Online banks are springing up across Europe like mushrooms after rain. See for yourself on the Web, via Qualisteam's directory of banks (www.qualisteam.com/eng/conf.shtml), or the Lafferty Group, a London financial research and publishing company (www.lafferty.com). You'll quickly find that Internet institutions offer all the services of an ordinary bank--from basic checking accounts and credit cards to stock dealing and mortgage lending. And since they are keen to draw in customers, they usually offer pretty good deals.
Some online banks pay high rates of interest on savings. Take the British part of first-e, one of Europe's first pure Net banks. It pays currently an eyepopping 6.81% before tax on savings accounts. Where national regulations permit, online banks pay generous interest rates on checking accounts, too. Smile, the Internet subsidiary of Britain's Co-operative Bank, is trying to live up to its name by paying 4.85% on checking accounts whenever they are in credit. It also offers a fee-free overdraft of $790.
GENEROUS. Interest rates paid by online banks on the Continent are usually less attractive because euro rates are so low. Even so, they are generally more generous than those paid by brick-and-mortar rivals. Germany's Advance Bank, for instance, pays 3.3% on its Cash-Management-Konto, a cross between a giro account (the German equivalent of a checking account) and a savings account. Like other German online banks, Advance Bank does not charge monthly account fees so long as the account is in credit. By contrast, most traditional banks charge clients up to $7.40 a month just for having an account.
In France, banks aren't allowed to pay interest on checking accounts and usually charge customers even for basic services. Depositors typically pay $7.35 or so per month to run a checking account, but most online customers who manage their checking accounts over the Net don't pay any fees. Other fees are also generally lower at online banks. Logitel Net, Societe Generale's Internet service, offers a 15% discount on share transactions. But online banks in France say they may introduce service charges in the future. Logitel Net says it plans to offer a choice between a monthly fee of $6.20 and a daily fee of 88 cents for each day they access their accounts.
Other online banks offer gifts--and not the proverbial toaster, either. Citibank's British operation gives trips to Brussels or Paris by Eurostar trains for new customers who have their salaries direct-deposited. France's Banque Directe offers "exceptional gifts for anyone who opens a current account"--and the account is free. Go to its Web site and click on "Compte Courant" for details. Some online banks also provide Internet access, e-mail, and other Web-based services free of charge.
Doing most things online is relatively easy and speedy. That's especially so when it comes to buying and selling shares--which explains Europe's huge surge in online brokerage. Take a guided tour of German online broker comdirect's Web site, and you'll see how quick and easy that can be. You can trade as soon as you open an account.
If you're in Italy, take a peek at the Web sites of Banca di Roma and Banco Ambrosiano Veneto. A transaction can take a matter of seconds and cost far less than a regular broker's service. A word of warning, though. Online share trading is now so popular in some countries--especially Germany--that the banks' systems occasionally get overwhelmed with buy and sell orders. On exceptionally busy days, you may have to try several times before you can log on. In an active market, it can take up to 30 minutes to execute a trade once you're connected.
Borrowing on the Web is a breeze, too, and certainly far easier than it is over the telephone or by going to a branch. Log on at Banque Nationale de Paris, and it immediately offers you the chance to take out a loan. And you get an instantaneous response. The BNP site is among the most comprehensive in the business--and one of the most colorful. A visite guidee is worth it. You can even use the Net to do a lot of the donkey work that mortgages require. At Spain's Banco de Bilbao Vizcaya Argentaria, you can seek advice--and even apply for a mortgage.
How do you withdraw or deposit funds at an Internet bank? Logical question: After all, some don't even have branches. Withdrawals are easy via ATM networks--without fees if you use the designated network. You can make deposits by mailing checks or via electronic transfers.
Perhaps the biggest attraction of online banks is the any-time, any-place ease of doing business on your PC or a mobile telephone. The Nordic online banks lead on the mobile front. Online customers of Solo, the Net subsidiary of Meritanordbanken, and of Skandinaviska Enskilda Banken can now do just about everything using cell phones with Internet access. Deutsche Bank 24, the online unit of Deutsche Bank, is also at the forefront of mobile telephony.
CROSSBORDER. But before you get too excited about how easy it all is, remember that there are geographical limits to what you can do over the Net in Europe. Most countries share the euro, but banking and clearing systems aren't yet harmonized. So crossborder transactions are costly and time consuming.
Take first-e. It operates in Germany as well as in Britain. But the two parts of the bank have to be run separately for regulatory reasons. So they do things differently. British customers get checkbooks because checks are still heavily used in Britain. German customers don't need checks because almost all payments in Germany are made by electronic transfer. Meanwhile, the British end of the bank uses Britain's clearing mechanism, and the German side, Germany's. Paying a German bill from your British first-e bank account isn't all that much easier than it would be through a regular bank.
On the other hand, first-e offers commission-free use of foreign ATMs. And all normal transfers to other British banks are free. It also has just unveiled a deal with eBay Inc., the U.S. online auction house, that lets you sell or buy items in the U.S. easily and cheaply. You pay the equivalent of just $5 per transaction for this service--far less than you'd normally pay an ordinary auctioneer in charges and transaction fees when making an international payment.
Remember, too, that most online banks offer services only in their national languages. Web sites are almost always available in English. And a bank may offer services in several languages for wealthy clients--as Union Bank of Switzerland does. But for run-of-the-mill services, you'll need to know the local tongue. Still, it's usually easier to read a different language than speak it. So online banks could be just the thing for you even if you aren't fluent in the language of the country where you reside.