). According to Mark Coan, founder of MoneySherpa.ie, while Irish banks automatically deduct tax on earned interest, some online banks do not, requiring individuals to account for it in their tax returns.
Digital banking is gaining ground on traditional financial establishments, yet many online banks lack one critical financial service most people require at some point in their lives – a mortgage. Bunq has started venturing into this sector through an alliance with Tulp, a Dutch platform. However, Revolut, another digital bank, hasn’t launched any mortgage product currently. Despite this, Revolut has asserted that locally embedded teams are working on developing its mortgage proposition for the Irish market, as per an official statement.
Does operating exclusively with digital banks impede the prospect of obtaining a mortgage with a traditional bank? Ryan Coan reassures that the choice of bank should not be a hindrance when applying for a mortgage. He believes digital banks such as Revolut, Raisin, or Bunq are just as eligible. He found no significant disadvantages between neobanks and longstanding banks concerning account verification for mortgage approvals.
Bonkers.ie’s Cassidy highlighted a widespread misapprehension, especially amongst first-time buyers, that they couldn’t hold a current account with another bank when seeking a loan. Cassidy emphasised that it was a minor issue a few years back, but digitally-based accounts are now viewed as equivalent to regular banks by lenders in the loan application process.
Regarding customer service and security, some customers maintained traditional bank accounts whilst transitioning to digital banking due to concerns related to fraud and seeking assistance in case of an issue. Negative experiences like large-scale misuse of banks by fraudsters, as reported by Revolut, have heightened these fears. The Irish Times exposed the difficulty faced by a couple whose wedding funds were plundered from their Revolut account by fraudsters and struggled to engage with a human representative over the phone.
Revolut defended itself by emphasizing their dedication to securing its customers’ funds, stating that they scrutinise over 500 million customer transactions each month for fraud detection. They justify their use of in-app customer support as the most secure communication mode for their patrons.
Through chat interactions within apps, customers can ensure that they’re speaking with an actual employee from the bank, rather than a potential fraudster, which provides additional security. There’s a significant rise in scams involving fake calls or messages mimicking banks, which emphasises Cassidy’s point about the enhanced safety of in-app chats within digital banks.
Moreover, Cassidy also warns about the power of artificial intelligence in duplicating voices, suggesting that reducing risks of fraud could be easier if customers know their banks will only communicate through a secured app and never through calls or text messages. However, as Coan indicates, those who appreciate a sense of personal contact might still find traditional banks more suitable for their needs, though the closure of branches and ATMs indicate that their business models are also becoming digital-based.
Coan additionally highlights a crucial point for those considering digital banks as their main banking option: understanding the coverage they offer. Digital banks operating in the European Union “must” secure your deposits via some deposit insurance scheme. For instance, N26 uses the German Deposit Protection Scheme while Revolut’s deposits are secured by the Lithuanian State Company, both up to €100,000.
However, Coan stresses that it’s important to fully comprehend the specifics of this coverage. Case in point, Revolut’s Flexible Accounts, known for their high-interest offerings, are actually not covered by the deposit insurance scheme as it’s an investment, not a traditional savings account, and are instead only insured by an investor scheme with a lower limit of €22,000.
Consequently, those contemplating a complete switch from traditional to digital banks, need to be fully aware of both their own expectations and the specific guarantees provided by the digital bank before making such a significant decision.