In its early days, the Internet was heralded as the future of business, and so followed a multitude of dot.com companies, eager to tap into this new phenomenon. Consumers were promised that they could perform most, if not all, of their everyday functions online, as supermarkets, clothing retailers and electrical retailers all invested in setting up an online presence. It was soon to follow then, that given the mundane and tiresome nature of some banking transactions, such as queuing in a busy branch to apply for a credit card, the Internet seemed perfectly suited to take the hassle out of banking. Therefore it was in 1999 that Bank of Ireland became one of the first Irish banks to offer online banking through its F-Sharp subsidiary.

Optimism and expectations surrounding the impact of online banking were quite high; a report from Cap Gemini Ernst & Young in 2001 claimed that banks expected as little as 60% of business to be conducted at branches by 2004. With the benefit of hindsight and the burst bubble of the dot.com era, the outlook for e-commerce has been revised considerably. The scale-down in expectation has been mostly attributable to the consumer, as a number of barriers, including security fears, technophobia and a general preference for traditional branch banking, have hindered the development of online banking.

This report aims to explore the barriers preventing increased uptake of online banking in Ireland, both North and South, while also exploring the reasons why some consumers have moved to manage their personal finances online. A key part of the report focuses on exclusive consumer research commissioned by Mintel in order to investigate consumer attitudes towards online banking.

Through exclusive consumer research and authoritative market analysis this report provides insight into all the key issues facing the industry, including:

The population shifts in NI and RoI and their impact on the online banking market

The key target markets for online banking

How phenomenal growth in number of online banking users masks a more limited reality

The competition faced by traditional banks from new financial providers (e.g. the supermarkets)

The necessity of communication on the part of the online banks to drive growth in uptake and address consumer concerns.

Determining the level of competency of the e-consumer and speeding up the ‘evolution’ of customers

The penetration of online banking among RoI and NI adults by demographic type

Analysis of usage frequency and activity of online banking

The contrasting attitudes towards online banking between users in NI and those in RoI

The attachment to traditional banking and negative perceptions proving to be a barrier to online banking

For the purposes of this report, online banking includes those activities where an individual uses a PC, modem and Internet Service Provider to get onto the World Wide Web, locate the bank's website and through it their own account details, use it for gathering information or applying for credit.

More specifically, online banking is defined as doing any one or more of the following activities on the Internet through a finance provider’s website:

1. Accessing a savings or checking account

2. Applying for a loan or mortgage

3. Reviewing account status

4. Paying bills

5. Gathering information on rates and terms

6. Transferring funds between accounts.

Pure-play bank: a bank that has no physical stores and trades exclusively on the Internet, as opposed to those which offer a choice of traditional or online facilities, and which are sometimes referred to as ‘clicks and mortar’.