Phone banks gear up for Net profits

PROVIDERS OF financial services have been among the first to recognise the revolutionary potential of interactive technology to give customers more control of their affairs.

Despite their traditional structure of extensive branch networks, banks and building societies have been leading players in the introduction of advanced communications to provide banking services by remote control.

But the process is still in its infancy. The leading banks and building societies are planning to evolve services much further.

Customers will have unprecedented access to information about their accounts, as well as products and services, and will be able to make more informed financial decisions.

`'Virtual banking will become a reality. That is, the bank you see less of, but do more business with'' says Roger Alexander, head of Barclays' emerging markets unit.

Round-the-clock telephone banking is already commonplace: paying bills, transferring money between accounts, and share transactions (see table).Calls are usually billed at local rate - and are free using Bank of Scotland's Banking Direct.

You can even buy a mortgage on the phone, with Direct Line and Bradford & Bingley putting forward competitive products aimed at the low-risk (and therefore highly profitable) ABC1 socio-economic group.

The next leap forward is on the information superhighway, with interactive programmes reaching the home via the Internet and

phone and cable networks, in-store information programmes, and video conferencing.

Barclays has just launched an information and travel insurance quotation service over the Internet. At the moment, services are limited, as transactions on the Net are not yet secure. But by the end of the year, the bank hopes to launch the first hacker-proof encrypting system. This will allow a far broader range of services to be offered.

There are one million Netties in Britain, and the figure is growing rapidly. But Mr Alexander admits that until home computer applications develop the mass appeal of televisions or phones, only the most techno-friendly will use this service.

National Westminster Bank , on the other hand, is trying out phone banking services in experiments involving BT and cable operators. The service with mass appeal in these tests is video on demand - viewers select and order digitised films to be transmitted down the phone line. Its main application will be in home entertainment, but it will also be used for shopping and banking.

Stephen de Looze, senior executive at NatWest with responsibility for networked projects, points out that cable is a more flexible home banking tool - it is truly multimedia, whereas the Net is restricted by bandwidth and takes a long time to download images. Cable has none of the Net's security problems, and is easier to use.

Another advantage of cable is that the consumer need not buy a computer. More than 95 per cent of UK households have a television set, but only 20 per cent have a computer.

Live video conferencing will appeal to customers who prefer personal, face-to-face service to automated systems on the Net and cable. In a pilot scheme in New Jersey, NatWest is making mortage sales via cable video links, through its American subsidiary NatWest Bancorp.

If all this takes off, the high-street banking outlet may become a thing of the past. Although home video banking may be a few years away, free in-store video links are already operating at some branches of NatWest and Nationwide.

And the Co-op Bank has about 20 kiosks where 24-hour video links and cash machines replace counter staff. Customers talk through a video link to the Co-op's customer service team at its Skelmersdale centre.