The Co-operative Bank is following Egg and others in launching an online bank, Smile.co.uk. At the heart of the "clicks and mortar" strategy is passing along Internet-style savings to the customer. So what does Smile offer?
The current account interest rate of 4.0 percent gross is the most generous of any current account. The no-fee overdraft of £500 carries an interest rate of 9.9 percent, whilst students will be entitled to an interest-free overdraft of £2000. All transactions can be carried out online, including standing orders, foreign currency exchange and requests for an increased overdraft.
Mervyn Pedelty, chief executive of Co-operative, said: "We have one of the most intuitive and accurate online credit rating programs available. Customers will receive a decision within minutes."
Smile will make use of a new standing order and direct debit transfer scheme, operated by BACS, which simplifies the transfer of customer accounts between banks. Although mortgages will not be immediately available, it is anticipated that they will be offered early next year, in line with the Co-operative Bank. A credit card (APR 4.9 percent, rising to 9.9 percent in April 2000 for current account holders, and 5.9 percent rising to 12.9 percent for non-current account holders), personal loans and a mini-ISA (interest rate 6.5 percent) are also offered.
Smile customers will be able to withdraw money from the LINK cash machine network, whilst cash and cheques can be paid into English post offices and, from early 2000, those in Scotland and Northern Ireland too.
Although few details of security were revealed, Pedelty did disclose that there were 12 levels of security, incorporating 128 bit encryption via the VeriSign Digital ID certificate. Keith Girling, Head of Technology, insisted that a great deal of thought and planning had gone into system protection. "Our system uses both symmetric and asymmetric encryption, and part of the key is generated by onscreen cursor movement," he said. Rather than sending confidential account information by email, customers will be directed to a secure personal inbox on the Smile system to read details of their financial status.
The success of Egg, which attracted a surprisingly high number of well-off middle-aged customers, has shown a demand for online financial services. By launching the Smile Web site a month before the service begins, Co-operative hopes to anticipate the level of consumer interest and modify the technical set-up accordingly, in the hope of avoiding the glitches experienced by recent high-profile launches such as Jungle.com and Egg's online credit card.
Smile will go live on 28 October, following a television and billboard advertising campaign.