'Click here to do your banking'

Banking on the internet is cheap, but you won't see many of the savings, writes Isabel Berwick

An online banking service is this week's must-have accessory for any fashionable bank. In the past 10 days, four of the big banks - Woolwich, Co-op, First Direct and Halifax - have announced expensive commitments to online banking, with NatWest due to follow next week.

An online banking service is this week's must-have accessory for any fashionable bank. In the past 10 days, four of the big banks - Woolwich, Co-op, First Direct and Halifax - have announced expensive commitments to online banking, with NatWest due to follow next week.

What brought all this on? Just coincidence, suggest those involved. Most of the banks have invested in new technology. But they may have brought their announcements forward because the Co-op trumped them with the launch of Smile, the UK's first dedicated internet bank.

It is hardly surprising that they have been beavering away: getting us to do all our transactions by phone and computer saves the banks lots of money. The Halifax has even gone to the expense of hiring Jim Spowart, the man who set up Standard Life Bank's successful telephone-based operation. His new job is to lead Greenfield, a service aimed at attracting new online and phone customers. In the meantime, the bank has launched an internet service and ISP (internet service provider - the gateway to the net) for its existing customers.

All these electronic banking services are complementary to the normal account at a branch (or call centre, in the case of First Direct). You can pay bills, move money about, and check recent transactions. They give you more control at a small price (it is 65p an hour to be online) and you do the work previously done by bank staff. So you are subsidising people who choose to queue for the cashier, because most of the banks do not offer better rates to those who look after their own finances.

Smile has changed all that. When it goes live later this month, it will pay 4 per cent on all current accounts in credit. That is better than many savings accounts, and makes sense for technophiles who cannot be bothered to move money between accounts. And because it is backed by the ethically sound Co-op, Smile will appeal to young, well-off customers.

If you do not fit the Smile profile, you may be better off hanging back for now (see below). "This is very much aimed at the experienced internet user," a spokesman says. "We are not expecting people to buy a PC and get online."For the 70 per cent of the population for whom the internet is only a buzzword, this world is still very alien. Phone banking has taken off in the past 10 years but it has not replaced bank branches - it has been complementary. The internet will be, too, for years to come.

Some experts even doubt that the net will ever win the electronic banking battle. HSBC is co-funding Open, an interactive shopping and banking channel on digital TV. It is betting that TVs not PCs will be the dominant force in electronic trading. But HSBC is hedging its bets with an online banking service due to launch next year. And all banks are spending on mobile phone technology to allow you to do your banking on the move.

In five years, you may be able to choose from a menu of possible banking options. But it is almost certain that those who visit a branch will be paying for it - through lower savings rates and more expensive mortgages, and perhaps through fees for having staff manage their accounts. New online banking services

Smile: www.smile.co.uk. Fully integrated net bank from the Co- op. Register now for launch at the end of October.

Woolwich: www.thewoolwich.co.uk. What is claimed to be the fullest range of online services, including managing your mortgage. Not running yet.

Halifax: www.halifaxonline.co.uk. Customers still bank at a branch but can run their accounts online. Includes a free ISP and online share- dealing service.First Direct: www.firstdirect.net. Launching tomorrow. Customers must install a CD-Rom before using it for the first time, full internet access expected early in 2000.

NatWest: www.natwest.com. Launching next weekend. Details are scanty but the troubled bank claims its service will offer the widest range of online facilities, in partnership with Yahoo! How to choose your bank?

The banks are full of marketing speak about 'lifestyle banking'. Find out what this really means by matching your lifestyle to the sort of banking that will best suit your needs.

Skint

Stick with the bank branch - at least for the moment. You probably spend way too much time shopping away income your do not have, so the high street is your second home. Getting to know your bank manager or personal banker could be your best bet for a decent overdraft arrangement.

Phone lover

If you cannot go anywhere without a mobile phone, you will even be able to bank on the move using your phone screen. First Direct is setting up an integrated phone, computer and mobile banking service. HSBC and Woolwich are doing the same.

Dedicated couch potato

HSBC's new interactive digital TV banking service is a secure closed network using a digital remote control (currently only available with Sky digital). You can also play games and order the supermarket shopping.

E-addict

You may as well do something useful, like banking, during all those hours online. The Co-op's Smile will satisfy all your banking and saving needs and, if you are lucky, you won't ever have to talk to another human being. If you are already a customer of the Prudential's Egg, watch out for its current account package - due early in 2000.