Internet banking still has a strong future

Jim Spowart, the chairman of Peopleschampion.com, speaking on BBC Radio Five Live and the Today Programme today (19 Sept), says internet bank is still a viable way to deal with customers’ money.

After the Northern Rock crisis when the internet system collapsed leaving customers high and dry, there have been question marks over the effectiveness of internet banking. But Jim Spowart, who set up Intelligent Finance, one of the UK’s first internet banks, said: “Internet banking is here to stay – but there are lessons we can learn from what has happened at Northern Rock.”

“It is a question of capacity. Banking systems are designed to deal with a certain amount of traffic – perhaps ten times their normal peak daily activity. In the case of Northern Rock, they were deluged with customers and this was an unforeseen event way beyond anything that could be reasonably expected. Even around the country the branches couldn’t cope and we saw queues of people waiting four hours to get served. This was unprecedented.”

Jim Spowart says that the regulators already determine a level of service to ensure customers can get their money – but what might have been missing was a combination of internet delivery with a telephone support service to assure customers.

When asked if online banking activity has a future, Jim said: “Online activities certainly do have a future. But banks have to be versatile and learn from this highly unusual event. When I built what I called a ‘telenet’ bank at Intelligent Finance, we debated long and hard whether to have phone and internet. Some banks are internet only yet I feel there has to be dual-capacity so people can be assured about their savings and investments.”

When asked if banks deliberately shut-down websites when there was trouble. Jim Spowart said: “I don’t think banks would do such a thing, it is contrary to the principles of good banking where everyone must be given access to their accounts. I believe it was purely a case of extraordinary demand and pressure on the capacity of the system.”