Abbey National launches internet bank

Abbey National will today launch a new internet bank with the ambitious target of attracting five million customers within the first four years of operation.

In the first year alone Abbey hopes to attract one million customers with innovations such as making the service accessible through television sets.

The targets, if achieved, would transform Abbey into a big player in the banking sector, putting it in the same league as NatWest, now part of Royal Bank of Scotland, which has six million customers.

However, the plan looks ambitious compared to the number of customers attracted by rival internet banks.

Lloyds - the UK's biggest retail bank - has 300,000 internet customers. Egg, the internet banking arm of Prudential, took 18 months to hit the one million mark.

Halifax's If.com bank has projected number of 500,000 customers in the first year.

Ambrose McGinn, director of e-commerce at Abbey, said the new service will result in "one biggest shifts away from traditional areas of banking to date".

The new service, which so far has cost £40m to set up - is mainly aimed at the 13m people who currently have a mortgage with Abbey but bank elsewhere.

Mr McGinn said: "Only 2m of our 15m customers have bank accounts with us. We are offering a service which allows people to simply tell us they want to switch away from their old bank and we do the rest. We contact the other bank and handle the paperwork."

Mr McGinn said the service would also appeal to anyone who feels "huge dissatisfaction with the high street clearing banks".

But industry insiders questioned how revolutionary the service would be. Customers cannot register over the internet to set up their internet account yet and will instead have to go to a branch, use the telephone or an ATM.

From today they can click on to abbeynational.co.uk to find out about a range of accounts, mortgages and insurance and share dealing.

But they will not be able to buy mortgages or other products until an unspecified date in the future.

Abbey may find itself outpriced as it will not offer discounted rates for internet users, unlike many e-banks which attract customers with more competitive rates than found on the high street.

Halifax Online launched a new savings account with a attractive rate of 6.25 per cent last week, while Egg offers savers a rate of 6.3 per cent.

Mr McGinn defended the decision to offer the same rates to customers of both its conventional banking service and the new internet bank saying: "It has been a huge investment to develop new technology, which our customers will have access to free."

Abbey will also face stiff competition from high street and other banks, which are rapidly expanding their internet services. Lloyds is set to announce details of its e-banking plans on Wednesday while Halifax's If.com launches later this year.

One insider at a direct competitor of Abbey's said: "All of the banks are developing internet and interactive TV services, it is just a matter of a few weeks or months."

Abbey says it has three unique aspects to its service. Customers will be able to move their money between accounts and see the result immediately. They will be able to access their account over the television as well as the internet from June, first on BSkyB's Open, with Telewest and NTL following later this year. And customers will be able to move from their existing account with minimum hassle with the switcher service.