An Post has reached agreement with AIB and Bank of Ireland to take over the banks' over-the-counter bill payment services. Bill payments in person will be phased out by the two main banks in the coming months and An Post will lead the formation of a new company, Billpay, which will streamline bill payment facilities.

The initiative was introduced as the banks declined to comment on a suggestion by the Minister for Public Enterprise, Ms O'Rourke, that they pay millions of pounds to keep the post offices open. Yesterday's deal will add only £1 million (€1.27 million) in gross revenue terms to An Post's bottom line. The post office network is facing losses of £10 million this year.

The National Payments Strategy, introduced by Ms O'Rourke, will create 50 jobs at a payment processing centre in Kilrush, Co Clare.

The Taoiseach, Mr Ahern, welcomed the initiative and said the Government was committed to using the technology envisaged by the electronic payments infrastructure "to deliver user-focused public services through the post office network".

The changeover to the new system will take three months. Customers paying bills will not be charged for the service, which will generate an additional five to seven million transactions per annum. An Post's network of about 1,900 post offices handled 16 million bill payment transactions last year.

Mr Eamonn Ryan, managing director of the post offices division, said: "The spread of our network equips us to provide a key focus in delivering the Government desire for the provision of access for all citizens to a full range of electronic services."

Ms O'Rourke said the move was a good business idea as well as good common sense. "The strategic partnership between An Post and the banks provides specific benefits for consumers and the bill issuers now but, as the roll-out of technology grows, it will ensure much greater benefits in the future."

Ulster Bank has decided to maintain over-the-counter bill payment services for its customers. Group chief executive Mr Martin Wilson said the bank believed in offering a total package of personal services in tandem with electronic transaction services.

An Post already handles over-the-counter payments for a number of utilities and other service providers. In the ESB's case, payment services are out to tender and An Post has made a submission.