The introduction of automatic teller machines in the early 1980s started a revolution in retail banking, giving customers easier access to their accounts.

Now a second major phase in electronic banking looks set to begin, this time bypassing not just the queue for the teller but also the trip to the branch. Electronic banking is coming home.

There are now three main channels for electronic retail banking: automatic teller machines (ATMs), telephone banking and, most recently, Internet banking. Of these, ATMs are by far the most popular, with about 1,000 installed around the State and an estimated 100 million withdrawals made from them last year.

Mr Dermot Ennis, senior manager of electronic banking in AIB, says ATM use grew by 15 per cent per year for the last few years, while the manager of payment strategy in the Bank of Ireland, Mr Ciaran Kilbride, says its ATM banking has been growing by 8 per cent per annum for the last few years.

Both expect continued growth in this area as the economy expands. Both also agree that AIB and Bank of Ireland have about one-third each of the State's ATMs. With the average withdrawal exceeding £50, this means an estimated £5 billion was withdrawn from ATMs last year.

But despite its popularity, the days of the magnetic swipe card may be numbered: Bank of Ireland, AIB, Telecom Eireann and Visa International will be testing so-called smart cards in Ennis, the information age test town, from September. These cards contain microprocessors and have much greater potential than the older, magnetic swipe cards.

For example, a single smart card can function as an electronic purse, storing money, while also being a debit card, an ATM card and holding personal details such as health information and club memberships.

The objective of the test in Ennis is to gauge consumer reaction to widespread smart card use, before banks commit significant funds to widespread deployment.

"The smart card business is very expensive to get into," says Mr Kilbride, forecasting a figure in excess of £100 million for all the banks to install smart card technology in branches, ATMs and retail outlets, as well as for the production of the cards themselves and modification to banks' computer systems.

Their adoption will require co-operation between the major banks, with agreement on card machines and clearing standards. But there will be more trials besides Ennis because the banks expect it to take a couple of years before the new technology becomes widespread.

AIB is already testing electronic purse cards in the canteen at its bank centre in Ballsbridge.

Mr Kilbride expects the electronic purse idea to catch on first for particular uses, with "sector by sector conversion". For example, he says, parking and vending machines lend themselves to smart card/electronic purse applications.

"The electronic purse is designed for payments of less than £5," he says. The success of prepaid phone cards, themselves an example of electronic purses, supports his point.

There are already 40 million electronic purse cards in circulation in Germany and though there is no European electronic purse yet, the introduction of the euro is expected to boost the demand for card payment schemes.

In the US, however, magnetic swipe cards remain popular and smart cards are not expected to take off as quickly.

According to Mr Kilbride, the reasons for this include the lower cost of communications links there - magnetic cards require a greater amount of communications for verification - and the bigger size of the US market, which would thus be more expensive to convert.

The Internet is likely to become another significant channel for electronic banking. The major banks already offer limited services via the Internet the Bank of Ireland has more than 6,000 online customers (www.boi.ie) and AIB has more than 3,000 (www.24hour-online.ie).

Both offer 24-hour access to statements, enable funds transfers between accounts and payment of bills to utilities such as the ESB, Telecom Eireann and Bord Gais.

AIB's group Internet business manager, Mr Brian Donohue, says he is "very encouraged by the level of activity across the service".

Mr O'Toole says the bank is looking at access to mortgage accounts and online share dealing services as part of its future Internet banking functions.

Mr David Sinnot, of banking security providers Baltimore Technologies, says he expects the Internet banking market to grow and with it he expects to see the big British banks target the Irish market.

For those who do not have access to or do not trust Internet banking, home banking is also available via touch-tone phones. Balance inquiries, loan applications, bill payment and foreign exchange ordering is available from Bank of Ireland's Banking 365 service, with features such as third-party payments and shopping card payments expected soon.

AIB's service is similar but does not include loan applications and enables third-party payments.

Does electronic banking spell the end of branch banking? According to companies supplying electronic banking software to banks throughout Europe, branch banking is a static industry and no bank is investing in bricks and mortar. However, the banks themselves describe electronic banking as a "complimentary channel" and will not be drawn on the future of branch banking.