A few days before the controversial AIB decision, economists had warned of cashless disadvantages

Treasury Department research, released days before AIB’s aborted decision to go cashless at 70 branches, backed the bank’s main argument that consumers prefer digital services.

However, the study also specifically warned that the trend towards reduced cash use would have a negative impact on seniors and rural residents – the very groups most upset by AIB’s move.

The note, issued July 15 by economists at the ministry, said the Covid-19 pandemic has caused a “structural change” in spending habits, with less cash and more electronic transactions across the consumer economy.

“This trend reflects the health and safety concerns of businesses and consumers during the pandemic; although due to the convenience and security of digital payments, cashless transactions are expected to continue even when Covid-19 recedes from the headlines and is projected to be higher than pre-pandemic levels,” reads the release, which was included in the latest Economic Insights quarterly.

It goes on to say that this reduction in cash use “could disproportionately impact cohorts without access to digital payments or bank accounts,” such as the elderly or those in rural areas.

According to central bank data cited in the briefing, total card issuance in March 2022 was 12 percent higher than in the same month of 2019 before the pandemic.

During the same period, ATM withdrawals and point-of-sale cash transactions declined sharply as consumers switched to non-tactile payments and online shopping.

Although cash payments have recovered somewhat as economies reopened this year, the gap between cash and cards has continued to widen.

Average weekly cash spend is still well below pre-lockdown week levels, while card spend is nearly 50 per cent higher.

Last Tuesday, AIB announced that it was withdrawing cash services from 40 percent of its 170 branches, many of them in rural towns.

The move sparked a major public and political backlash, forcing the bank and its CEO Colin Hunt into an embarrassing relegation on Friday, just a day after Taoiseach Micheál Martin said AIB should reconsider.

It later emerged that Treasury Department officials knew of the bank’s plan as of Friday, July 15, but only informed Treasury Secretary Paschal Donohoe on the morning of the announcement.

A spokesman for the department said officials “underestimated the possible response” to AIB’s proposal and viewed plans to expand banking services with An Post as “positive for customers”.

In a statement Friday reversing its decision, the AIB said it had seen a “dramatic increase” in digital banking usage and a decline in branch visits and cash usage in recent years. It cited figures showing a 36 percent drop in cash withdrawals from its ATMs in five years and a 50 percent drop in over-the-counter transactions. Digital payments grew 85 percent over the same period.

Fianna Fáil TD John McGuinness, chairman of the Oireachtas Finance Committee, said he would hold hearings on the matter in September

https://www.independent.ie/business/irish/economists-had-warned-of-cashless-downsides-just-days-before-controversial-aib-decision-41864144.html A few days before the controversial AIB decision, economists had warned of cashless disadvantages

Fry Electronics Team

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