-Caveat Lector- Click Here: <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Digital Society Do Internet Banks Give Value for the Money? Cost savings are not being passed along to the customer. THE landscape of British banking is transforming as famous high street names ditch branches and staff in a bid to slash costs to fund the battle for business over the internet. But experts claim that many of these online banking services are failing to provide real value for consumers. Eight current accounts are now available online: from Barclays, Halifax, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland, Citibank and Smile from the Co-operative Bank plus its own service under the Co-op brand. Virgin Direct is planning to launch internet banking in January, NatWest in the next four weeks, although customers will be forced to pay a £30 set-up charge, and HSBC will soon be launching interactive TV banking. But Ian Millward, marketing manager with IFA Chase de Vere, is largely unimpressed with most online offerings. He says: "The overall impression I get is that there are a lot of people payin g lip service to the net, but there is not actually a lot of substance there." Experts say many of these sites are difficult to navigate, slow to use, and fail to add any value for consumers. Worse still, many do not offer preferential rates. High street banks are making vast savings by closing branches. This week alone Northern Rock announced it is closing 29 of its 105 branches to help finance its drive into internet banking. Barclays plans to close 200 branches next year after having already cut its UK work force by 6,000. Online customers bear the lion's share of running costs on accounts, paying phone and electricity bills. Industry estimates put the typical cost of an internet banking transaction at between 1 per cent and 25 per cent of those handled manually. But traditional banks have yet to pass on these savings by offering enhanced rates to customers choosing to bank online. Millward says: "That is the thing that I found abhorrent about the traditional banks. They are levying exactly the same charges for internet accounts as they are on the high street. Online banking will save them money, but none of it is coming back to the consumer. It is outrageous, customers are doing them a favour essentially." Lloyds TSB says its is planning to launch a freestanding internet account next year and is looking at the question of enhanced rates for net customers. Howard Davies, chairman of the Financial Services Authority, cautioned banks this week that online banking could mean a shake-up for banks who rely on customers' inertia. He says as more players offer internet accounts as barriers to entry fall and the reliance on extensive branch networks is broken, customers can more easily shop around for the best deals, and more will "rate chase" the best buys. Current accounts designed specifically for the internet are already outstripping offerings from the high street banks. Smile, the purely internet-based banking offshoot from the Co-op Bank, launched last month. Co-op says this is the first time that an internet bank has offered a full range of services. Customers can choose from current, student and savings accounts, pay bills, take out loans and credit cards, set up direct debits and standing orders, and a cash mini-Isa. But perhaps most startlingly, Smile pays 4.07 per cent interest on credit balances, compared with a typical rate of 0.1 per cent on standard accounts from traditional banks, such as Lloyds TSB, Barclays and Royal Bank of Scotland. Savings accounts from Prudential's Egg and first-e also top best-buy tables. Egg was launched in October last year and so far has attracted more than £7bn in customer deposits and more than 50,000 credit-card customers. It offers a savings account paying 6 per cent gross interest a year. Accounts can be opened with £1 up to a maximum balance of £250,000. Loans and travel insurance are available. First-e is an operation of France's Banque d'Escompte. Davies says this "could be first indicator of much more genuine cross-border competition in the retail banking market in the EU". It offers a savings account that pays a market-leading 6.51 per cent gross. Because interest is paid gross it is the responsibility of the account holder to declare tax. First-e is planning to launch a current account later this year at a time when internet banking, and the redundancy of the branch network it ushers in, looks set to fire competition in the banking sector to levels previously unseen. A recent survey by Barclays indicated that the number of consumers using internet banking is set to increase sevenfold over the next year. Banks which are still reluctant to pass cost savings on to these consumers are unlikely to win new business or keep existing customers for too long. The London Telegraph, November 25, 1999 The Nukes of Hazard Israel Releases Some Nuke Trial Transcripts "Suspicion and fog" ISRAEL has released some details of the 1986 closed-door trial of the nuclear technician Mordechai Vanunu, who disclosed the story of the country's carefully hidden atomic weapons arsenal. The excerpts showed a more open attitude to a topic which is still regarded as a state secret. But they provoked a denunciation from some military experts and a former prime minister, Shimon Peres, who said they highlighted a subject best left shrouded in "suspicion and fog". In the transcripts Vanunu, 44, tells the court that he decided to blow the whistle on the nuclear arms project "so that Peres cannot lie any more to [President] Reagan and tell him we don't have nuclear weapons. Now everyone knows." Vanunu, who told his story to the Sunday Times, was held in solitary confinement for 12 years, but recently he has been allowed to mix with other prisoners. To human rights groups abroad, he is seen as a prisoner of conscience and anti-nuclear campaigner, but to many Israelis he is one of their most dangerous traitors. Mr Peres said yesterday that the release of the transcript could only put further international pressure on Israel over its nuclear programme, which is a leading source of friction with Egypt. Mr Peres said the maximum amount of secrecy should be maintained. He said: "The suspicion and fog around this issue are constructive, because they strengthen our deterrent." Israel has never acknowledged that it has nuclear weapons, but foreign experts believe that it holds at least 200 warheads. The excerpts were released at the request of an Israeli newspaper. All confidential issues were censored. The London Telegraph, November 25, 1999 Innovations in Finance Kimono-Backed Bonds Japanese bankers are turning to kimonos to dress up their capital markets. Quoq, a large consumer finance company, has begun issuing securities backed by the revenue stream from loans it extends to help consumers buy Japan's traditional costume. So far ¥30bn ($283m) of "kimono bonds" have been issued, representing about 100,000 kimono loans. But underwriter Daiwa SBCM says they have proved popular with domestic institutional investors. The kimono bonds have been popular partly because they are considered secure. The main clients for kimono loans, which represent one-fifth of Quoq's business, are women over 40 who need formal kimonos for themselves or relatives for weddings. Since small bank loans are hard to obtain in Japan, and kimonos cost between ¥200,000 and ¥2m, these women often need loans. And they rarely default - the earnings stream that acts as collateral for the bonds is relatively safe. Japan's record low interest rates have also left investors looking for yield. Though the latest kimono bonds only offered yields of up to 1.5 per cent, on issues of between six months and five years, this is higher than the interest rate in money markets. "The kimono issues were very oversubscribed, and so we think that there is prospect for more growth [in issues] - not just with kimonos, but with other shopping loans," said an official at Daiwa SBCM, a joint venture between Daiwa Securities and Sumitomo Bank. The development has also been welcomed by western investment bankers, who hope it shows that "Big Bang" financial deregulation is triggering the long-awaited growth in Japan's asset-backed securities market. This has lagged well behind the US, for example, in part because until recently Japanese companies could raise finance easily from banks and did not need to use the capital markets. Anthony Dixon, director of securitisation at Nikko Salomon Smith Barney in Tokyo, believes that outstanding ABS issuance in Japan has doubled this year to about ¥2,000bn. The Financial Times, November 25, 1999 ------------------------------------------------------------------------ ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. Roads End DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. 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