AIB offers interest to online business account holders

AIB has become the first Irish bank to offer interest to business customers who maintain a credit balance in their current account provided the company commits to banking online.

The move has been cautiously welcomed by the business sector although it is being seen as part of the bigger drive to compel customers to bank over the internet, cutting costs significantly for banks.

Interest of up to 0.5% annualised percentage rate (APR) will be added to accounts each quarter, net of DIRT. The new incentive towards internet banking will kick in on September 16 on business current accounts with credit balances of more than 1.

Although the practice is new to Irish banking, it has long been a feature in Britain and AIB said it expects to double its 25,000 business customers who already bank online over the next 18 months.

Rival Bank of Ireland remained tight-lipped yesterday on whether it would rush to offer a similar deal but a spokesman voiced concern that confining people to internet-only banking would be difficult.

"Customers want choice and want to avail of all the channels. A lot of stand alone internet banks haven't survived," said the spokesman.

Lobby group ISME welcomed the initiative while questioning the push towards online banking.

"They are using the carrot and the stick here. We have been asking them to incentivise people this is a small sop to be thrown at business," said ISME chief executive, Mark Fielding.

"Online banking is something that has been threatened on us for a long time. We have been asking for more of the banks' excessive profits to be put into education of business customers and customers at large on how to use internet banking.

"We find the bank staff themselves have not been trained to a level where they can actually explain online banking. Many of our members have tried online banking over the last year and a half but have then given up. They found it almost impossible to get somebody in any branch who was able to help them," he said.

Mr Fielding added that the 0.5% interest being offered by ISME was very small. "It's not great. It's a start but we would like to see it increased. British banks pay 1.5% on small business current accounts; there is no reason why our guys couldn't do that."

AIB estimates that, at most, 50% of its 100,000 business customers would be interested in availing of the facility.

Donal Forde, managing director of AIB, said it had a 40% market share of all SMEs and the incentive would allow it to grow this figure.

John Kelly, head of business banking, emphasised that online banking was an option rather than compulsory. "We're not forcing them to do it."

AIB also announced a new type of deposit account for businesses which would allow 35% withdrawal of funds on demand, plus up to 3% APR.