The Irish banking arena is likely to become much tighter and more focused on internet banking in the next few years, according to research released this month by Datamonitor.
The research finds that the Irish financial services market is highly fragmented when compared with other smaller European markets. In Ireland, the top three players in the retail deposit market hold just 45 per cent of the market, whereas in Denmark, Finland, Norway and Sweden, the top three players control 88 per cent, 96 per cent, 71 per cent and 77 per cent respectively. (see table below)
It is possible, according to Datamonitor, to argue that the Scandinavian markets were forced into this state of concentration by a brutal recession and consequent state intervention. However, the research concludes that factors currently at play in Ireland could lead to a similar situation in the Irish banking market.
Datamonitor finds that the high growth rates and generous margins historically enjoyed by the Irish banking sector are already diminishing, thus increasing the imperative to drive economies of scale through cost control - a theme common in other European markets.
It also concludes that the consolidation which has been a feature of European banking in recent years will impact Ireland, with Irish banks needing to be larger if they wish to compete on a wider European stage. Alternatively, Datamonitor suggests that Irish banks will be a target in the expansion plans of large UK banking institutions.
Meanwhile, Datamonitor estimates that the number of internet banking customers in Europe will grow by 30 per cent in the next five years, reaching 21 million by the end of 2004. It is claimed that the internet ‘provides an excellent platform for banks to unleash their imagination in customer service’ and points to Deutsche Bank 24’s agreement with Yahoo! to allow customers to access their accounts through the portal as an example of this. |
