Customers could save up to €1,000 on a €10,000 personal loan after online platform Revolut became Ireland’s newest lender
CUSTOMERS pay up to €1,000 more for a €10,000 personal loan in Irish banks than on the Revolut online platform.
The crippling three-year interest rates add at least €236 more – and up to a grand – to the total repayments to the scam’s anchor institutions.
Experts say the old banks fear as their tech rival attracts new customers with cheap loans and protected deposits of up to €100,000.
And they insist that once workers start receiving their wages directly into their Revolut, the old guard will be in trouble.
With over 1.7 million Irish users already on board, Revolut is eyeing some of the 1.5 million KBC and Ulster Bank customers who need a new home for their money.
Daragh Cassidy of Bonkers.ie said: “Banks will be worried. Very few people used Revolut as their main bank account, so I think the banks were probably a bit lax.
“But now that Revolut has moved on to offering loans, and with credit cards coming, I think banks are going to be worried.”
An Irish Sun analysis of anchor banks reveals that none come close to Revolut when it comes to personal loans of €10,000.
Permanent TSBs charge 12.5% for a loan of €10,000 over three years, which costs the customer €1,922.84 in interest.
AIB’s 8.95% will cost you €1,382.84 and Bank of Ireland’s 7.5% €1,158.56.
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A loan with Revolut, on the other hand, will cost €922.56 at an interest rate of 5.99%.
Experts say the best way for anchor banks to combat the fintech revolution may be to keep branches open and step up failing customer service.
Last month, online platform Revolut launched online deposit accounts. Ireland with funds protection up to €100,000, following its decision to start offering personal loans the previous month.
Revolut Bank’s launch here comes as Ulster Bank and KBC prepare to exit the Irish market.
Cassidy said another player in the Irish banking market was a “positive” and “timely” development.
THE SCARED BANKS
He explained, “Interest rates on some personal loans in Ireland can reach 12 to 14%. Revolut has arrived and they are offering 5.99%.
“I think this will scare the banks off and they will hopefully be forced to respond by lowering some of their own rates.”
Valerio Poti, professor of finance at UCD, echoed this assertion: “It will certainly be good for competition and diversity in the banking sector. And that could drive down interest rates here.
“Personal loan rates are very competitive compared to existing ones. And this is not surprising because they have a lower cost structure than traditional banks. They can offer these competitive rates because they have a lower cost base .”
Revolut has over 18 million customers worldwide.
TIPPER POINT TO COME
UCC’s Dr JB McCarthy said he did not yet see Revolut’s emergence as a ‘tipping point’ – but said it could happen if online banks grow even further.
He said: “A tipping point is likely to be when a significant number of people start getting their salaries at these fintechs and then go and get their mortgages from them. Because then everything becomes much more direct, easy, clean, efficient process allowing customers to deal with one company.
Dr Poti was of a similar belief, saying: “Anchor banks would obviously feel much more threatened if Revolut offered the full range of banking services, such as mortgages etc.
“I think the banks are starting to watch this closely. But if Revolut goes mainstream and starts offering a whole range of financial services, they’ll worry and keep an even closer eye.
Daragh also thinks mounts could be key in the banking battle, adding: “I don’t know if Revolut will get into mortgages anytime soon.
HIGH MORTGAGE RATES
“But you would wonder, if in four or five years, if this is the next step, in which case the banks are going to be even more worried. Such a decision would really put the cat among the pigeons.”
Ireland has the second highest mortgage rate in the Eurozone, just behind Greece.
The average interest rate on a new mortgage in Ireland stood at 2.76% in February, more than double the eurozone average of 1.36%.
Dr. McCarthy pointed out that as long as we deal in cash, there will always be a need for traditional banking infrastructure.
He said: “As long as we still have coins, notes and checks, we will need a banking infrastructure that will support this.
“Fintechs will not support these processes, so traditional banks will have to and they will have to charge enough for them, to make it worthwhile, because it is high cost infrastructure.
THE POWER OF PEOPLE
“So we’ll need both – or at least until we become a fully electronic payments company, and that won’t be for everyone.”
Dr. Poti said the bank’s best option to fight fintech is personal interaction.
He explained, “Banks will have to change the branch business model. Essentially, branches became places where paperwork was handled and lost customer focus; personal contact and the ability to dialogue to establish a relationship.
“So if branches remain places where paperwork gets jostled around, there’s very little point in their existence, because technology makes it redundant.
“But what technology doesn’t make redundant is human contact, human interaction and the ability to listen to a customer’s needs.
“If they focus and grow that, I think traditional banks have a better chance of coexisting with fintech.”
PERSONAL LOAN COMPARISONS
How the major banks compare to Revolut when looking for a €10,000 loan paid off over three years.
Monthly repayments: €316.19
Total loan cost: €11,382.84
Cost of credit: €1,382.84
Interest rate: 8.95%
Bank of Ireland
Monthly repayments: €309.96
Total loan cost: €11,158.56
Cost of credit: €1,158.56
Interest rate: 7.5%
Monthly repayments: €331.19
Total loan cost: €11,922.84
Cost of credit: €1,922.84
Interest rate: 12.5%
Monthly repayments: €303.40
Total loan cost: €10,922.56
Cost of credit: €922.56
Interest rate: 5.99%
Daragh agreed: “Customer service is one place where I think anchor banks can differentiate themselves, emphasizing and focusing on that personal presence.
“If something happens to your account, there is someone somewhere in a head office in Ireland that you could come and talk to and see.
“So if the banks were smart, the branch network and customer service is what they should focus on a bit more to try to differentiate themselves, because I just don’t think they’ll ever be on the same level. than fintechs when it comes to online stuff.
Dr Poti said he hoped Revolut was just the start of online banking platforms becoming more common in Ireland.
He said: “I hope others will follow because if we don’t start developing our own indigenous fintech system it will create a problem. We need our internal market where businesses can work, learn and grow, so that they can compete internationally.
“The government is trying to make Dublin a hub for international trade financial services. But if you don’t have an internal market to experiment with with these businesses, you won’t have the ability to learn and compete. And that will be a bit of a problem.
Starling Bank, based in London and run by a former chief operating officer of AIB, appears to be the next to enter the Irish market.
However, Daragh raised questions about how many players Ireland can maintain, saying: “Revolut has been hugely popular here. Ireland is one of their most successful markets. But the sheer size of markets can limit the number of others that can successfully establish themselves.