European online bank First-e will close for business.
European Internet bank First-e has announced it will close for business. The bank, set up by venture capitalists in Ireland under French Banque d’Escompte’s banking license, had 200,000 customers in France, Germany and the UK. Its customers in France will remain with Banque d’Escompte, while German eBroker DAB has bought the customer list in the UK and Germany.
The closure comes as no surprise. First-e once seemed in a strong position due to its planned merger with Spanish giant BBVA’s Uno-e online bank, which would have provided credibility and a larger pan-European customer base. Once that deal was cancelled in April, the writing was on the wall. Datamonitor said at the time that First-e had little prospect of independent survival, or even of finding a takeover partner.
First-e has long suffered from a range of problems that many other eBanking players have managed to avoid. For a start, it lost its momentum in customer acquisition, partly due to negative press surrounding its regulation (or lack thereof). Whatever the cause, it isn’t viable to run a bank with only 80,000 customers. For comparison, UK-only eBank Egg has 1.72 million customers.
It also didn’t have any offline backing, following the collapse of the BBVA deal. Even out of standalone eBanks, the successes have been operations like Egg and DAB, which are majority-owned by bricks-and-mortar players. The combination of customer reassurance and experience is, unsurprisingly, a major boost to these operations.
First-e’s demise is yet another reminder that the Internet is a powerful distribution medium, not a new way of doing business. The company didn’t have the innovation, the experience, the reputation, or the resources to challenge the existing players. This is a recipe for failure in any business.
The collapse doesn’t demonstrate that eBanking is doomed – quite the reverse. Datamonitor’s report ‘eBanking technology in Europe 2001’ predicts 75 million Europeans will be using the technology by 2005. It’s more a sign that eBanking is becoming a mature industry.
