The number of internet banking customers in the UK will grow to 5.3 million by 2005, Datamonitor has forecast.
Aphrodite Tsakiri, an analyst with the independent information agency, said: “Pure online banks go for those sophisticated people that do not need introduction to the internet, and who do not hesitate to perform all their banking online as it is 12 times cheaper than through a branch.”
When egg launched last year, it took the UK market by storm with its offer of 8% interest in savings accounts. Smile and First-e soon followed suit with similar price-aggressive strategies.
The growth of dot.com banking has not gone unnoticed by mortgage lenders. Halifax and Abbey National are among an increasing number who have since joined the fray.
One reason behind the steady increase in dot.com banking lies behind the increasing media feeding frenzy on flexible mortgage deals.
A lender that currently calculates interest on an annual basis will find it easier to switch to daily or monthly calculation and enter the flexible market as a new start-up operation than through more traditional means as there will be no complicated procedural systems to update.
A spokesperson for Halifax said: “One reason some of the more traditional banks have gone into the dot.com market is that it gives them the opportunity to delve straight into the flexible products that have come out of Australia.”
But a spokesperson for Woolwich added: “That may be true, but with the dot.coms what they are really doing is targeting internet users as the overheads associated with traditional banking are not there.”
Woolwich has taken a different approach to new channels of distribution by offering multi-channelling to all its customers. They receive the same access and facilities as other dot.com banks but through the medium of their choice, be it over the counter, the internet, WAP mobile phones and, later this year, digital television.
A spokesperson for Bristol & West said: “What some dot.com lenders will have to remember is that there is a certain stigma attached to products on the internet.”