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Outlook for internet banking remains positive despite Northern Rock crisis

19 September 2007
Addressing concerns over the effectiveness of internet banking, chairman of, Jim Spowart, affirmed that internet banking is still a viable way to deal with customers’ money.

Mr Spowart spoke on both BBC Radio Five Live and the Today Programme in a bid to assure customers that, despite recent problems connected to Northern Rock, online banking is not on its last legs.

“Internet banking is here to stay – but there are lessons we can learn from what has happened at Northern Rock,” he said.

He explained that Northern Rock’s online service crashed as it was overburdened when news of the company’s struggle came to light, and pointed out that high street branches were also unable to deal with the high level of customer demand. He said that the collapse of its internet service was the result of “unforeseen” and “unprecedented” demand.

Having set up one of the UK’s first internet banks, Intelligent Finance, Mr Spowart has good insight into the problems associated with online banking. He said: “It is a question of capacity. Banking systems are designed to deal with a certain amount of traffic – perhaps ten times their normal peak daily activity.”

He said that the situation may have been better handled had internet services been combined with additional telephone support.

Mr Spowart said: “Some banks are internet only yet I feel there has to be dual-capacity so people can be assured about their savings and investments.”

“Online activities certainly do have a future. But banks have to be versatile and learn from this highly unusual event,” he added.

When asked if banks deliberately shut down websites when trouble arises, he said: “I don’t think banks would do such a thing, it is contrary to the principles of good banking where everyone must be given access to their accounts. I believe it was purely a case of extraordinary demand and pressure on the capacity of the system.”

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