Despite the growth in internet banking, the death of the high street bank branch remains a far-off prospect, a market analyst said today.

Datamonitor said that, despite the expansion of online banking, the internet is still only the third most commonly used means of buying a financial product.

The group, which interviewed people in six European countries, found that while 26% of people with internet access said they banked online, only 4% said this was their preferred method of handling their finances, compared to 79% who favoured visiting a branch in person.

Britons were most likely to chose to bank online with 7.52m carrying out some transactions over the internet, though only 5% named this medium as their favourite way of banking.

Alex Boorman, Datamonitor e-financial services analyst, said: "The strategies of many an internet bank were based on the idea that the death of the branch was imminent.

"However, Datamonitor's research confirms a growing realisation within the e-banking sector that this is not the case.

"Although branch numbers are still falling, it is now recognised that the branch assumes an important role as part of a bank's multi-channel distribution strategy."

He added that the group predicted standalone internet banks would soon have to establish a branch presence, although this was likely to take the form of tie-ups with retailers rather than traditional branches.

Despite the uncertainty surrounding internet banking, just under 30% of all banks thought they would handle at least 60% of current account and credit card applications online by 2002.

The telephone was the second most popular way to buy products, with 37% of UK consumers using it to buy or arrange banking services.

Datamonitor said that, despite a slow start, it also expects mobile phone banking to take off, with the number of people using mobile phones to bank to soar from 1.1m now to 27.1m by 2005.