Egg, the banking subsidiary of UK life insurer Prudential, expanded into France in 2001 following a successful three years' operation in the UK where it has been one of the leaders, if not the leader in UK Internet banking, writes Bloor Research's Bob McDowall.

It has announced that it will take a year longer than expected to break even, now forecast to be the end of 2005. The take-up of the service has been disappointing in France and it will have to increase its investment from €160 million to €300 million. In consequence it has postponed its move into the USA.

The financial press has devoted much time and column space to describing the disappointing response of the French customers to Egg's Internet banking service.

Perhaps, the most interesting issues which emerge from the analysis of this is the marked behavioural difference between UK and French banking consumers. There was confusion over Egg's cash-back service, where 0.5% of all spending is rebated by way of a cash credit to the customer account, a bargain too good to be true.

The French appear to use store cards more than credit cards, even though they charge a higher rate of interest on outstanding balances. Societe Generale, one of the largest French Banks, does not offer customers a credit card service. The slightly brash advertising launch campaign and the inability of Egg to position itself in the minds of many prospective customers as a bank rather than a service provider have not helped progress.

The experiences of Egg have a wider implication. The suggestion that National consumer attitudes and habits towards financial services are moving us towards one retail services market within the European Union is a myth.

Institutions which believe this or estimate that they can be catalysts in changing national customer behaviour characteristics, do so at a high degree of financial risk and exposure. Behaviour changes in banking habits are primarily generational. They take time to come to fruition. Technology may help but it is not the panacea.

Internet banking, seen as a low cost, efficient service has a role nationally, but cannot be rolled out across borders without detailed research and analysis of the population's behaviour, spending, saving and lending habits. The EU Commission may like to pay some attention to this illustration of national behaviour, but on second thought maybe not, as it may issue a directive instructing nation states to harmonise consumer banking behaviour!

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