Bloomsbury Financial Planning

Yet slowly but surely, the internet is making its mark on the sector as more people move their banking online. Lloyds is to shut up to 400 branches as part of its integration of HBOS. Its rivals are likely to follow suit.

A decade from now, the local branch could well be an endangered species as "cyber-banking" grows ever more popular and more branches close.

"Is there such a need for so many branches? Clearly, there are too many in certain areas," says Ben Yearsley, investment adviser with Hargreaves Lansdown. "The only time I personally go into a bank is to collect foreign currency and to pay in cheques that I occasionally receive, and I can't imagine I am too different to most people."

Since the dotcom boom of a decade ago, high street banks have been pushing their internet businesses, offering incentives to encourage online bill payment and enticing customers with attractive rates.

Crucially, it is the banks' core brands, rather than their internet-only spin-offs, that have been making all the progress.

At the height of the dotcom boom, Abbey launched Cahoot, Halifax brought out Intelligent Finance and the Co-op Bank launched Smile. Yet while these banks have had some success, none has threatened the market position of the sector's leaders.

Despite the cost advantages of running an internet-only operation, the likes of Cahoot and Intelligent Finance don't always top the best buy tables.

Cahoot's main savings account pays interest of 0.5 per cent per year, rising to 1 per cent per year for balances of £500,000 and 2.5 per cent for £750,000 or more.

Smile pays just 0.25 per cent across all balances in its savings account and ING Direct, one of the UK's best-known internet-only banks is offering just 0.5 per cent.

Even the 2.85 per cent offered on Intelligent Finance's iSaver falls short of the interest paid on online-only accounts offered by high street banks and building societies.

Kevin Mountford, head of banking at Moneysupermarket.com, says: "This is a crucial area to be in - consumers are getting much more comfortable with transacting online . . . so providers need to be active in this area of the market in order to attract new customers."

However, internet-savvy customers are more likely to switch accounts in search of better deals, so the key problem for the banks is how to retain these customers and cross-sell products to them.

American banks have been far more successful at persuading their customers to bank online. Just 30 per cent of British adults banked online in the past month while almost half of those in the US did, according to a survey this year by Gartner, the market research group.

But that gap is likely to shrink. About 87 per cent of UK residents with incomes of £15,000 use the internet for browsing, reading newspapers and other activities, Gartner's research indicates.

The move online is likely to be accompanied by a change in the role of the remaining bank branches.

Jason Butler, a planner with Bloomsbury Financial Planning, predicts that large regional centres where advisers offer financial planning and other services will replace the traditional branch networks.

"However, banks need to avoid past mistakes of selling poor value, financial 'rubbish' to their customers," he cautions.

Other parts of the financial services sector face more fundamental change. The growth of online fund supermarkets such as Cofunds, for example, threatens to take business away from independent financial advisers who earn commission from selling funds.

Yet some advisers say the arrival of fund supermarkets helps them more than it hinders them. "My feeling is that fund supermarkets are growing quickest through IFA firms and their customers rather than direct," Mr Butler says.

"The consolidation of an investor's funds on to a platform and investment of new funds via a platform appears to be cost-neutral compared with buying it direct from the fund manager."

Traditional stockbrokers have not been so fortunate. Execution-only services such as those offered by Self Trade, Hargreaves Lansdown and Alliance Trust Saving are grabbing market share by offering low prices for online dealing. In the first quarter of the year, 2.88m online trades were handled by execution-only brokers in the UK, up from just 1,079 in the second quarter of 1998, according to ComPeer, the market research group.

Such rapid growth is likely to spread to other parts of the financial services sector as broadband internet access becomes a "must-have" in almost every home. Little wonder that the big banks are doing their all to push their online presence.