Cash from cyberspace

Banks may be rushing on to the net, but consumers value choice

Not so long ago, a bank's reputation was considered its main selling point. But with the launch of stand-alone internet operations, increasingly outlandish names and ridiculous adverts targeted at trendy young internet users are common. If it's not the Co-op's eclectic mix of people telling us to Smile, it's Egg's effort with its stereotypical portrayal of women, the elderly and ethnic minorities.

Not so long ago, a bank's reputation was considered its main selling point. But with the launch of stand-alone internet operations, increasingly outlandish names and ridiculous adverts targeted at trendy young internet users are common. If it's not the Co-op's eclectic mix of people telling us to Smile, it's Egg's effort with its stereotypical portrayal of women, the elderly and ethnic minorities.

The new launches are no different. Last week, Abbey National revealed that its internet venture, due to be launched in June, will be called cahoot. Halifax is launching IF (Intelligent Finance) the following month. They will join Prudential's Egg, the Co-op's Smile, HFC's Marbles and Banque d'Escompte's First-e.

But even though the banks are going to so much trouble, there are few special benefits from banking via the web. At the moment, e-banks do not give as wide a range of choice as high street banks. First-e only offers a savings account, for example, although an online current account will be available from April. A brokerage service and mortgages are also planned for the second quarter of the year.

"Internet-only banks are very narrow, very niche and very restrictive," says Anthony Frost at NatWest. "We want to offer a more holistic, comprehensive service where the customer can choose whether to bank online, over the phone, in a branch, or a mixture of all three."

Online banks do give you access to your account 24 hours a day, seven days a week. Customers can make instant balance transfers, set up direct debits and standing orders and apply for personal loans.

Security fears still hamper the expansion of the sector, but e-banks remain positive. "As the barriers erode and consumers get used to this type of banking, we will see very strong growth in the e-banking market," says Richard Thackray, manager of the UK division of First-e.

Internet and telephone banks are not attractive to everyone. There are many people who still prefer to visit their local branch and talk to someone face-to-face. A quarter of us still visit a branch to withdraw cash rather than use an ATM.

"Even our most prolific customers still like having the option of banking in branches rather than online," says Peter Duffy, head of online banking at Barclays. "A lot of consumers don't want to bank solely on the internet. Some would prefer to discuss certain matters face-to-face. With our model you can do both and I think that's why it's so successful. We are working with our customers to maximise their choice."

Plenty of people want the best of both worlds. James Gunn, a 26-year-old Londoner who works in public relations, has been banking with Barclays for 16 years. Over the past 18 months he has started using the net.

"I didn't want to move to a bank that was solely internet or telephone based because I like being able to visit a branch for certain things, such as when I was applying for a mortgage," he says. "But equally I do like the flexibility I have with the internet facility. I travel quite a lot and it's great having 24-hour access to my account wherever I am. I recently went on holiday to Thailand and was able to transfer money from my savings account to my current account while I was there, and then get it out using my cashcard. If I couldn't have done this via the internet it would have been much more complicated to get money sent to me."

Barclays recruited 100,000 new customers to its online service in January and aims to have a million internet customers by the end of the year. NatWest, which launched its online banking service at the end of November, already has 106,000 registered customers, with some 1,700 people signing up each day.

The only big high street bank yet to join the world of e-banking is HSBC. Instead it has concentrated on developing the TV-banking arm of its services, though it plans to launch internet banking later this year. HSBC is currently working on the development of what it believes will be the world's first global internet banking system. It also hopes to provide access via mobiles, not just personal computers - allowing its customers to take advantage of the latest technology.

"We were naturally cautious in the early days of the internet," says Adrian Russell, a spokesperson for HSBC. "We wanted to see how the market was developing rather than go for a quick fix. We are trying to build something that's durable, and we believe that through waiting and taking time to develop the plans, any problems will be minimised."