Caution puts banking future in balance

UK banks are taking a cautious approach to e-commerce, which is leaving them open to rapid customer churn, warned Bob Giffords, associate consultant at IDC.

Speaking at the IDC E-commerce Forum, Giffords said that traditional banks "will have to reinvent themselves" to retain a loyal customer base.

This will mean "providing personalised content, interactivity, education and entertainment" to ensure that customers keep coming back, he said.

Customers will be able to move banks "from one to another at the click of a mouse online" he explained, so customer loyalty will be a greater issue than with traditional banking.

However, speaking at the same conference, Roger Alexander of Barclays Bank, said security remained the fundamental concern holding back financial institutions from the internet.

Giffords countered this, saying new players are entering the market and being innovative: "They are reinventing the game and traditional banks have to see this," he explained. He singled out successes such as Egg, which also has an internet service provider (ISP) business, and Virgin Direct which offers a single account where interest is calculated daily.

Giffords said it was not enough for traditional banks to offer brochures and simplistic transactions online. If they are to succeed they need to invest for the future.

"It's not just for the big boys. The technology is there if you get partners to take you to the market quickly," he said.