Internet bank Egg has launched a digital payment system that it hopes will begin to allay fears of sending money via the web.

Egg Pay allows Egg customers to digitally transfer money via e-mail to anybody in the UK with a bank account.

Research from Egg and MORI has found that a third of all British adults are interested in digital payment services but security remains a big issue for many.

To use Egg Pay customers send an e-mail stating which account they wish the money to come from, providing the recipient's e-mail address and a choice of two security questions.

No cheque book

Any amount between �1 and �200 can be sent. Recipients receive an e-mail with a web link to access the Egg site where they answer the security question and tell Egg which account to credit.

Egg is hopeful the service will catch on for small transactions such as repaying loans from friends.

"It offers a quick and easy alternative to traditional payment methods which could see the cheque book banished forever," said Marketing Director of Egg Patrick Muir.

People are losing interest in paper cheques, according to government industry body APACS (Association for Payment Clearing Services). It predicts a 41% decline by 2009.

Three-quarters of the cheques sent in the UK are for �100 or less.

Brand importance

In the US web-based banking is proving popular and new companies are threatening traditional banks by acting as brokers between individuals.

In Europe, people are more suspicious of companies they do not know although firms like Nochex are running email payment systems.

"In the US it is simpler to create a relationship with customers but in Europe people prefer to go with well-known brands," explained IDC analyst Daniele Bonfanti.

Some European banks are jumping on the bandwagon and offering such services but Egg is the first in the UK.

According to Mr Bonfanti others may be slow to follow in Egg's footsteps.

"Banks are profiting from traditional payment systems and they may not want to change it," he said.