The report, "New Channels in European Financial Services 2002," shows that despite financial services providers investing heavily in new technologies such as mobile phones, interactive digital television (iDTV) and personal digital assistants (PDAs), few customers are currently making use of the new channels to manage their financial affairs.

However, Datamonitor urges that while the new channels have so far failed to meet expectations in terms of functionality and consumer uptake, there is no reason to give up on them entirely. In some European countries levels of ownership of devices such as digital TV and mobile phones are high. More than 35 per cent of UK consumers currently have digital TV and over 80 per cent of Swedes currently have a mobile phone.

Financial institutions just need to reposition the new channels correctly within the financial services distribution and marketing mix, says Datamonitor.

The report points to a number of factors that have restricted the success of new channels in financial services. For example, new channels are highly time-efficient, in fact mobile phones are the most time-efficient financial services channel. Yet they offer poor transactional and after-sales care and are not able to provide the same ease of access or input of information as the branch, mail or PC-Internet.

Consumers associate TV with relaxation, leisure and entertainment not financial affairs - just 13 per cent of UK consumers plan to use digital TV for online banking or broking during the next 12 months. In Germany and France, less than six per cent of consumers plan to do so.

Mobile phones are seen as a means of communication rather than a transactional device. In Spain and Italy, more than 20 per cent of consumers plan to use their mobile phones for e-mail over the next 12 months, less than seven per cent plan to do so for banking or broking purposes.

Alex Boorman, Datamonitor's financial services technology analyst, comments: "It is no good trying to get consumers to use these devices for functions that they are obviously not suited for. Expecting consumers to input large amounts of information via a remote control handset is a non-runner. Financial services providers need to ensure that using the new channels becomes more straightforward whilst simultaneously ensuring that there is really something there for consumers to get excited about."

According to Datamonitor, mobile payments may be one opportunity that European financial services suppliers can exploit. However, in doing so they must be careful that they do not lose ground to mobile operators who may be able to take control of the payment process.

A number of mobile payments systems have been introduced in Europe, of which some such as Paybox re-position financial services suppliers in the value chain. In contrast, Mobipay should be regarded as an example of best practice in the m-payments space where financial services providers and mobile operators have come together to drive forward the market and to create an open payment system.

In the medium term, financial services providers should look to establish a presence on European i-mode services as part of the broad array of content that is likely to be available, suggests Datamonitor. The larger screens of i-mode-enabled handsets should provide a more user-friendly interface than traditional handsets and hence a more viable interactive medium. Furthermore, although the range of i-mode-enabled handsets available in Europe is currently limited it is likely to increase if the first services are successful.