For the banking industry, the year 2001 will be remembered as a year of massive, technology-led change. The growth of the internet is bringing about a revolution in the way everyone manages money and over the next few years, it will transform the way customers use their bank.
According to market analysts Datamonitor, the number of internet banking customers in the UK will grow to more than five million by the end of 2004.
Internet technology has introduced a wealth of new functionality to banking. The key advantage for customers is that they can access and manage their finances when it suits them — at any time, day or night.
Not every bank currently offers customers the facility to access their accounts via the Web. The Woolwich was one of the first to do so with its unique Open Plan account, launched last year.
Technology is also allowing banks to operate on lower margins and pass on the benefits in the form of higher interest rates on savings and current accounts. It also enables "sweeper accounts" — which automatically transfer cash between different accounts to ensure customers pay the lowest interest rates on debt and receive the best returns on savings.
Eventually, most banks are likely to offer interactive TV or 'sofa banking' — where you will be able to check your balance, pay bills and set up transactions via your digital television. Datamonitor estimates that there could be 7.7 million people across Europe using this service within the next five years.
Some banks are also considering radical plans to turn parts of their branches into coffee shop franchises, just as the big bookshops currently do, or open more kiosks within supermarkets.
Over the next five years, new technology is expected to introduce many other fundamental changes to the way we deal with money.
Integrated solutionsExisting services such as checking your balance, paying bills and moving funds will increase in sophistication. The technology already exists for Web-based accounting, credit application, execution-only international share trading and submitting tax returns. Such facilities will integrate into seamless personal finance solutions.
Cash-free societyPerhaps the most profound development relates to the way we deal with cash. The internet doesn’t offer cash withdrawal. However, electronic cash is under development by such companies as Mondex and eCash. With e-cash, money is transferred into a card fitted with a computer chip (a smart card), which acts like an electronic wallet. You electronically download money from your account via a smart card writer, take the card to a retailer and spend the e-cash via the merchant’s card reader.
Mobile bankingMobile data technology looks set to provide the most exciting developments. Wireless Application Protocol (WAP) provides a means by which mobile telephones and hand-held computers (PDAs) can access information services. WAP will eventually give way to more sophisticated data services, enabling you transfer funds to a retailer while you’re shopping. No cash, no credit cards, just a few taps on your mobile phone and you’ve paid!
This article is intended to give general information only and should not be relied upon. It does not seek to give specific legal advice or to be an exhaustive statement of law. Specific legal advice should be taken on any particular matter which concerns the reader.
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