Revolut’s Remarkable Growth in Ireland Signals Changing Banking Landscape
From its humble beginnings as a travel card with favorable exchange rates, Revolut has experienced a remarkable upward trajectory. In just eight years, it has amassed a customer base of over 2.2 million in Ireland, surpassing the success of its neo-banking rivals. This rapid growth has instilled hope for a viable alternative to the limited choices offered by Ireland’s traditional banks.
During my time working in the financial consulting division of a top accounting firm, I had the opportunity to identify sectors that thrived despite the challenges posed by the pandemic. The fintech industry emerged as an obvious choice due to its user-friendly interfaces, which became crucial during the shift to online banking. Revolut, with its global market and diverse product offerings, outshined its traditional competitors, particularly in catering to younger demographics.
Revolut’s ambitious plans for the future, such as migrating to Irish IBANs, enabling direct salary deposits, offering personal loans, and expanding into the credit market, have now become a reality. Back then, it seemed imperative to take the fintech sector seriously and consider the impact of global competitors on Irish banks. However, my suggestions were met with skepticism and dismissed as a passing trend.
Fast forward to 2023, and the withdrawal of major players from the market has led to a significant concentration in the banking sector. The recent half-year results reveal the substantial benefits Ireland’s legacy banks have reaped from the departure of KBC and Ulster Bank. Bank of Ireland acquired €8 billion in mortgage loans from KBC, while AIB and Permanent TSB divided the Ulster Bank mortgage and commercial loan books between them. AIB’s share of new mortgage loans has surged to over 30%, and Bank of Ireland’s deposits rose to €102 billion, reflecting the acquisition of KBC accounts.
This collapse in banking competition, coupled with the European Central Bank’s aggressive interest rate campaign, has resulted in lucrative profits for Ireland’s banks. AIB posted an operating profit of over €1.2 billion for the first half of 2023, surpassing its total for the previous year. Similarly, Bank of Ireland reported an operating profit of €1 billion, a significant increase from the same period in the previous year.
However, such fortunes come at a cost. Banks have simultaneously increased rates for consumers, offered low rates to depositors, and implemented cost-cutting strategies that impact their own employees. The Financial Services Union recently called on AIB to agree on a pay rise for employees in light of the bank’s bumper profits. Furthermore, Irish savers receive only 7% of the European Central Bank’s rate increases, while mortgage interest repayments have soared by over 46% in the past year.
In recent years, Revolut’s expanding range of services has reduced the need for customers to bank elsewhere. With a customer base comparable to Ireland’s legacy banks, Revolut’s focus is now on expanding the usage and engagement of existing customers through additional services. As part of this strategy, Revolut has signaled its entry into Ireland’s mortgage market, pledging to offer “100% digital” home loans financed by the bank itself.
This expansion into various financial services positions Revolut as a global bank that offers home loans, small business loans, instant transfers, cash-back shopping, junior banking, stock trading, insurance, and more. It serves as a reminder to Ireland’s banks that they are not immune to international competition. The message seems to be slowly sinking in, and the changing banking landscape in Ireland may soon see customers flocking to alternative options like Revolut.