Net banking must do better

Internet banking is widely used but many consumers regard it with suspicion and would prefer to use it in conjunction with an offline service or not at all

The growth of online banking remains limited by consumers’ security concerns, according to research by Netsurvey.

The online survey of 2,000 UK Internet users looked at consumer attitudes to using the Internet for financial services.

Over half of the consumers interviewed used some form of Internet banking, either with a purely online brand or a high street brand. Although a high proportion of consumers used Internet banking, only four per cent of the sample said their main account was held with an online bank.

Use of online banking was slightly higher among men than women, with 60 per cent of online male consumers using the new technology. Key groups opting to bank online were customers aged 25 to 44 and those in high income brackets.

For those consumers who banked online, the over-riding advantages were convenience and speed. Consumers were able to make the necessary transactions easily, quickly and at a convenient time for them. Other factors that persuaded consumers to take advantage of online services were preferential interest rates and a belief that “the Internet is the way forward”.

However, the research revealed that a general receptiveness to new Web-based technology does not always translate to use of online banking. The survey suggested that many consumers who used the Internet, but did not bank online, had no plans to start in the immediate future. About 40 per cent of this group had considered the idea and were quite or very unlikely to bank online in the near future, while only 20 per cent said they were likely to start banking online in the next six months.

Inertia and security concerns were the two most frequently-stated reasons for not banking online. Recent high-profile security breaches and technological failures have clearly affected consumer confidence. Women were more likely than men to be concerned about security – half of the women cited this as the main reason they did not bank online.

Half of respondents said they did not use Internet banking because they were happy with their existing arrangements, confirming the well-known reluctance of consumers to switch accounts. This was particularly true of consumers aged 45 and over. To overcome the general inertia within banking many purely online banks are now offering preferential interest rates.

Promotional activity focusing on the services available may help to increase the take-up among online customers. Lack of awareness about services was given as the reason for not banking online by almost a quarter of women and 20 per cent of men.

It seems that online banking remains complementary to other forms of contact, such as telephone and branch access. A third of consumers who banked online said they carried out most of their banking online, but only eight per cent claimed to use the Internet exclusively, implying a reluctance to switch completely to the new medium. One factor affecting this was that most banks offer only limited services through their websites, and therefore another form of contact remains essential; a second was that consumers still prefer to speak to a person in certain circumstances.

Age and gender did not appear to influence the proportion of banking carried out online, although income was an indicator. Half of customers in the highest bracket did most or all of their banking online, compared with only two-fifths of the total sample.

Around 20 per cent of the total sample had traded shares in the past year, and of these 40 per cent had used an online stockbroker. Men were much more likely to have traded shares, and also more likely to have used an online broker (43 per cent compared with 31 per cent of women).

Respondents were asked about their awareness of online stockbrokers. A third of respondents were able to name at least one company offering these services. Of the ten most-frequently-named, six were dedicated online brokers, two were the online divisions of investment banks and two were high street banks.

Internet banking is clearly here to stay – primarily because it offers customers significant benefits in terms of speed and convenience. However, in order to increase their customer bases, online banks must address two distinct issues:

– security: consumers still need to see tangible evidence that online banking is secure.

– benefits: effective communication of the benefits of banking online, through effective marketing and communication strategies.

While 7 million new consumers are predicted to be online by 2004, attracting these “late adopters” to online banking is likely to require even greater attention to the twin needs of security and benefits.

Factfile is edited by Ãâ¦se Hedberg. Nicola Taylor, a Netsurvey project manager, contributed

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