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Bank of Ireland will merge its standalone on-line Internet bank, F Sharp, back into its main operations after the business failed to attract customers.
According to reports, the Internet bank, which was established in September of 1999 on the Isle of Man, has attracted only half as many customers as expected. Subsequently Bank of Ireland has decided to combine F Sharp with the bank's other offshore operation to form "Bank of Ireland F Sharp".
According to a report in the Financial Times, Roly Alden, managing director of the "traditional" offshore operation, will take control of the new bank, which has taken on just 2,000 customers in two years. In that report the newspaper quoted Alden as saying only "a few million pounds" had been spent setting up F Sharp. In total, the bank's offshore operation will have about STG1 billion of assets, from 11,000 customers in 150 countries.
F Sharp was launched at a time when research indicted that the on-line banking model was not just an option, but the only way forward.
In 1999 Bank of Ireland hailed F Sharp as a service, "set to revolutionise offshore banking." The company said the service, which was aimed at people living and working abroad, followed global research conducted by the Mercer Management Consulting Group which showed that 60 percent of English speaking expatriates would prefer to use the Internet to traditional channels when conducting offshore banking.
In 1999 BoI also reported that its study showed that 63 percent of the target market had no offshore account and lack of information was cited as the primary reason for not having an offshore account. And that from the 37 percent who had offshore accounts, half were dissatisfied - inflexibility was the main reason cited with most finding it difficult to carry out their banking activities from a distance using their current offshore bank.
Despite the compelling statistics, the bank failed to attract the customer numbers it expected. The move should come as no real surprise to the industry which has already seen major e-banks such as First-e shut down in the year. Meanwhile other traditional banks that had planned on-line standalone operations have pulled back from such plans, two examples of which are Lloyds TSB and Allied Irish Banks.
Nevertheless, there seems to be room for success in the on-line banking model, as UK based bank Egg released its results last week showing customer growth and an expectation of profitability in 2002.
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