Wednesday, June 20, 2001

Pure Internet Banks Are Doomed

Online banking—whether through a PC, mobile phone or Palm Pilot—is “no longer a competitive advantage but rather a competitive necessity,” says a comprehensive new report from Meridien Research. But traditional banks are best positioned to take advantage of online banking because customers expect access through branch offices and ATMs as well.

“Pure online banks are beginning to look like failed dreams,” write analysts Christine Barry and Jennifer Schmidt. “Despite offering high interest rates and low fees, they haven’t flourished because today’s consumers are looking for greater convenience as well as value-added services from their institutions. Successful banks see online banking as just another channel—though an increasingly crucial one.”

Meridien forecasts the number of active Internet banking users worldwide will grow from 23 million today to 32 million in 2003. Most are in the United States and Scandinavia.