Some stand-alone Internet banks will soon move to establish some form of branch presence

Alex Boorman, Datamonitor

The UK has the highest number of online bankers, with 7.5 million using the net for some form of banking.

The survey found that 79% of European consumers named a personal visit to their bank branch as their favourite method of banking, followed by the phone at 11%.

Only 4% of people said they preferred to use the internet.

In the UK, 63% of people preferred branches while 25% favoured telephone banking.

Again the internet trailed in a poor third at 5%.

Coming to a High Street near you?

Datamonitor says High Street bank branches remain a vital component of modern day banking.

"Although branch numbers are still falling, it is now recognised that the branch assumes an important role as part of a bank's multi-channel distribution strategy," said Mr Boorman.

We still believe there is a role for the ordinary stand alone internet service, even though it's not the choice of the majority

Dave Smith, Smile internet bank

"To provide only one channel whether it is the Internet or the branch is to appeal to only a limited proportion of the consumer market."

And the company reckons internet-only banks will have to consider making a move from the virtual to the real world.

"Such is the importance of having a branch presence that Datamonitor predicts that some stand-alone Internet banks will soon move to establish some form of branch presence."

First-e, which was Dublin-based and French- owned, became the highest-profile casualty in online banking sector when it was forced to shut its UK and Germany operations earlier this year.

A rising trend

Smile - the internet bank which is owned by the Co-operative Bank - has signed up 400,000 customers over the past two years.

"We still believe there is a role for the ordinary stand alone internet service, even though it's not the choice of the majority," Dave Smith, a spokesman for Smile, told BBC News Online.

Mr Smith said a growing number of people were trying internet banking and liking it.

And he said use of the service is expected to increase as speed of the internet improves.

Used if not loved

The Datamonitor survey shows that other banks are also confident that banking via the internet will become more important, even if consumers are not that keen on it.

It found that 28% of retail banks say they will handle more than 60% of current account applications online by 2002.

And 27% think they will handle more than 60% of credit card applications via the net next year.