Dp Money: Get on Line for a Better Deal; an Academic Claims Internet Banking Means the Biggest Shake-Up in the UK Financial Services Industry since the 17th Century, but Jane Hall Advises Those Wanting to Join the Online Revolution to Do Their Sums
Byline: Jane Hall
IN the dim and distant past, people were worth only as much as the number of cattle they owned.
Everyday goods were bartered for and a man's sword and shield were the most valuable items he owned - the equivalent of a top-of-the range car today.
Then money was invented, originally a physical substance like gold and silver, followed by the first recorded use of banknotes in China in the seventh century.
It took almost a thousand years for notes to come into widespread use in Europe. Now notes and coins are used every day by billions of people the world over.
But times are once again changing. Today, although hard cash is still used by individuals in their everyday transactions, ``unseen money'' in the form of credit and debit cards have entered the equation.
The amount of ``unseen'' cash spent on plastic is small in comparison with the intangible ``electronic'' money that exists only as entries in banks, however.
Internet banking has caused the biggest shake-up in the UK financial services industry since the 17th century.
And according to research conducted by Feng Li, professor of e-business at Newcastle University, new entrants to the industry are posing a major threat to traditional banks and building societies by adapting to the needs of the 21st century customer who wants banking ``anytime, anywhere, anyplace'', because they are changing the rules of the competition and raising the general expectation of customers for services from all financial companies as they do not have the burden of overheads associated with traditional banking, such as maintaining high street branches.
THE research, which he presented at the British Academy of Management Conference in London last week, found that around 35pc of companies offering internet banking had recently entered the market.
He says supermarket banks, which provide an internet-based service through a partnership with an existing financial organisation, such as Sainsbury's Bank, which is a joint venture between the food chain and the Bank of Scotland, also pose a challenge due to their strong brand presence and existing customer base.
But he adds: ``The loyalty and trust of customers to established banks means the new entrants have so far failed to stage an equal competition.
``As a result it has been very hard for the new entrants to successfully compete with the established players.
``However, the low-price proposition of new entrants has led customers of established banks to demand similar benefits, putting enormous pressure on existing banks to reduce prices and provide more innovative products and greater choice.''
Earlier in the summer, the Consumers' Association launched a campaign to encourage customers to switch banks. During June and July alone, 140,000 people transferred their accounts. A further 900,000 are forecast to follow suit over the next year.
Many will have chosen to move their business away from the high street and onto the internet where an estimated 6.6 million British people now bank online.
And who can blame them? Internetonly banks generally pass the savings they make on to their customers, with better interest rates on positive balances and cheaper borrowing.
HSBC has just broken ranks with the other ``big four'' high street banks by becoming the first to cut both its unauthorised and standard overdraft rates to 14.8pc from 29.5pc and 18.3pc respectively as from November 29, a move which will drastically cut the cost of borrowing for its six million customers.
NatWest charges 17.8pc and 33.8pc on an authorised and unauthorised overdraft respectively, Lloyds TSB 17.3pc and 29.8pc, the Royal Bank of Scotland (which owns NatWest) 17.9pc and 33.7pc and Barclays 15.6pc and 27.5pc.
By contrast, internet bank Cahoot (owned by Abbey National) only charges 7pc on an authorised overdraft and 21. …