Irish consumers favour traditional payments

Coupled with a high usage of cheques, Ireland could stand to save up to €1 billion each year if more efficient payment methods were employed, author of the report Ronnie O'Toole said.

The report pointed to a number of trends in Ireland that show the economy is lagging behind its EU counterparts in moving to electronic and cashless payments.

Although card use in Ireland is growing rapidly, with debit cards showing significant growth in recent years, the country is still falling behind.

Irish consumers recorded an average of 76 payments per capita in 2011, compared to 203 in Finland and 146 in the Netherlands. Debit card use is growing, however, rising by an estimated 14 per cent annually, while credit card payments continue a downward trend that has been observed since 2008.

When it comes to electronic payments and transfers, irish consumers are also behind the EU average. The average rate of electronic credit transfers – for example, one off payments or standing orders for savings accounts - stood at 34 per capita, behind the EU’s 50 every year.

In Europe, direct debits are made at a rate of 44 per head of population annually; in Ireland, that figure is only 24.

Ireland also has a high rate of cheque usage, writing 84.2 million per year or 18.8 per capita compared with the EU average of 9 per capita. The study found that cheques are particularly popular among the elderly and the farming community, with small and medium enterprises accounting for a significant proportion of the beneficiaries.

However, the cost of such payments, including ATM transactions and over the counter payments, are significantly higher than for card and electronic payments. In 2009, banks lost a combined total of €172 million on the provision on cash and cheques, but credit card businesses offset some of this figure, making a profit of €140 million.

“Since 2009, the degree of this cross-subsidisation is likely to have risen,” said Mr O’Toole, citing the level of interchange fees paid to banks on debit cards, which has risen from 3.8 cent under the laser card scheme to 10 cent per transaction for Visa debit cards. The Laser standard is being phased out of Irish banks.

“Furthermore, thee re-introduction of per transaction charging by the main banks in Ireland is likely to have generated more fee income on debit cards, with 238 million transactions annually, than on ATM withdrawals at 173 million, despite the fact that the costs of maintaining the debit card infrastructure is far lower than that of providing cash services,” he wrote.