The research indicates that competition is the greatest concern for e-commerce in 36 per cent of financial services firms, while only 17 per cent cite security. Despite recent scares, the situation is more extreme in Europe where only 11 per cent of firms are most concerned about e-commerce security.

Yet in too many cases, Internet banking is failing consumers. In Europe, up to 50 per cent of e-mails are not responded to within eight hours and the level rises to 64 per cent in the US. There is also an urgent need for integration as 30 per cent of firms in Europe and 40 per cent in the US give customers inconsistent information about their finances through different delivery channels.

Jonathan Charley, vice president financial services of Cap Gemini Ernst & Young, says: "Financial services companies are under intense pressure to produce an e-commerce offer as quickly as possible and there is a danger that many are compromising the quality of that offer. It is essential that they focus on a multi-channel strategy that enhances the customer experience and helps to increase customer take up of e-commerce.

"Many firms – one third in Europe and half in the US – are not even offering an incentive to encourage their customers to migrate to Internet banking. Given the benefits that the banks themselves will realise, it seems unusual that this opportunity is being missed."

Firms in Europe and the US have different business goals for e-commerce. European firms are focusing on opening new markets (24 per cent) and gaining new customers (18 per cent), with their greatest challenge being speed to market (41 per cent). In contrast, US firms are focused on customer retention (32 per cent) with their major concerns being a lack of resources and skills (29 per cent) and the cost of implementing e-commerce (29 per cent). Only 19 per cent of US firms are concerned about speed to market.

While 45 per cent of transactions are currently made via branches, brokers or agencies, this is predicted to decrease to 29 per cent by 2003. The largest predicted increase was in Internet transactions, going from a current four per cent in Europe to a predicted 25 per cent by 2003. In the US, a rise from the current three per cent to 12 per cent is expected.

"Despite the hype, Internet banking is not expected to replace the need for branches," says Charley. "Although transactions are predicted to decrease through this bricks and mortar channel, respondents in our survey still believe that the number of transactions through branches will be four per cent greater than those made via the Internet in 2003."

Europe is leading the US in m-commerce, largely due to increased mobile telephone penetration and a consistent standard of GSM (global system for mobile communication). By 2003, Europe is expected to conduct nine times as many transactions over m-commerce than the US; 4.5 per cent of all transactions compared to 0.5 per cent.

Overall, financial services firms are dramatically increasing their investment in e-commerce, spending eight per cent of their IT budget on e-commerce in 1998, nine per cent in 1999 and projecting 19 per cent spend for 2003. In Europe, 22 per cent of the IT budget will be spent on e-commerce.

IT investment in branches has dropped from 40 per cent of respondents thinking it is the most important category for IT investment in 1996 to only 26 per cent in 1999 and is predicted to fall further to 11 per cent in 2003. However, while one per cent of respondents thought Internet banking was the most important area of IT spend in 1996, 40 per cent see it as the most important in 1999 and a further rise to 58 per cent is predicted by 2003.

The survey questioned chief technology officers, chief financial offers and those responsible for e-commerce and CRM initiatives from more than 125 financial institutions in over 20 countries representing Asia/Pacific, Europe and the Americas. Research was conducted face to face, over the telephone and in written format.

To obtain a copy of the report email cg.finance@capgemini.co.uk