INTERNET BANKING HAS THE POTENTIAL TO REACH 110 MILLION EUROPEANS BY 2005,
PREDICTS FORRESTER

But Sustained Innovation Will Maintain The Current Growth Curve And Drive
Profitability

LONDON, December 10, 2001 . . . While the downturn in equity markets takes
its toll on online brokerage, Internet banking in Europe continues to
attract more than 1 million new consumers a month, according to a new brief
by Forrester Research (Nasdaq: FORR).

"More than a third of European Internet users -- 42 million people, or 14%
of all European adults -- bank on the Net today," said Forrester Analyst
Charlotte Hamilton. "Net banking correlates strongly with users' education,
attitudes, and assets, and among online users, Net bankers are 23% more
likely to have a higher education than those not banking online. But as the
Net becomes increasingly pervasive and online tenure overcomes security
concerns, online banking will penetrate more than half of the continent's
Net users in 2005 -- 110 million Europeans."

"Our strong growth forecast for Net banking over the next four years rests
on the assumption that Net offerings will continue to improve. Why? Because
these customers are simply too good to lose," said Dr. Therese Torris,
group director at Forrester's European Research Center in Amsterdam.

To sustain their investment in Net banking, Forrester believes that
Europe's financial firms will retreat from expensive noncore Net
investments, such as independent online brokerage arms, and will redirect
funds from these unprofitable single product ventures to their banking
offering. Forrester also believes that they won't invest in new proprietary
online product offerings but will outsource from third parties. Also,
Europe's banks will seek cheaper transaction costs through self-service and
automation; they will lower their investments by integrating third-party
transaction platforms into their Internet banking service -- enabling
customers to apply for and purchase multiple products online. Finally,
banks will drive greater customer loyalty online by using Web features like
personalization and automated advice.

"To maximize their return on online banking investments, we advise Europe's
banks to encourage customer migration to reach critical mass by clearly
communicating the benefits of Net banking -- highlighting the availability
of information, analysis, advice, and real-time transactions," Hamilton
added. "To keep customers from turning to more expensive channels like the
telephone, banks must also weave customer service throughout their sites.
So, when customers have a query that isn't answered at the site, banks
should encourage customers to email rather than phone the call center and
then automate routine customer-service queries. Equally, banks must use
their Internet services to cross-sell more profitable products like life
insurance, thus justifying promotional offerings like high-interest savings
accounts or low-rate loans. Finally, online banking must be made easier for
tomorrow's less patient users. Simple Web design improvements, such as
letting users know in advance how much data entry an application requires
or reducing the number of clicks necessary to perform a transaction, will
improve sales by up to 30% in one design overhaul."