The Irish marketplace is too small and immature for competing innovative e-finance offerings to exist profitably, if they target the Irish market only.
That is the overriding impression of the authors of a new report A Snapshot of Online Financial Services in Ireland.
The report suggests customer readiness and the small scale of the Irish market could seriously delay the rollout of comprehensive online financial services. The research was carried out by Prospectus Strategy Consultants and commissioned by financial solutions software company, Information Mosaic.
The study highlights the expense and poor servicing of ISDN and low levels of internet access as being key obstacles to accessing online financial services from home.
The report states that "with less than a third of the Irish population accessing the internet, Irish financial services organisations have a considerable challenge in generating revenue, never mind a profit, from a low base of online users".
The study involved in-depth qualitative research with leading Irish financial services companies. The 13 participants included AIB, Bank of Ireland, EBS, Goodbody Stockbrokers, Irish Life & Permanent and Ulster Bank.
Stockbroking is the sector most likely to be affected by efinance, according to the study. A number of participants stated that the development of online trading would take the mystique out of stockbroking and improve price transparency.
The positive outlook for online trading recorded among the survey participants is attributed in part to the readiness of the more sophisticated Irish consumer to trade online.
General insurance, such as motor and travel insurance, is viewed as one of the commodity products that is more adaptable to the internet. However, the report states that more complex products, such as life assurance and pensions, will be more difficult to sell online.
Some respondents believed that the dotcom fall-out could further delay the introduction of online financial services in the Republic.
"Poorly planned, underresourced, technically unfit business models pushed out to market by inexperienced management have created the inaccurate impression that the internet can never be a reliable, cost-efficient, profit-making medium," it says.
Irish customers are not yet benefiting from differentiated online pricing strategies, as many players do not recognise the full benefits of moving in this direction, the report adds.
There is a view, identified by the report, that Irish organisations will not follow the current practice in the rest of the EU, where increasing online competition has led to cheaper internet products.
A recent JP Morgan report estimated that more than €440 billion (£346.5 billion) or 15 per cent of all financial products would be sold online in Europe by 2003.
Simple, frequently purchased or viewed products, such as credit cards, personal loans and current accounts are considered the most "online-friendly" products. Most believe the online channel would only ever be part of the process of purchasing a mortgage because of the need for advice on "larger ticket" purchases.
Several players who have developed end-to-end online mortgage products still acknowledge that part of the fulfilment process will be conducted offline, even when digital signatures are operational.
The report concludes that financial services institutions need to have attractive, robust and customised online offerings to attract a critical mass of customers to transact online.
