Presenting the firm's annual results statement, Richard Pym, A&L CEO points to radical changes in the way that consumers buy and transact their financial services products.

"Consumers are becoming ever more aware of the value of the products available in the market, and business models which rely on customer inertia to charge high prices are becoming increasingly out-dated," he says. "Our own evidence is showing that our branch transactions are starting to reduce, whilst for the UK as a whole the number of people using the Internet to carry out their financial transactions has more than doubled in the past two years."

The bank, which has 300 branches and over 225,000 Internet banking customers, says that around 80% of the 100 million transactions it conducted in the past year were processed through self-service channels

"The C1/C2 customer group, our target customer, has above average Internet usage," notes Pym in his presentation. "In the next two years we believe customers will become even more confident in using technology to process their financial transactions, following the national introduction of chip and pin technology for plastic cards."

The bank says applications of personal loans, mortgages and current accounts via the Internet almost doubled in 2003 compared to 2002. In 2003 over £2bn of mortgage and personal loan applications were received directly via the Internet, with over two-thirds of mortgage intermediary applications also received via the Web. In total the Internet and the telephone generated 87% of personal loan applications.

Pym says increasing self-service is leading to a reduction in the marginal cost of acquiring new customers, some of which in turn can be passed on in the form of better value products.

"Our strategy is to increase the number and range of transactions that customers can undertake themselves without involving our staff...Unlike solely direct providers, however, we also offer customers face-to-face access through our compact branch network for more complex sales and transactions, and as a source of confidence for customers so that they can talk face-to-face should they need to."