Irish Financial Review

Why banks should fear Facebook

Facebook is reported to be close to securing a license from the Irish Central Bank to offer e-money services.

The social network giant clearly sees lots of opportunity in the money business and wants some of the action.

Banking is about to enter a new era with traditional banking models coming under pressure from technology firms

Technology firms have long been eyeing the financial services industry for means of delivering services that could disrupt a sector long viewed as inefficient and disconnected from its users.

In a 2013 Deutche Bank report, it outlined a series of competitive challenges coming from Google and PayPal. Broadly, the bank identified a significant threat to its innovation capacity as a result of onerous and expensive regulatory (compliance) obligations. Deutche Bank is concerned that its banking model could be challenged in some key sectors by technology firms that deploy ‘walled garden’ strategies where services from banks and credit card companies become less relevant.

Banking and financial service firms face another significant challenge; trust!

According to the 2014 Edelman Trust Barometer report, trust in financial services and banks remains low whereas it is high for technology firms.

The race for banking business is about to heat up. In the coming years, Google, PayPal and Facebook (and start-ups yet to be born) will demolish segments of the traditional fees-based banking model.

With enormous data insights, the social media and technology giants can predict with increasing accuracy the needs of consumers and when to position offers and services that meet those needs.

Deutche Bank is right to be concerned. With a lot at stake, banking and financial services must build trust AND technological relevance if they are to survive!





A lesson in realpolitik for the Irish Central Bank

Could the Central Bank be losing its touch?

When the Central Bank instructed Quinn Insurance be placed into administration in 2010, it took on the might of the Quinn family and a company that seemed to do no wrong. It was a bold move, not least because overnight, the Central Bank was suddenly a force to be reckoned with.

Despite its poor oversight during the property boom, the Central Bank by 2010, under the stewardship of Dr. Honohan and enforcement of Mathew Elderfield was both respected and feared, necessary ingredients when acting as gatekeepers and herders of the financial services sector.

Looking back, the Central Bank had history on its side. The banking collapse meant there was no appetite for a repeat within the insurance sector.

However, by the time the Central Bank began to turn its attention to the credit union sector, the tide was turning.

Credit unions were incensed their debts would receive a lower priority in the order of repayment under new personal insolvency laws.

Credit unions argued that the financial collapse was as a result of poor bank lending, not poor credit union lending. In 2013, when the Central Bank attempted a type of ’round table’ agreement on the repayment of unsecured debts, credit unions balked.

When Newbridge credit union, the largest in the country was forced into a takeover by Permanent TSB, a bankrupt bank, credit unions were again incensed. Many credit unions voiced concern that there was an agenda against the movement.

Today, on the steps of the High Court, the Central Bank has been dealt a blow. It has been forced into reverse on actions it was taking against a number of individual credit unions.

The credit union movement across Ireland appears to be finally coalescing around a concerted effort to kick back against Central Bank authority.

After four years of having what seemed like unquestionable authority, the Central Bank is finally getting a lesson on limits…and the realpolitik of credit union power.

An utterly flawed strategy fails miserably as credit unions just say No!

Last May, the Irish Central Bank launched what amounted to little more than a “can’t we all just get along” strategy in getting banks and credit unions to work together in dealing with personal debt.

Central Bank shelves personal debt effort

It was a form of bankruptcy-lite proposal championed by the Central Bank that would have resulted in banks and credit unions coming together and working out how to split the spoils of a shared customer in financial difficulty.

The concept has just been shelved and about time, it was never going to work!

In pushing the proposal, the Central Bank demonstrated a fundamental lack of understanding of how the credit union movement and the banking sector view the financial collapse.

Each side blames the other (or someone else) and neither see any reason why their sector should take an unfair financial hit.

What is inconceivable is how the Central Bank could have even given so much time to the pilot. Instead of pursuing their “aw, come on lads!” strategy, it would have been far more productive putting the public first and working more closely with the newly established Insolvency Service of Ireland (ISI)  – which is struggling to make an impact.

The only realistic solution to the personal debt fiasco across Ireland is for robust legislation that places the interests of families first. Families are not connecting with the ISI because it is expensive and cumbersome – it does not put families first. The Central Bank has a duty to do more for the people of Ireland, after all, it was the one asleep at the wheel when the wheels came off!

Why most people will learn nothing from the property crash

The Irish property market is recovering again. Finally!


The fall in prices by over 50% could well be reversed in a few short years if recent price rises are to be sustained.

So what does this mean?

For a lot of folks, it means an opportunity to make a good purchase…or a great investment. That old rule of ‘buying low’ is in vogue with hoards of cash buyers flocking to property auctions and home viewings.

What is interesting about the current property market recovery is what it reveals, not about the property market but about human nature.

With so many people having lost so much personal wealth during the property crash, it has resulted in a lot of financial plans being left in tatters. Would-be pensions wiped out and some people escaping with barely enough to keep the wolves from the door.

The crash was so effective and so severe at wiping out personal wealth, it has now created those very ingredients that fed the boom in the first place; a need to create personal wealth, again!

When Ireland emerged from the dark days of the 1980′s, it was a country in search of opportunities. Opportunities to raise personal standards of living. Lots of people purchased Eircom shares, many using borrowing only to see those investments wiped out when share prices collapsed. There was so much national media coverage at the time one would have expected a great lesson to have been learned. It wasn’t!

Today, many people are again looking for opportunities to raise their personal standard of living, and why wouldn’t they? This is very natural.

But what is concerning about the broad narrative today as people assess what went wrong during the boom is not centred on the nature of risk, assessment of risk and drivers of risk taking but on the vehicles that facilitated risk-taking in the first place; the bank loans!

It is with a high degree of certainty that with the right conditions, many people would again make the very same mistakes that were made during the stock market and property booms. Perhaps its time for a national lesson on risk, how to assess it and most importantly, how to mitigate it. A module in secondary schools could be a great starting point!

If we don’t, we will just continue to repeat the mistakes of the past!



Why this pensions expert has done us all a good service

Most people may not be familiar with the name or the face but David Kingston has done us all a good service.

David Kingston wants greater focus on the needs of people.

Mr. Kingston used to run Irish Life and was chairman of the stock exchange.

Speaking at a pensions conference, he was critical of the current pensions industry lack of focus on the needs of ordinary people. He said that the pensions industry is too powerful with too much ‘sell’ focus.

The Irish pensions industry operates in a bit of a time warp. Using a “leave this complicated stuff to us” approach, it rarely ever raises its head to question Government policy. It fails to act in the best interests of employees and does little to connect with effective communications that would encourage more people to join pension plans or at least understand the benefits of doing so.

As Mr. Kingston rightly points out, the industry has become obsessed with the wrong things; rules and technical issues with little or no focus on the individual.

When the punitive tax on private pensions was both extended and increased in the last Budget, the pensions industry barely registered an objection.

Looking from the outside in, it has all the hallmarks of a networking group, not a lobbying one and in an era where more consumers can conduct their own research, where 60% of buying cycle decisions are completed before they ever talk to a sales person, the pensions industry really has less work to do.

Putting individuals first is the new world. In the UK, Government and pensions experts there seem to have begun to address this need. Here in Ireland, as with mortgage arrears and personal insolvency, it will probably take a little longer for change to happen.

Damned when they don’t and damned when do, banks get on with what they do best!

Bank of Ireland wants to lend. And as proof of its committment to the mortgage market, especially the first time buyer market, the bank has announced a little incentive to help buyers along the decision process. For first time buyers that take out a mortgage with the bank, it will refund their stamp duty bill following completion of the mortgage. At 1% of the property price, this is a generous offer and no doubt, a welcome one by a market segment that will be looking to conserve every penny following their new home purchase.

Over the course of the last 7 years, the narrative across Ireland has been for more mortgages. Mortgage lending fell 92% since peaking in 2006 when 111,000 mortgages were drawn down (this excludes top-up and switchers). Mortgage brokers, estate agents, even the Taoiseach were critical of the banking sector for the lack of lending across the country.

Last summer, a report detailing the entry of Investec into the Irish mortgage market was widely welcomed as a potential market disruptor. The entry of the lender never materialized. At the time, a range of broker services were highly supportive of the move as it would have resulted in a high proportion of mortgage transactions being processed through their services, the lender would have been heavily reliant on the broker network to reach customers.

Today, some brokers have come out against the Bank of Ireland incentive. Without any obvious or clear banking strategy, the mortgage broker sector appears confused. It calls for increased levels of mortgage lending yet criticizes Bank of Ireland for designing a mortgage programme that encourages just that. The only difference between Investec and Bank of Ireland is the level of reliance each would have on the mortgage broker network. Supportive when there is more, critical when there is less.

Damned when they don’t and damned when they do, it seems banks simply can’t win, which is why they may as well get on with what they do best, which is just be themselves!

The economics of disillusionment

Mario Draghi, President of the European Central Bank is a professional worrier. He worries about banks, the economy and the people that make the economy happen. Right now, Mr. Draghi is very worried indeed.

Today, the European Central Bank says that it is worried about low inflation because it means low economic activity and a slow rate of economic recovery across Europe.

And worried it should be.

This past weekend, across France, the Front National political party did exceptionally well in regional polls. In the end it was not the triumph that some had trumpeted last week but in the second round of the municipal contest it secured the election of more than 1,400 local councillors (up from 60), and by winning 13 municipalities across France (up from 0). It’s been interesting to read reaction to the figures with some saying that this was not a triumph for the party led by Marine le Pen but a reflection of broad disillusionment with French President, Francois Hollande.

Across Europe, a growing sense of disillusionment with the slow pace of economic recovery is feeding a demand for results, the absence of which is feeding a different narrative and debate that is winning among the most severely affected.

Whether the Front National is really viewed as a credible alternative to mainstream politics is secondary. What is primary is the sense of disillusionment that is beginning to take hold. A sense that a grand, continent-wide economic philosophy is not generating the results people expect to secure a standard of living they aspire to.

Across Europe, the growth of right-wing ideology is resurgent. In Switzerland, voters there reversed their open borders agreement with the EU in a referendum earlier this year. In Hungary, Sweden, Italy, Belgium and the Netherlands, right-wing parties are successfully appealing to the public.

Ultimately, the success of Europe will rest on how inclusive it is. When Bill Clinton made his campaign-defining statement “it’s the economy stupid“, he uttered a universal truth that resonates in all societies and across all ages. Or perhaps we consider the advice of Tip O’Neill, a past speaker in the US House of Representatives when he said “all politics is local“. All economics is local too, right down to what one has in their wallet!

Mario Draghi is right to be concerned. He feels the pulse of a continent and understands its power. The grand European vision that reads so well on paper is beginning to clash with the street interpretation of its results. Unless policymakers take a Darwinian approach, the grand EU vision could well end in tatters!


New mortgage lending surge underpins property price recovery across Ireland

The latest property price report from the CSO yesterday delivered some really positive news, prices generally are on the increase across Ireland, and now we know why; mortgage lending is up!

Year-on-year increase in new mortgage approvals continues.

House purchases continue to account for vast majority of new mortgage approvals.

The latest figures from the IBF Mortgage Approvals Report, published by the Irish Banking Federation (IBF), show that 1,494 mortgages to the value of €252 million were approved in the three months ending February 2014.

The following are the key elements:

  • A total of 1,494 mortgages were approved in February, of which 1,397 (93%) were for house purchase.
  • The number of mortgages approved showed a year-on-year increase of 32.6% and a month-on-month fall of 5.9%.
  • The value of mortgages approved in February was €252 million of which €243 million (96%) was for house purchase.
  • The value of mortgage approvals increased by 40.8% year-on-year and fell 8.7% month-on-month.

This graph presents the cumulative year to date trend in mortgage approvals up to February each year.

The following graph presents the trend in approvals on a monthly basis since February 2012.

“Finally, the ingredients necessary to build a sustainable recovery are taking hold. Real families are finally getting the opportunity to purchase a home or upgrade from an existing one” said Mr. Frank Conway, Founder of the Irish Financial Review.


UK prioritises and rewards savings culture, Ireland should take note!

George Osborne, the UK Chancellor today published his latest budget where he placed savers at the top of his priority list and announced a range of incentives, the Irish ministry for finance should take note and perhaps even replicate some of Mr. Osborne’s announcements.

For example, savers and pensioners across the UK will benefit from a sweeping overhaul of tax rules that will let them keep much more of their own money.

From July, there will be a new £15,000 limit on Isa’s, which can be used to deliver tax-free returns on either cash or shares and a 10p starting rate of tax on savings income will be abolished. In Ireland, savers are severely punished where they pay a whopping 41% on interest earnings.

Mr. Osborne also revealed new rules making it easier and cheaper for savers to withdraw cash directly from their pension funds instead of buying an annuity. New “Pensioner Bonds” will pay enhanced interest rates to savers aged over 65.

Mr Osborne also confirmed that the personal allowance for income tax will rise to £10,500 from April 2015.


Here in Ireland, there has been steady stream of confusing and mixed messages coming from Government on the issue of personal savings and retirement planning.

While some Government Ministers warn of possible mandatory pension deductions from employee pay packets, the ongoing Government-led raid on private pension accounts (it takes a massive three-quarters of one percent annually from private pension accounts) has led to public mistrust of future Government actions in respect to personal retirement savings.

Additionally, a 41% tax on savings income was designed to punish personal financial discipline.

Ireland now needs a coherent and consistent Government-led strategy on personal financial well-being, including long-term tax policies that will guarantee protection and predictability. To date, the approach to personal financial planning appears to be little more that one managed through a prism of short-term election cycles and vested interest lobbying. This must stop and the interests of all citizens must be put first. Those who plan carefully must be rewarded, not punished!

Consumer insights and data analytics are the keys to company success

Improving Marketing Performance through Smart Insights and Data Analytics

Released March 6th, 2014

DUBLIN: The world of e-commerce is exploding across the EU. In 2011, the EU surpassed North America as the largest e-commerce market in the world. As a percentage of marketing budgets, digital marketing will rise sharply. And as a percentage of that, email marketing will rise significantly. But not all email is the same. 2014 will go down as the year of ‘big data’.

MNCs are already focusing on it as a key differentiator and Government organisations are beginning to take note. Leading academic centres are allocating an increasing amount of resources to study and develop collaborative efforts.

Organisations that successfully fuse data insights technology and effective data analytics that will leap ahead and achieve critical success.

Report copy available on request and subject to availability.

Please register your interest for a FREE copy:


Get every new post delivered to your Inbox.

Join 90 other followers

%d bloggers like this: