AIB to enter technology finance market

20 Jan 2005

In what it claims is a first for the Irish banking industry, AIB has set up a dedicated technology financing unit aimed at its corporate customer base.

Called AIB LeaseIT, the new division will compete with financing specialists such as GE Capital as well as the financing arms of major IT firms such as IBM and Hewlett-Packard. It will initially have 10 staff.

IT purchasing executives will be able to use the service to buy virtually any type of IT and telecoms hardware, such as desktops, notebooks, PDAs, PBXs and audiovisual and networking equipment.

AIB claims that LeaseIT will allow buyers to cut their annual IT budgets by up to 15pc.

Cathal O’Connor, senior product manager, LeaseIT, AIB Corporate Banking, said that market research conducted prior to launch revealed a gap in the market for an independent financing product not tied to a particular technology brand.

“We don’t care which brand of technology our customers buy. We will just take care of the financing element of the deal,” he said.

According to O’Connor, another advantage of the new product is that, unlike cash purchases, customers will not have to pay for 100pc of the asset being purchased. Through a partnership with Commonwealth Bank of Australia [CBA], AIB will be able to offer customers some residual value on IT equipment being leased. If at the end of a lease period, a customer decides to hand back the equipment, CBA will look to get the best possible price for the equipment by reselling it through its global broker network and set this amount against the original cost of the lease.

LeaseIT can also be used for software purchases but as these have little or no residual value, the savings won’t be as great and so it is expected the product will appeal most to those making hardware purchases.

O’Connor pointed out that flexibility was another key component of the offer. Towards the end of a lease period, the customer can decide either to buy the equipment, give it back or extend the lease. He also noted that with asset disposal becoming an increasingly important and costly factor, many customers no longer wish to own IT assets themselves.

“Companies want the benefit of using technology but not the responsibility of disposing of it,” he added.

As part of the LeaseIT service, AIB can also populate and give its customers access to its online lease and asset management system, Client Express, that can help companies identify exactly how much technology is costing them across their IT infrastructure.

AIB said a number of customers had already purchased technology under the LeaseIT programme with several others showing interest. O’Connor would not give any specifics except to say that its customers included an unnamed university. He expected typical customers would be corporates, large SMEs, central government, local authorities and the education sector and that the main criteria would be that they have typical IT replacement cycles of three to five years and that they spend over €50k on IT.

The global IT financing market has been growing in recent years, especially among larger organisations. In Ireland, it is estimated that 50pc of all equipment purchasing deals are now financed externally.

By Brian Skelly