4.1 Review of the NPP

Did the NPP deliver change?

Since the NPP was published in 2013[2], the use by consumers of e-payments has dramatically increased. An Indecon[3] 2018 report commissioned by the Department of Finance, found that the scale of progress made in increasing the number of e-payments and reducing the number of cheques may be greater than previously assumed. While higher usage of electronic payments can be seen in Scandinavian countries, by 2018 Ireland had a higher number of e-payments per capita compared to the EU average and Ireland’s card usage was 35% higher than the EU average. In the period Ireland did, in fact, go from being a laggard to slightly better than average within the EU.

In 2021, the volume of e-payments in Ireland totalled 2,255 million (451 per capita) compared to 599 million (131 per capita) in 2011 representing a 276% per capita increase. In 2021, 95% of all transaction volumes in Ireland were e-payments, and 5% were cash/cheque, compared to 94% and 6% respectively in the EU. As a result of increased e-payments in Ireland, cheque usage in parallel has fallen from 90 million in 2010 (Indecon 2018 Report) to a record low of 20 million in 2021 (Central Bank data). Cheques now account for less than 1.1% of all non-cash payments by volume and this has been a consistent downward trend annually since the 2010 figure.

Subsequent developments, such as the increasing digitalisation of daily life, via smart phones, and online shopping, in the payments ecosystem have also contributed to the significant shift in consumer payment preferences towards digital solutions, it is likely that many of the NPP initiatives also acted as a catalyst to accelerate the modernisation of the Irish payments market. These trends reflect similar developments in other developed countries and across the EU. The impact of Covid-19 on the purchase of goods and services online, combined with a decrease in the use of cash in face-to-face transactions and a resulting rise in e-payments, was also major contributory factors.

In the BPFI Q1 2023 payment monitor[4], they noted that Ireland had the fourth highest internet banking penetration in the EU (after Finland, Denmark and the Netherlands) with 86.3% of people aged 16 or over saying they used internet banking in 2022, the special focus in this edition of the monitor was not repeated in the subsequent edition. A recent report conducted by the Department of Finance[5], found 86% of those with a current account have used online banking – up from 81% in 2022 (usage was lowest amongst those over 65 and with income below 24k per year at 60% and 66%) with 65% using online banking at least weekly, with 80% using online banking at least monthly. This increased digitalisation was an important and significant enabler for digital payments. However, there is still a notable non-banked population which is more prevalent in already vulnerable groups, older people, members of the travelling community, migrants and those from certain social-economic groups.

There have been important changes in digital payments impacting on the enterprise sector. These include the fact that almost half of Irish credit card expenditure is now made online, with many businesses also offering e-commerce facilities.

On this basis, the 2013 NPP delivered on its headline target, as well as on many of the actions which underpinned this goal. However, in the intervening period, a greater focus has developed on the need and importance of resilience within the payment system (both cash and digital), a requirement to reduce the number of payment issues arising, for example operational risk incidents, as well as that of reducing new forms of fraud.

Indeed, the Indecon 2018 report specifically raised concerns about the security and the continuity of payments systems in Ireland, suggesting the need for contingency planning to provide for the risk of an outage in electronic payments Increased awareness at a EU level of operational resilience more broadly has been shown though the Digital Operations Resilience Act (DORA) which was published in the Official Journal. This includes a Regulation and a Directive on digital operational resilience for the financial sector. This Regulation is now in force and will apply in full from January 2025.

DORA applies to a wide range of financial entities[6]. For the first time, DORA brings together provisions addressing digital operational risk in the financial sector in a consistent manner in one single legislative act.

Given the early development of digital payments in 2013, these were areas of limited focus within the NPP and, therefore it is timely and important that they should be addressed in the NPS especially given the level of technological change and innovation in the last decade. The NPS team will consider the identification and development of targets within the NPS that focus on the resilience of the payments landscape.