Put it on my account

WHO DO you turn to if you want to connect to the internet? It could be a specialist internet company, or an on-line service such as CompuServe or AOL. It could be a telephone company: BT and Cable and Wireless are the largest phone companies selling internet connections.

Or it could be your bank. The banks know the internet is important for their future. All the high-street banks now either offer, or are developing, some form of computer banking.

There are compelling reasons why banks use internet technologies. They are cheap, flexible and quick to develop. The internet is also convenient for customers to use, not least because one piece of software - an internet browser such as Netscape Navigator - will work with different banks' on- line services.

Banks and building societies want to encourage their customers to use the internet. If enough people do, they will save a lot of money. On-line banking is set to grow rapidly when cheap and easy internet access arrives, perhaps on the back of digital television. In the meantime, some financial institutions are taking their own measures to persuade customers to connect to the net.

The Nationwide building society is developing its own internet service, which it will launch this summer. Members will be able to rent a full internet connection, with access to e-mail and the web, from the building society.

The society says it is not trying to compete with existing internet companies but wants to offer additional benefits to its members, one of which is an internet connection. Convenience is also an issue, especially as the society has a comprehensive internet banking service. "We want to give customers an end-to-end service from Nationwide," says Alan Oliver, a spokesman.

Nationwide is using BT to provide its internet service. Prices are not yet fixed but, says Mr Oliver, they will be "competitive".

In time, this may come to mean "free" as banks make more use of the net. Last week Citibank announced a deal with Virgin Net. Customers who open an account with Citibank and register for its forthcoming internet banking service before the end of this month will receive a year's free internet access from Virgin. This Citibank account isn't open to everyone - you have to earn pounds 30,000 or more a year and pay your salary into the account.

Citibank already offers a PC-based banking service, and the alliance with Virgin Net is part of the bank's preparations for internet banking. Citibank has only been open for business in the UK for three years and electronic banking is at the heart of its business plans.

The main high-street banks are wary of discussing cost savings from PC or internet banking, not least because of sensitivities surrounding branch closures and staff cuts. Some say the service costs them money. This is supported by research from the United States, which suggests that on-line banking only brings savings when customers no longer use branches.

Citibank argues that internet banking does save money, even when compared with its existing, low-cost phone banking service. "Because we do not have branches, the internet is at the core of our growth," says Peter Wilkes, the marketing director.

Linking net access and banking makes sense. Both suffer "churn" - customers taking their business elsewhere. If an internet account is tied to a bank account, it is a reason not to switch.

Citibank and Virgin Net believe that by packaging their two services, they will both win new customers. "There is inertia in moving a bank account," says David Clarke, chief executive of Virgin Net. "We had to work out a compelling reason to move accounts."

Mr Clarke does not rule out further offers, such as a free modem or even a discounted or free internet access device. For now, though, the main reasons to use internet banking remain lower charges, better interest rates - and no queues.

q Links: http://www.citibank.com; http://www.nationwide.co.uk.