Conventional techie wisdom holds that the Internet is sweeping everything before it. But the technological juggernaut is not unstoppable. There are two blocks to its success: regulation and a neo-Luddite consumerist reaction.
There are very few Web sites set up by UK financial institutions that comply with existing UK financial legislation. Indeed, plenty of them lack the myriad disclaimers that should exist on every page. One day, someone will lose a lot of money and will reach for their lawyer to sue an unknowing broker who gave them rotten advice and there is nothing that gums up the works faster than a lawsuit.
But even more damaging than the uncertain regulatory environment in which Net banking operates today, are governments' cack-handed attempts to fix the problem. In Article 19 of the Financial Services and Markets Bill, which will determine the shape of UK financial regulation for the century, is an assertion that the UK has the right to regulate any Internet-based financial offer that is accessible in the UK. This means the UK authorities reserve the right to regulate any financial offer on the Net.
This is madness. In the end, the only regulatory approach that can work is one that accepts that, if you visit a Web site based in country A, you accept the protections of that country.
Unfortunately, that is not acceptable to consumer bodies across Europe which insist that if I buy a financial product cross-border over the Internet, I should have the right to avail myself of consumer protections in my home country. As a result of such intervention, the revolutionary potential of the Internet - the ability to market worldwide at virtually zero cost - is completely undermined.
Andrew Hilton is director at the Centre for the Study of Financial Innovation