Internet banking bubble implodes

Internet banking has been a costly experiment for many banks swissinfo.ch

Zurich Financial Services has decided to abandon Internet banking, following a SFr415 million (€283 million) loss.

Zurich’s Internet bank is one of several to go to the wall. Private banking group, Vontobel, killed its off last year, as did Swissquote and Swiss Post has warned that it is preparing to abandon its site.

Vontobel’s cyber bank, called Y-O-U, was closed after making losses of SFr206 million (€140.7 million). Three bank executives lost their jobs in the debacle.

Swissquote’s flirt with the Internet suffered the same fate, after the online-broker lost SFr17.9 million (€12.2 million), forcing it to cut almost 50 jobs.

Last week, Swiss Post said it was preparing to abandon its financial site, yellowworld.ch, after it had chalked up losses of SFr70 million (€47.8 million) in its 30 months of life.

Axing subsidiaries

On-line banking has suffered from the collapse of the New Economy as well as the drop in world stock markets. This has led to a complete restructuring, with Internet brokers now focusing on their national markets and axing non-profitable subsidiaries.

In Switzerland, there are about 20 online brokers, but analysts predict that only half will survive.

The potential market has been estimated at 500,000 potential customers – five times more than the current number of e-banking clients.

According to figures for 2001, Credit Suisse dominates the market with its Youtrade Internet site, which has 30,000 customers.

Next are Consors and Swissquote with 10,000 customers each, followed by the UBS’s Tradepac (9000 customers), Easy Trading (Basel Cantonal Bank, 7000 customers) and E-sider (Vaud Cantonal Bank, 5000 customers).

Despite the current gloom in e-banking, the Swiss Life insurance group has pushed ahead with its launch of Redsafe.com. The financial portal, which cost more than SFr75 million (€51.2 million), features not only stock exchange and banking transactions, but also insurance products.

Redsafe hopes to become profitable and to have 55,000 customers by 2004.

swissinfo