After a steady take-up of online banking services between 2000 and 2005, growth has slowed in the last two years and is set to remain sluggish as customers stick to using branches and ATMs, according to a UK study released by Forrester Research.
The report, which surveyed 4226 adults, found that only a third of Brits - 31% - use the Internet to manage their bank accounts. This is expected to grow to just 44% by 2010.
By international standards, the UK is an online banking laggard, says Forrester. The 31% of adults who do bank online is a lower proportion than in Germany and the same as France, which has much lower Internet penetration. The UK also has a relatively large number of quitters, with about two million people saying that they used to use online banking, but have given up.
Furthermore, although two-thirds of Brits are regular users of the Internet, more than half of these net users still don't bank online, says the report. Just 46% of UK Internet users - around 15 million people - bank online, compared to three quarters (74%) who regularly shop via the Web.
The survey found that a major reason for the lack of interest in Internet banking is that customers are happy with other channels. Brits remain attached to branch banking and are still the most frequent branch visitors in Europe, says Forrester.
Around 44% of respondents say they avoid using the Internet because they are happy to visit a branch, while over a third prefer using ATMs. Around 11% prefer telephone banking.
The research suggests that security is not a major factor preventing the take up of online banking - only 31% of those who don't bank on the Internet cited it as a reason for their reluctance. This seems to suggest that the roll out of two factor authentication is unlikely to drive growth, says the report.
However, Forrester says that most people who don't bank online would be willing to switch if offered incentives. But because UK banks don't charge customers to use branches or ATMs, it is difficult to move people over to the Web. As a result, banks are showing little desire to attract new customers to the Internet and are focusing on selling financial products online rather than driving adoption.
However in the longer term, a gradual rise in confidence in online security, and the growing role that the Web plays in people's everyday lives will drive up numbers.
Generational change alone is likely to increase online banking adoption by several hundred thousand people per year, as young adults are much more likely to bank online than older peope, says Forrester.
This latest research contradicts previous studies, including one released earlier this year by Lloyds TSB which found that in 2006 a massive 68% of Brits conducted the majority of their banking over the Internet.