A little over a year ago, An Post, AIB, Bank of Ireland and the Minister for Public Enterprise, Ms O'Rourke, announced with great fanfare that the banks were going to transfer over-the-counter bill-payment services to An Post. So far, the joint initiative has come to nothing.

At the press conference, Ms O'Rourke said the move was a good business idea as well as common sense. The changeover to the new system was supposed to take three months. By mid-summer 2001, it was expected bill payments in person would be phased out by the two main banks.

But before that could happen, the Competition Authority got involved and the deal was put on hold while the Irish Payment Services Organisation (IPSO) waited for a decision on its application for a licence. IPSO is the umbrella body for payment services for financial institutions in the Republic.

The authority finally announced its decision last week, concluding that "the notified arrangement would have the effect of preventing, restricting or distorting competition in the market for bill payments within the State". It stated that the arrangement contravened the Competition Act and refused to grant a licence.

The fact that the banks were acting together in withdrawing and transferring services was key to the authority reaching its decision, a spokesman said.

The parties concerned said they were disappointed and baffled by the decision. IPSO chief executive Mr Stewart MacKinnon called the decision a regressive step that was not in the best interests of consumers. "It is also inconsistent with stated Government policy on electronic payments," he said.

While Ulster Bank welcomed the proposal in April 2001 to introduce a new payments structure, the bank made it clear at the time that it would continue to offer bill- payment services to its customers.

Chief executive Mr Martin Wilson said: "We have no intention of discontinuing these services, therefore we are not as concerned about the Competition Authority decision as other members of IPSO appear to be."

Of course there's more than one way to skin a cat. The banks that want electronic banking to replace existing in-person services have already been rethinking their strategies. AIB struck its own deal with An Post in November, allowing the post office network to handle basic cash transactions for bank customers.

The bill-payment strategy of Irish financial institutions is worth monitoring because it may ultimately have an impact on the commitment to keep branch networks open.