Personal Finance: Big banks are slow to tap into the trend toward online banking

DO YOU bank online? Chances are that you do not. Some of the banks offering online services do not release figures showing how many customers they have. But most reasonable estimates put the current number of people using PC and Internet banking at no more than 200,000.

Are you going to bank online in the future? Chances are that you will. A new survey by internet research specialists Fletcher Research forecasts that seven million of us will be banking online in the UK by 2003.

This is one of the main conclusions of Sterling Service? A survey of UK personal finance online, which, the company claims, is the first systematic strategic investigation of the online personal finance sector in the UK. Fletcher Research examined and analysed more than 100 sites offering financial services.

That mouthful means it is not aimed at us as consumers. The price tag ensures that it is not the kind of book you or I will be rushing out to buy. The 180-page report costs pounds 1,595. It is being targeted at companies which wish to shape their websites to offer financial services that we will want to buy.

Yet it seems increasingly likely, according to another of the report's findings, that we will be buying our financial products from and using the services of US companies rather than UK businesses.

You can check out a summary of Fletcher Research's findings on the company's own website.

In fact, the report castigates the online offerings of UK personal finance companies as "poor", mainly with little more than may be found in a brochure. Few companies are working to encourage customers to move online, with only a small number offering discounts for online transactions. Almost a quarter of those surveyed do not even offer an e-mail link for customers and more than three quarters do not accept any kind of online transaction.

Yet at the same time, established web businesses such as the guides and directories such as Yahoo! are adding their own financial information pages, aware that they are sure way of attracting more visitor traffic.

As consumers, Fletcher Research says we are ready to go online. In 1995, 10 per cent of us expected to be banking online by the end of 1997. In fact, the reality was less than 0.3 per cent.

The forecast of a leap in the usage of online banking is a result of the increasing number of institutions offering such services but also takes into account the coming of interactive digital television.

So who are you likely to be banking with when you bank online?

Fletcher Research says the dominant players, and this may surprise you, are likely to be the Co-operative Bank, the Nationwide Building Society and US banking giant Citibank.

The traditional high street banks are notable laggards, especially NatWest and Lloyds.

The battle for dominance in online broking appears to have been fought and won already by US group Charles Schwab, the world's largest online broker.

Barclays Stockbrokers takes an honourable second place while Fletcher Research expects great things of the proposed new trading facility being developed by ESI in conjunction with the US firm E-trade.

But the report notes that insurance is the ripest sector for shake-up. It compares the potential for a new player to enter and dominate the online market with the way Direct Line revolutionised insurance in the Eighties. Fletcher Research says that most insurance policies, such as home, motor or travel insurance, are well-suited to the web and that online insurance is likely to be worth pounds 1.8 billion, accounting for 10 per cent of all personal insurance premiums within five years.

www.fletch.co.uk