First-e, first out of business

One of the first internet banks to operate in the UK, first-e, is closing after just two years.

Its customers were informed of the news via an email sent from Alain Wormser, first-e's chairman and MD, last night.

The online branch of the French Banque d'Escompte has given its estimated 200,000 customers (50,000 in the UK) until 3 October to make alternative arrangements.

On that date they will be unable to access their accounts over the internet.

Customers are being given the option of transferring funds to an investment account with Self Trade, an arm of DAB bank (AG), or getting on the phone and rearranging their standing orders and other financial obligations.

Customers of customers have been advised not to write any new cheques, and have been told that no new cheques will be honoured after 20 September.

They have also been told that they will not be able to withdraw cash from ATMs after 20 September.

Some 250 staff based in Dublin are expected to be laid off as a result of the closure.

But the news was not seen by industry experts as a trend about to hit other internet channels.

Phil Alcock, senior VP at financial technology and consultancy provider Fiserv, commented: "The failure of first-e was inevitable without using 20/20 hindsight. It would be missing the point completely to put the blame at the door of the dotcom bust. first-e was a business with a deeply flawed strategy from day one.

"Once the market started to offer competitively-priced competing products, first-e had nowhere to go. This was largely due to poor technology decisions when the business was launched.

"first-e was an internet channel supported by, and connected to, a traditional bank processing system. As a result, the product and service innovation critical to success, could never be achieved effectively."