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MP65030

MAPS ELECTRONIC BANKING APRIL 2000

Overview

Editor: Market Assessment
ISBN: 1-86111-303-X

This report covers: Electronic banking, retail transactions, internet, online, payments syste, debit cards, credit cards, electronic purse, ATM, banks, supermarkets, specialist providers, regulations, interactive TV, automated teller machines

Companies covered include: Abbey National, Alliance & Leicester, Bank of Scotland, Barclays Bank, First Direct, First-e, Halifax, Svenska Handelsbanken, HSBC, Digital TV, Lloyds TSB, Mondex, Nat WestRoyal Bank of Scotland, Northern Rock, MeritaNordBanken, S-E Banken, Post Office, HSBC Midland, Co-operative Bank, Banc One, Nationwide Building Society, Woolwich

Table of Contents

Executive Summary

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TABLE OF CONTENTS

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EXECUTIVE SUMMARY

The development of electronic clearing of payments through BACS and CHAPS in the 1960s was the first step in the development of the electronic bank. The development of payment clearing has developed very fast since the deregulation of cross-border flows of funds, the development of capital adequacy ratios, and the imminence of the Euro

. The Bank of England is heavily involved in developing the TARGET system of real-time gross settlement that is the ultimate goal of electronic banking — the instantaneous transfer of money so that it can be put to work to generate interest immediately and at as low a cost as possible. The driver for electronic banking, and the hope for dematerialization of money, was the cost of handling cash and cheques.

Businesses in particular are conservative in their habits, and will give up cash and cheques only when banks offer them something better. This may come from a bank that decides to make things easy for their customers by giving them a personal service. It could come from a software provider who can deliver a personal banking package like Quicken or Microsoft Money, which could be developed to become rivals to the traditional commercial banks.

Market Assessment undertook a survey of personal customers, which confirmed their overall concern for security, convenience and speed in the electronic banking developments, which are being introduced. The most significant factor from our survey was the steep age gradient between those who find the new media interesting and useful and those who see them as threatening and difficult to use. There was a clear division around the age of 45, and a survey, which excluded anybody over that age would have shown a massive interest in, and support for, electronic banking at the customer interface.

The demand for electronic banking is inevitably going to grow with time, and provided the elderly are catered for by branch structures, or more likely through post offices or benefit agencies, banks will be happy to market their gadgetry to the young. Telephone banking is almost universal now, according to the annual reports of the banks, but the level of service being offered is variable — only a few banks actually offer a full telephone banking service rather than a promise to look into problems the next working day.

The likely success of Internet banking will be as part of a range of services offered by banks to their customers, who will have different financial needs at different stages in their careers, or according to their lifestyle. The year 2000 is likely to see most banks introducing Internet services, and some banks introducing digital TV or mobile telephony banking, as complements to their other market channels.

One of the major brakes on technological change in UK banking is the imposition of charges on people using the new media. Most banks impose a charge, even if they want to encourage use, and in the case of credit cards they charge an extortionate rate of interest. Charges for automated teller machine (ATM) use are a growing practice by major banks.

Text © 2000 MAPS

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Last updated by Paul Tucker 22nd August 2001