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THE Internet banking war is hotting up in Australia with the smaller banks and insurance companies entering the market to offer cheaper home loans - plus a better rate of interest for investors.
One of the big players to enter the new market will be AMP Banking which is planning to introduce a no frills on-line account.
Other new arrivals would be on-line finance brokers, eager to become intermediaries for the new Internet banking customers.
St George Bank Queensland manager Peter Cooper said the bank's new "directsaver" on-line account was being promoted first in Queensland and aimed at expanding its customer base as well as matching ING Direct's Internet banking product.
ING said it expected its Internet banking to be profitable within three years but had already taken $600 million of deposits from 30,000 clients.
While there were high interest rates on deposits, the funds were being lent out by ING Bank's mortgage business at higher rates.
Even with official cash rates on the increase, the 6.25 per cent rate was previously only available on money tied up in its one-year term deposit with 6.3 per cent offered for three years.
Both banks pointed to the cost benefits of automation via the Internet and the absence of branch office costs.
With no overheads, on-line banks could offer rates equivalent to or better.
A National Australia Bank spokesman said convenience was the main factor for its 280,000 customers who conducted their banking on-line.
NAB cash management accounts were offering top interest rates of up to 5 per cent or slightly higher for amounts of $20,000 or more.
The ANZ Bank already had 300,000 of its customers on-line with a further 50,000 in New Zealand.
Internet banking services were given a qualified seal of approval by the Australian Securities and Investments Commission.