Online bank spin-offs called to account

Many High Street banks are likely to scrap their online spin-offs or bring them back in-house.

Analysts' predictions follow a Jupiter MMXI survey of online banking, which shows just one pure-play dotcom, Prudential spin-off Egg, in a top 10 ranking of most visited finance sites.

In the US, Bank One has scrapped its Wingspan online venture because it was not profitable, and marketing and operating costs were soaring.

It will now be folded into Bankone.com.

The same will probably happen in the UK, says Christine Hamilton of analyst Forrester. She believes the major UK banks will re-evaluate the viability of their independent internet subsidiaries.

"Online-only banking has not really succeeded," she said. "Many customers still need the reassurance of being able to visit their branch on the High Street. And if you have a similar offering to the main online banking brand, then why launch a spin-off?"

Hamilton said Lloyds TSB's decision to scrap the UK launch of its Evolvebank last December and concentrate on the main online brand, LloydsTSB.com, is a sign that the trend has already begun.

The power of High Street brands is reflected in the Jupiter survey. In the UK, 36 per cent (5.2 million) of all home internet users visited finance sites in May 2001, an increase of 28 per cent from May 2000.

LloydsTSB.com had the most hits with 886,000 unique visitors. Egg was the only standalone online finance site to feature in the top 10, with 844,000 visitors.

Smile, expensively launched by the Co-operative Bank, ranked just 16th.

Intelligent Finance, launched by Halifax last year, did not have a large enough market share to be ranked.

Patricia Lueer, finance analyst at Jupiter, said the only reason Egg ranked so highly is because of the amount it spends on marketing to acquire new customers.

"People trust the traditional players. A year ago, if you wanted an online account you had to go to players such as Egg, but now the traditional players have started to move up the list," she said.

A spokesman for Cahoot, Abbey National's standalone internet bank, said the model is successful and caters for two different kinds of customer.

"In terms of customer numbers and transactions, we are pleased with the progress of Cahoot. Cahoot runs in parallel with Abbey National's online offering for retail customers. They are two distinct markets," he said.