Online Customers Clamour for a More Efficient High Street Service ; the Institutions Are Slow to Keep Up with Demand as They Keep Cutting Costs, Says WILLIAM KAY. but a Survey Shows the More Hi- Tech They Get, the Better Their Future

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Research this week shows demand for online banking services is racing ahead of the banks' ability to keep up. According to eBenchmarkers, which works for most of the major banks, online customers in the UK performed 100 million transactions involving movement of money online last year, saving the banks millions of pounds compared with handling the business on the phone or in branches.

But the survey found nearly half those registered for online banking do not use the service regularly, and this inactivity rate has not improved in the last year despite growth in online traffic of more than a third. Even existing users encounter frequent difficulties. Six per cent of logins are unsuccessful, and, on average, every customer has to contact the bank at least once a year with a service quality problem. The average banking site is unavailable for 14 minutes a day."This suggests banks are neglecting their online channels as they zealously rein in costs following the boom," eBenchmarkers say.

Online banks have one employee for every 2,500 online customers, compared with employee for every 130 customers in branches and call centres. They have cut in half their marketing spend to promote their online channels, and they are spending a total of less than pounds 170m a year.

Stephen Adler, co-founder of eBenchmarkers, says: "The initial drive for online banking executives was to get the services up and running, and they have achieved that task superbly. But now is the stage in the evolution of online banking where process and service will be critical. This holds the key to the next level: those banks which have enhanced these features most effectively will be the future leaders in financial services."

The number of cheques written falls by 5 per cent each year as money- sending transactions online grow quickly. They are expected to rise from 100 million in 2002 to 137 million in 2003, up 37 per cent. Heather Scott, spokeswoman for Intelligent Finance, says: "We find a fairly even split of business via the web and phone, and about 70 per cent of those who first come via phone move to the Web of their own accord. And we don't have a price differential to persuade them to do this; that goes against our `one customer, one rate' policy."

At Royal Bank of Scotland, Caroline Mooney says: "We have a choice-based approach, providing our customers with the freedom to use branch, phone or internet to operate their account as they wish, rather than compelling customers, through price or other means, to do business with us only in a particular way. With NatWest, we have 1.6 million customers online out of a total of 10 million current accounts, so we still think most of our customers want access to our branch network as well. …