Banks in the Lead
In the late 1990s, pioneering work by innovative stand-alone Internet banks led to a sudden rush into Internet provision by the traditional banks. Some moved too quickly and experienced security system failures that a delayed launch might have avoided. However, retail banking has now accepted the Internet as a standard current account channel.

The Property Boom
The crisis in the housing market, where demand exceeds supply, boosted online homemaking sites. These already had a high profile in 2000 but by 2002, they were much larger and more comprehensive. Such sites lead the homemaker to other sites offering cheaper mortgages, as well as other financial sites on the Internet.

Insurance- A Mixed Picture
General insurance is gradually gaining in popularity as a commodity bought via the Internet. It is important to differentiate from general personal lines insurance, which can be bought at a reasonable price direct from a number of companies or through a funds supermarket. The success of online insurance may lead to the shrinkage of call centres.

Growth in the online life insurance and pension provision market has been slow, hampered by the complexity of the product and by regulatory change in the face of bad publicity. In view of this, the number of life products advertised online is comparatively small and demand from consumers is poor.

Investment Outlook
Funds supermarkets have developed during the past 5 years and are likely to take a more prominent role following the changes in UK legislation regarding the 'polarisation' of sales of financial products. Until 2002, there were two main sales channels for financial investments — independent financial advisers (IFAs) and tied agents or direct sales. From 2002, it will be possible for tied agents and direct sales staff to sell financial services products from companies other than their principal one. This should bring more choice and competition to the market and should reduce the market power of IFAs. This will depend on the market and on economic pressures. It will have some impact on IFAs and on the in-house marketing of products by financial services providers. The fortunes of the industry over the next 5 years depend on the state of the stock market rather than on turmoil in distribution.

The Future
The revolution in the distribution channels leading to online financial services will be consolidated before 2007. Technological change envisaged includes the development of a smart card that carries cash and financial information on it and can be interfaced with the Internet, the eventual introduction of third generation (3G) mobile telephony, affordable broadband connections, which will make the Internet easier to use, improved payment transfer through electronic systems, and greater Internet security.