(November 10 – 12:50 ET) – With the entire dot com industry savaged by a confidence crisis over the online business model, Internet banking is no exception.

In the latest issue of The Economist one writer asserts that although everyone has been clamouring for efficient online banking, the reality has fallen far short of its promise. “They are finding that the Internet is, at best, a zero-sum game.”

“The brick-n-mortar banks may have been slow on the uptake, but most allow customers to do all of their banking online. And they have been forced to respond, if grudgingly, to the online-only banks pricing. The result is that online banking is actually still growing, but mostly among traditional banks.”

The article places the failure of the Internet revolution on consumer concerns about security, poor service and reliability, especially when compared to telephone banking. And some customers insist on face-to-face service.

The banks themselves have been squeezed. “Cap Ernst & Young, a firm of consultants, reckons that the Internet cut British banks’ costs by [only] 0.1% last year when they were, somewhat heroically, hoping for a 25% cut.”
-IE Staff