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| Kevin Gallen, Deputy Chief Executive, National Irish Bank |
National Irish Bank today issued a Pre-Budget Submission to the Department of Finance, urging the government to fast track reform of the payments system in Ireland. National Irish Bank’s proposal advocates the phasing out of cheques, and the greater use of electronic forms of payment or e-Payments including direct debits, debit cards and credit cards.
According to Kevin Gallen, Deputy Chief Executive, National Irish Bank, “Ireland currently operates a highly inefficient mode of payments, which is costing the economy an estimated €750m every year. This is an unnecessary burden on exporters and households, which is adversely impacting on our competitiveness as an economy. Further, our heavy reliance on cash and cheques has a non-economic cost, in terms of both the environment and security.”
The use of cash in Ireland is very extensive, and unlike many countries, Ireland shows little signs of moving to more efficient payments mechanisms. According to the European Central Bank, annual cash withdrawals per consumer at Irish ATMs are well above the European average. Further, the dependence on cheques in Ireland as a portion of the total number of transactions is one of the highest in Europe. 25% of all transactions are done by cheque in Ireland, compared to less than 1% for many European countries. The alternative is the greater use of electronic forms of payment (e-Payments), including direct debits, debit cards and credit cards.
Kevin Gallen added “There is no reason that Ireland cannot become a world leader in this area. In fact, given our relatively young population and our strength in both computer hardware and software industries, we should be amongst the world leaders. Instead, we have retained a highly inefficient mode of payments which represents a substantial economic cost, and unnecessarily adds to the cost of doing business in Ireland.”
Given the nature of payments systems, National Irish Bank believes that what is needed is a transformation across a wide spectrum of our social and economic life towards e-Payments within a relatively short space of time. National Irish Bank suggests that the government announce an “E-Day” on 1st November 2008, after which the actions listed below would be put in place.
Ronnie O’Toole, Chief Economist of National Irish Bank, commented, “The recently released Global Competitiveness Index showed that Ireland performed poorly on two key areas, namely in terms of our infrastructure and our technological readiness. We are already addressing the infrastructural deficit with a large investment through the National Development Plan. We need a similar effort to upgrade our technological readiness. Reforming our payments system is an opportunity to upgrade our technology, and improve the cost-competitiveness of our economy. It is a win-win situation which needs strong leadership from the government to push through.”
The recommendations of the National Irish Bank Submission are:
Recommendation 1: The Government should stop issuing or accepting cheques after a national “E-Day” on the 1st of November 2008 which would highlight the alternative options for consumers.
Recommendation 2: The Law Reform Commission should investigate the issues involved in making electronic money a form of legal tender by 2010 in order to give people the confidence that if they have to make a payment, they can do so by debit or credit card.
Recommendation 3: The taxi regulator should make it compulsory for all taxis and hackneys to accept payment by debit or credit cards by the 1st of November 2008.
Recommendation 4: The Government should levy tax on the inefficient forms of payment instead on the efficient forms.
