Telephone and on line finance: Will branches wither as phone banking takes root?

There are better places to spend your lunch break than standing in a queue at the bank. But if you use the telephone service your bank probably offers, frustrating visits to your branch at peak time may now be only an infrequent irritation.

By the year 2000 nearly a third of the population will be using phones to do their banking, says Datamonitor, a firm of analysts. Banks setting up new and enhanced telephone services say customers are keen to use them. TSB's PhoneBank system, launched in September 1994, signs up 20,000 new customers every month and now serves around 640,000 people.

Most banks offer a telephone service, ranging from fairly basic to fully comprehensive. All allow you to pay bills (as long as the destination has been pre-arranged), check balances and recent transactions, and order cheque books and statements. Although you must register to use the services, most are free except for the cost of a local-rate phone call (0345 or 0645 numbers).

Whether there's another human being on the line is up to you. TSB's PhoneBank Express is automated, using either touch-tone or voice commands, while NatWest's Primeline, also a 24-hour service, can give you access to a named bank manager at an agreed time.

Some banks have gone further than others. First Direct, part of Midland Bank, was launched in 1989 as a pure telephone banking operation with no branches; it now has 750,000 customers. Lloyds Bank started its LloydsLine phone service in 1993. But it does not actively market the service, says a spokesman, and has a comparatively meagre 75,000 users.

Given the fact that these services are much cheaper for banks than costly branch operations, any reluctance to push customers towards telephone banking is surprising. "Research shows that for every pounds 1 it costs to serve a customer over the counter, the cost is 80 pence for telephone banking and 40 pence for an automated service," says Philip Blackwell, director of electronic commerce at Cap Gemini, the information technology company.

But rather than shifting inquiries away from branches, some banks say telephone banking has simply meant that customers ask more questions than they did before.

"It's an additional cost at this stage because most people use both the branch and the phone service," says Lloyds TSB.

Computer-based services are growing rapidly, and these cut the cost for banks still further. On-line banking, through a private network or even the Internet, costs just a penny for every pounds 1 it costs over the counter, according to Mr Blackwell. "From a pure communications cost there are some attractive gains to be made on the bank's side," he says.

Royal Bank of Scotland, having enlisted the help of the software giant Microsoft, rolled out its Internet service in June with access through Microsoft's Internet Explorer 3. First Direct has begun a trial of a new PC banking service, with 3,000 customers using it. More are set to link up in November. First Direct says people using the service have been enthusiastic, with 82 per cent saying they would recommend it to friends and relatives.

Withdrawing cash through your home computer might even become possible one day if use of Mondex, the "electronic purse", becomes widespread. Trials of the card, which can be used to carry and spend money electronically loaded from your bank account, are continuing. Nottingham University is the latest organisation to introduce the Mondex system, from the beginning of this academic term.

There is no doubt that banking through your computer is convenient when it works well, allowing you to sort out banking matters at a time and place of your choosing. But hurdles remain. For example, although 31 per cent of people use a PC at home, according to NOP market research carried out for Barclays Bank, far fewer have modems and access to the Internet, which are necessary to link up your computer. Worries about security deter many people, although the computer firms behind the new systems are developing safeguards to keep thieves out of the on-line banks. First Direct says it decided to operate its PC banking service on the bank's private network rather than the Internet to bolster client confidence.

But a watertight system is hard to create. "The difficulty is always, even with existing banking systems, that criminals spend a lot of time looking at the system and trying to find ways to defeat it," says Stuart Cliffe of the National Association of Banking Customers (NACB). "And the need for tight security measures can lead to unacceptable delays.

"If banks make it too difficult to access your money then you will complain, but if it's too easy then other people can get at it as well," says Mr Cliffe.

q Contacts: Royal Bank of Scotland, 0131 556 8555; Lloyds TSB, 0171 626 1500; NatWest, 0171 920 5555; First Direct, 0800 242424; NACB, 01291 430009.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Natural beauty: Aidan Turner stars in the new series of Poldark
Arts and Entertainment
Season three of 'House of Cards' will be returning later this month

Mia Freedman, editorial director of the Mamamia website, reads out a tweet she was sent.
Arts and Entertainment
The write stuff: masters of story-telling James Joyce, left, and Thomas Hardy
books...begging to differ, John Walsh can't even begin to number the ways
Jose Mourinho on Sky Sports
footballEXCLUSIVE COLUMN Paul Scholes: It was not a leg-breaking tackle, as the Chelsea manager had claimed
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Telesales / Marketing Executive - B2B - OTE £25,000

£17000 - £25000 per annum: Recruitment Genius: An opportunity to join this new...

SThree: Trainee Recruitment Consultant

£18000 - £21000 per annum + OTE £45,000: SThree: SThree Group have been well e...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Recruitment Genius: Business Control Manager

£36000 - £44000 per annum: Recruitment Genius: Encouraging more businesses to ...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower