Online Banking Part.I

The acquisition of Egg by Citigroup shall deliver to the agenda the question of the model of online banks. Founded in 1998 by Prudential, Egg has always been deficient - the French branch was sold in 2004 to Auchan in the development of banking activities and never managed to achieve the objectives in terms of customers. This is the situation common to most of the independent online banks. However, their creation in the late 1990s, online banks seemed to have a promising future thanks to the Internet phenomenon. How to explain such a setback?


At the beginning, the online banks were intended to attract a large clientele (Egg counted on a portfolio of 1 million customers in 2003, five years after its creation) by proposing a new banking model: an account management possible at any time and from any Internet-connected computer, with an offer "discount". Using the Internet as the only interface between the bank and the customer had to allow significant savings, both in terms of personnel but also capital assets. Thus, online banks offer rates were very aggressive on a range of services equivalent to that of a traditional bank. However, they failed to offer prices low enough to stand out, to forget the absence of physical relationship between the customer and the banker, and manage to capture some of the customers used to a classical model.

Weakened by the explosion of the Internet bubble in 2000, online banks could not withstand the intensity of competition in the banking sector, especially as traditional banks, although behind the banks line, developed or acquired equivalent services. The interest of a "pure player" of online banking has therefore been questioned since it was possible to combine customer relationship in a network, and maximum flexibility via the Internet.