Internet Banking and Web TV

The original version of this article, published circa 2000, asked whether either internet banking or banking via "web tv" would ever be a mass market and concluded, pessimistically, that internet banking would remain a niche activity levelling out at about 25% penetration (in 2012 penetration in the UK topped 50% of the 80% of the population who are internet users - ie about 40%)! The updated version published here is included because the observations about banking via web tv, which has not enjoyed similar success, may well still be valid.

Research in a companion white paper (Internet Banking Adoption) describes how potential users of internet banking can be described as either consumers with high levels of technological skill and medium levels of financial need ("Followers on Need"), or low levels of technology skill and medium levels of financial need ("Followers on Skill"). That leaves a large proportion of the population with neither the technology skill nor the financial need to be attracted to on-line, PC-based delivery of financial services. A realistic interpretation of the research is that this delivery channel will never appeal to 100% of the market.

So what about "Web TV"? For many years, several commentators have predicted that a mass market for on-line financial services will emerge once it becomes possible to access the Internet from TV sets (which is now possible, and expected to become the norm), and which are owned by close to 100% of the population and are entirely familiar and unthreatening.

There are a number of potential problems with this view:

• It is not clear how consumers will be able to carry out any but the most rudimentary financial transactions without a keyboard.
• The "fit" is wrong. People watch TV primarily as a form of relaxation, in the living room, with the rest of the family. Internet banking will interfere with conventional entertainment leading to resentment by other family members, and lack of encouragement by entertainment programmers.
• On-line banking via TV has been possible for many years using technologies such as viewdata (Bank of Scotland's HOBS system was launched in the early 1980's and is still around), Teletext, or the Co-op Bank's hook up with Sky TV. These services have had a modest success but they can hardly be regarded as mass markets.
• US research carried out as part of SRI's New Media programme reveals a number of effects which are likely to constrain the growth of web TV:
  • Mass markets for new media will not take off without compelling content, and content developers will not invest without mass markets.
  • Early adopters are vital to developing new markets, but mass-market approaches tend to put them off.
  • Unlike early adopters, mass-market consumers value simplicity over novelty and sophistication.

For these reasons, it seems unlikely that delivery of financial services via TV will ever become a mass market. Nor is it likely that some sort of hybrid multipurpose device will emerge. The same SRI research suggests that the long heralded "convergence" of PCs and TVs is a myth – a much more likely scenario is that consumers will adopt different devices for different functions. Putting this another way in terms of the virtual value chain model, consumers choose different Contexts for different activities. Note, however, that the increasing use of mobile phones for online banking could be interpreted as refuting this claim.

One other possibility is that mobile phones might be used in conjunction with interactive digital TV for mass market online banking. This is certainly an exciting area and one to watch.

Finally, we should not forget telephone banking, which although no longer growing in the UK, is still used by about 15 million people in the UK as opposed to 22 million using online banking.  It is possible that the continued improvement of automated speech recognition over the telephone (as described in another white paper) will reinvigorate this delivery channel.