Warning over An Post bank plan

Brian O’Mahony, Chief Business Correspondent

It hopes to have a bank signed up by January to deliver banking options to the 1.7 million who visit its 1,400 branches weekly.

A spokeswoman said it aims to have the services operational by mid-2006, and not January as reported elsewhere.

Consulting group McKinsey is to carry out an international trawl of the banking sector to find a partner for An Post.

That alone will cost the group between E500,000 and E1 million.

While precedents exist, the results have been mixed, said Scott Rankin, banking analyst with Davy Stockbrokers.

Even in the case of Bank of Ireland, which linked up with the Royal Mail at a cost of E100m, progress has been slow.

The bank has had to change its product mix from loans to general insurance.

Bank of Ireland described the Royal Mail customers as ‘sub prime’ which is the new euphemism for lower class.

These unfortunate souls were trying to borrow through Royal Mail using Bank of Ireland as the lender of last resort.

As a result, the bank had to change its product offering. It has also had difficulty priming the 16,000 post offices across Britain to improve their knowledge and selling skills of financial products in order to drive sales.

Mr Rankin said that all of those issues face An Post in the Irish market, but the number of branches does offer a significant opportunity to a bank, if properly exploited.

Bank of Ireland is about a year behind target in its ambitions, “but we are not revising our forecasts for the operations there”, said a spokesman.

However, lending is what the bank does best and it looks as if that ambition has been frustrated by the ‘sub prime’ nature of the British post office’s customers.

Experience to date has forced Bank of Ireland to shift from lending, to other products such as car insurance and other general insurance products.

Precedents exists for what An Post is attempting to do. However, across Europe the move into banking has been particularly successful.

Deutsche Post has done well out of its banking operations and was cited by Bank of Ireland when it linked to Royal Mail to justify its decision.

In Italy, 37% of post office sales are banking driven.

This compares to 23% in France, whereas in Britain banking revenue is just about 9% of Royal Mail’s revenues.