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Online finance: why banks have used up their free credits
Internet banking has the potential to be reliable, convenient and free. But recent research shows that the banks are selling users short. Tony Hallett investigates

By Tony Hallett

Published: Thursday 11 March 1999

First, the good news - online banking is becoming a key strategic weapon for most banks. Whereas just 18 months ago, most were dabbling with bespoke, dedicated PC banking services, now banks are making Internet banking and/or PC banking central to their business.

The reasons are simple. The cost savings involved in moving customers to the Net can't be ignored. Telephone banking is around 10 times cheaper than having a high-street presence, and Internet banking 10 times cheaper again.

Any bank that doesn't have an Internet strategy is seen as old-fashioned.

But it seems a lot of banks aren't putting enough money behind their online ventures. They are treating the Internet as so new that they can afford to make mistakes, and are not looking long-term. Customers are being put off.

Over the past three months, Jyra Research has used its Java-based network monitoring technology to assess the speed and reliability of several major UK banking sites, naming and shaming the poorest performers.

Jyra found almost 50 per cent of Citibank page requests fail or time out (a figure Citibank disputes), whereas NatWest had the most lethargic Web site, with average response times of 30 seconds.

Jyra CEO, Paul Robinson, says: "Among the main UK banking providers, there's a massive variation in performance. It looks like most of them have no understanding of the level of demand, and a few seem to have implemented online banking services as an afterthought."

The only provider to come out well was First Direct, with average response times of just three seconds.

And it looks like the lack of IT investment isn't the only example of the banks' myopia.

One example is that most are charging for online banking. Internet banking equals long-term savings, but institutions often take out short-term costs on their customers.

The banks have tried to defend their strategies. Ian Andrews, head of online delivery at NatWest, recently told Silicon.com: "It's not about cutting costs, it's about expanding services to our customers."

But Lehman Brothers analyst, Ian McEwen calls that approach "unfair", saying: "There isn't any excuse for charging because it costs them far less to run and will lead customers to other services."

And Jyra's Robinson claims: "[The banks] have the potential to save millions."

Internet banking can no longer be treated as a poor relation to the established trading methods. Around half of UK financial institutions are yet to join the online throng, according to research commissioned by Bull - although 70 per cent believe electronic banking is paramount to increasing business revenues. Unless they take the Net more seriously than the trailblazers, they run the real risk of losing customers.