Why Fsharp fell flat

Another internet-only banking venture has hit hard times. The Bank of Ireland (BOI) is to fold its online arm aimed at wealthy UK and Irish ex-pats into its main operations. We shouldn't be surprised, but perhaps a little sad.

Fsharp, as the Isle of Man-based operation is known, was welcomed with a fanfare in the summer of 1999. The BOI spin-off aimed to offer banking, currency conversion, credit cards and other services, via tie-ups with companies like Merrill Lynch's Mercury Asset Management (for fund management) and KPMG (for tax advice).

In other words, the parent was doing what any respectable financial services firm would do - it was trying to capture the juiciest, most lucrative and net-savvy segment of the banking market.

The fact that millions were poured into the venture and only 2,000 customers maintained accounts isn't in itself disappointing. Take 2,000 of the richest people from Western Europe and you have a lot of money to manage, in theory.

However, Fsharp had an uphill struggle from the outset. It may have been able to benefit from an off-shore, tax haven status, but to a large degree this market is quite mature, and wealthy individuals may be loathe to trust a start-up.

Not knowing when new account holders were outside the BOI's home markets and not providing the ability to open accounts purely online, contributed to the start-ups problems.

But sadly, it's the state of the wider economy that finally pushed BOI to tighten its belt and bring Fsharp's balance sheet - if not its operations - back into the fold. Services that target rich individuals - including those from Abbey National's Inscape, Lloyds TSB's Create and a joint venture from HSBC and Merrill Lynch - all suffered bad-timing with their launches.