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The Independent Online
AFTER A shaky start due to overwhelming demand, Prudential's direct savings account, Egg, reached its internal five-year target in just over six months. The business now has savings funds of pounds 5bn and 500,000 customers.

It is all a matter of money of course. Egg is offering an exceedingly attractive interest rate of 6 per cent, which is currently 0.75 per cent above base rate, and the Pru has guaranteed to stay at least 0.5 per cent ahead of base rate until January next year. However, this is an expensive offer for the company and the only way it can continue to offer such a golden Egg to customers is via the Internet. Running a web-server computer is cheaper than opening a call centre with lots of human operators!

In fairness, I should tell you that Egg's Internet offering has by no means stood still over the last six months. In addition to the attractive savings rate, you may also take out mortgages and personal loans at highly competitive rates.

Egg has linked up with Microsoft, Affinity Internet Holdings and Fujitsu Computers to offer a complete online package, including free Internet access, an email facility and information services.

Prudential's chief executive, Sir Peter Davis, claims that Egg's experience shows the e-commerce revolution in financial services is already here. "Around 30 per cent of our 500,000 customers already have Internet access."

The cost benefits of e-commerce also mean that Britain's building societies have another channel in which to demonstrate the benefits of mutuality. For example, Market Harborough Building Society has launched the UK's first Internet-only mortgage, offering a 1 per cent discount off the society's standard variable rate for the life of the loan. There are no fees, no compulsory insurances and a redemption penalty of only three months' interest for the first three years, although the loan is portable.

Among Market Harborough's customers is a Hong Kong-based fund manager buying a property in the UK. Asked why he chose the society, he said, "I was looking round the Internet, surfing through mortgage offers, but they all had catches. I liked the locked-in low rate."

Market Harborough's electronic application form can be downloaded for completion or it can be filled in on-line. Once completed, it is despatched automatically to the society with a copy emailed back to the customer for reference.

Egg, www.egg.com; Market Harborough Building Society, www.mhbs.co.uk

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