The new report "eBanking Strategies in Europe 2002" finds that 26% of European consumers with Internet access are banking online. In 2001 the UK had the highest number of online bankers in Europe, with 7.52 million people choosing to conduct some or all of their banking affairs over the Internet.

Datamonitor predicts that by 2005, 57.7 million consumers will be banking online in six key European countries - France, Germany, Italy, Spain, Sweden, UK.

However, the research also reveals almost 80% of European consumers state that a personal visit to a branch is their preferred method for dealing with banking products.

Alex Boorman, Datamonitor e-financial services analyst, comments: "Although branch numbers are still falling, it is now recognised that the branch assumes an important role as part of a banks' multi-channel distribution strategy. To provide only one channel whether it is the Internet or the branch is to appeal to only a limited proportion of the consumer market."

According to the report, phone banking is also still widely used by European consumers. Only in Sweden and Germany have more consumers purchased or arranged banking services over the last 12 months using the Internet than the phone. In the UK, whilst 19% of consumers have purchased or arranged banking services via the Internet, 37% have done so using the phone.

Datamonitor predicts that the importance of having a branch presence will soon force standalone Internet banks to establish some form of retail outlet. "These new branches may not appear in the form with which we are currently familiar, as tie-ups with retailers are likely. In Sweden, for example, SkandiaBanken has launched a new online bank in partnership with the Coop, which will involve it developing a presence in supermarkets," says Boorman.

"Many banks are likely to see their existing branches undergo a shift from convenience to excellence as they specialise in providing more value added, expert services while the more mundane tasks are taken care of by electronic channels," he adds.

Results of the survey show banks remain optimistic about the proportion of their business that will be online in 2002. For example, 28% of retail banks believe that they will handle more than 60% of current account applications online by 2002, while 27% of retail banks believe that they will handle more than 60% of credit card applications online in 2002.

Their expectations appear to diverge from current consumer Web trends, says Datamonitor. The report shows 25% of European consumers who have accessed the Internet over the last 12 months have done so to make payments and 11% have done so to trade stocks/shares. Only three per cent of European consumers accessing the Internet have applied for a credit card online over the last 12 months. Big national variations are noticeable - for example, 42% of Swedes accessing the Internet over the last 12 months have made payments online as opposed to only 8% of Spaniards.

PC-based access to banking services is soon to be challenged by a new range of emerging consumer technologies, says Datamonitor. Currently, only 1.1 million Europeans engage in mobile banking. Datamonitor predicts that this number will rise to 27.1 million by 2005. Numbers of Europeans engaging in digital TV banking will increase from 0.75 million to 9.81 million by 2005, says the market analyst firm.

Currently 9% of European's own WAP phones and 19% own digital televisions. Levels of ownership vary both within and between countries. In Sweden, for example, whilst 19% own digital TVs only 9% own WAP phones. 14% of Germans own WAP phones and 15% own digital TVs.