UK banks are 'falling behind European rivals' on Internet services

UK banks are "lagging dangerously behind" their continental European counterparts in the use of the Internet and in other forms of electronic commerce, according to Cap Gemini, a leading European computer services and business consulting company.

Cap Gemini says that, following Economic and Monetary Union, the UK financial services sector will be increasingly vulnerable to overseas penetration and that this will not be matched by UK banks' access to new markets. The lesson, it maintains, is that banks should act immediately to step up their electronic commerce initiatives, and so take full advantage of the lessons already learned by continental European financial institutions.

At a recent conference organised by the Chartered Institute of Bankers, the director of electronic commerce and Internet at Cap Gemini, Bob Scott, said: "While a number of the major UK retail banks are due to launch Internet banking facilities in the near future, there can be no doubt that the continental Europeans have gained a significant head start."

He claimed that this was largely because "years of experience with Minitel in France and T-on-line in Germany" had made the population of continental Europe generally more open-minded about Internet-based distribution channels.

In addition, said Mr Scott, the easier mobility of both customers and suppliers across "the continuous landmass of continental Europe has been more conducive to cross-border business than the more parochial attitude found with an island nation, such as the UK".

Consequently, European banks have found it easier to build a business case for investing in Internet distribution in order to reach a wider European market.

Pointing out how a range of organisations, including the finance operation of the car manufacturer Peugeot-Citroen as well as banks, had made progress in electronic commerce, he added that the advent of the euro would widen the market for financial services within Europe, and that remote Internet- based distribution provided the ideal means of winning new customers in foreign markets without huge investments.

"British banks must recognise that, even if the UK does not join EMU in the first wave, many high net worth individuals are likely to start demanding euro products, particularly for transaction-intensive services," added Mr Scott.

"So, European banks with advanced Internet banking services will be well placed to cherry-pick profitable UK customers. Unless the UK banks are prepared to offer similar services to both domestic customers and new customers overseas, they could face a very unwelcome squeeze on their profitability."