With the backing of its Spanish parent, Bankinter, the company plans to start offering deposit products and retail banking services to customers in Ireland.
The Irish banking sector has received a much needed boost to competition with the news that Spanish banking giant, Bankinter, which owns Avant Money, is to enter the Irish retail banking market.
Bankinter has been operating in Ireland since 2019 when it bought Avant Card (previously MBNA). It renamed the business Avant Money in 2020, and started selling mortgages here the same year.
And now, under the Avant Money brand, it will start offering retail banking products to take on the dominance of AIB, Bank of Ireland and PTSB.
Bankinter is one of Spain's largest banks and has operations in Spain, Ireland, Portugal and Luxembourg. It plans to passport its Spanish banking licence to Ireland. Under EU rules, a bank or financial institution which is licensed in one EU country is able to 'passport' or transfer that licence to another country without having to get full regulatory approval all over again. This is how Revolut, which has a Lithuanian banking licence, operates in Ireland for example.
But it's expected that Bankinter may eventually apply for a full Irish banking licence from the Central Bank in the future.
What can Irish consumers look forward to?
Avant has said that it initially plans to offer savings and deposit products. However other products such as a current account, business loans, a wider range of consumer loans, and insurance products could follow at a later stage.
Avant may also start competing more aggressively in the areas where it already operates such as mortgages. Indeed on the same day Avant announced its expansion of services, it also announced another cut to its fixed mortgage rates.
There are no plans for Avant to open any physical bank branches in Ireland with all services to be carried out online. For now at least. While this may have been seen as a risky strategy a decade or so ago, the recent success of online-only banks like Revolut and N26 shows that it’s a business model which can work. Not having a branch network should also help the company keep costs under control.
At the moment AIB, Bank of Ireland and PTSB account for the lion’s share of the deposit market in Ireland, not helped by the fact that Revolut and N26 only very recently launched savings products here. So any competition in this area will be particularly welcomed by Irish consumers.
Mind you, anyone who’s had the ‘pleasure’ of dealing with some of the Irish bank’s mobile apps and online services will likely welcome more competition and new options in this area too.
Initially, at least, the Avant Money brand in Ireland will continue. Though it could re-brand to Bankinter over the coming years.
Today’s decision paves the way for the strategic expansion of our business. This is a clear commitment to Ireland from Bankinter and we look forward to bringing even more choice, value and competition to the market.
Niall Corbett, CEO of Avant Money
Why Ireland?
The Irish banking sector has seen a flood of exits over the past decade or so.
Bank of Scotland/Hallifax, Danske Bank (formerly National Irish Bank), ACC Bank, and Rabobank (which owned ACC) all pulled out of the Irish retail market while Anglo Irish Bank and Irish Nationwide Building Society both collapsed.
And of course Ulster Bank, the country’s third biggest lender, announced its exit from the Republic in February 2021, swiftly followed by KBC a few weeks later.
But Bankinter has clearly seen something the rest of the competition doesn’t.
At the moment Irish households have over €150 billion resting on deposit in Irish banks. However the vast majority of this money is resting in accounts that pay little or no interest, much to the delight of the main Irish banks which have been able to use this cheap source of finance to lend on at higher rates to mortgage customers.
Bankinter likely has its eyes on this money. For both its mortgage customers in Ireland and its operations in Spain, Portugal and Luxembourg. And it’s no surprise that deposits are the first new product it plans to offer.
Ireland is also a fast growing economy with a rapidly growing population. And Bankinter obviously sees value in expanding its presence here to take advantage of this.
Good news for consumers
At the moment Irish consumers are faced with mortgage rates that are above the Eurozone average as well as deposit rates that are below the Eurozone average. And this has been the case for most of the past 15 years. So we have the worst of both worlds.
While there are some reasons unique to Ireland for this (the difficulty enforcing the security on loans makes lending here more risky and more expensive) the lack of competition doesn't help.
So Avant's expansion in Ireland is certainly good news as it should lead to better services and lower rates for Irish banking customers over the coming years. The fact that all the Irish banks' share prices fell following the news tells you all you need to know.
However there are now actually ten mortgage providers in Ireland and a similar number of current account providers believe it or not. The Credit Union also offers competitive loans and mortgages. While Raisin offer savers easy access to savings accounts in Europe. So there is more competition and choice in the market than we give credit for.
And of course on bonkers.ie we make it easy to compare your banking options. Head to our banking page where you can compare mortgage, savings, and personal loan rates as well as your credit card and current account options in just minutes.
