The bank branch is dead. Or so we are led to believe by an increasing number of peculiarly named new entrants in the financial service arena, such as Egg.co.uk, First-e.co.uk, Smile.co.uk, IF.com, Moneygator.co.uk and Cahoot.co.uk.

They bombard us with the message that we should put our old bank into the dustbin and come online instead. As a result of increasing use of the telephone and internet, "big" high street banks, such as Barclays, say they are being forced to close hundreds of branches and become somewhat less " big". But do most consumers really want a totally remote relationship?

Experience from North America and Scandinavia suggests not.

Take for example Charles Schwab, one of the most successful online stockbrokers in the US. It has 7 million customers and conducts an impressive 80% of its trans actions online. But despite massive advertising and a strong web presence, 70% of its new customers still sign up by walking into a branch. Seeing that its wolf in sheep's clothing strategy was so successful, Schwab built 49 new branches in 1999, bringing its total to 356.

On the other hand, take the fate of the online-only mbanx, set up by the Bank of Montreal in October 1996. It was similar in intention to Halifax's IF or Abbey National's Cahoot. Management expected it to attract a million customers. Three-and-a-half years later, it had only 170,000 accounts, while more than a million of the Bank of Montreal's customers had opted for lower rates to retain the flexibility of banking by telephone and branch as well as online.

In August 1999, Bank of Montreal folded the internet subsidiary back into the bank. As the bank's Denny Allen said: "Customers were falling back on branches more than we have thought and wanted to retain their branch privileges while capturing attractive online rates."

What can we learn from these experiences?

First, most of us want the convenience of "Martini banking" - access any time, any place, anywhere - via any access device. While the telephone and internet may make up a larger share of our inter-actions with our financial institution, we also want the option to bank face to face, especially if there are banks prepared to continue to offer it.

Second, lists of FAQs [Frequently Asked Questions] cannot answer non-standard questions or reassure us that the product is appropriate for our needs. Humans are still better, particularly for advice on complex or infrequently purchased products.

Third, and most importantly, in an increasingly cluttered and volatile market place, how can we decide which institution is reliable? A physical location is a marvellous way to reinforce the impression of permanence and reduce marketing costs.

Following in Schwab's footsteps, most of the born-on-the-web online stockbrokers, like the nouveau riche buying a country estate, are planting roots in the real world to broaden their appeal.

The only trouble is that the internet community is afflicted bv Orwellian doublespeak and will not call a branch a branch. E*Trade calls branches 'investment centres', DAB refers to 'permanent trade fairs', and First-e has 'entertainment zones'. But the implication is clear. Many of the leading American and European players are seeing value in the physical.

However, this is far from good news for the high street banks. The invasion of the customer snatchers is putting tremendous pressure on banks' profit margins, especially for simple products that can be sold directly, such as savings, credit cards and motor insurance. Banks will have to re-invent themselves and reduce costs aggressively.

One way to do this is to significantly scale back branch networks. Banks will also have to offer more choice and sell other people's products alongside their own to compete with the range the new businesses offer. The successful financial institution of the future will be like a mythical supermarket that devises a unique menu matched to your nutritional needs.

As for the new internet banks, I expect that if they want to grow beyond offering simple products on a large scale, many will require substantial call centres and a number of investment centres. As with many internet businesses, over time the real beneficiary will not be the internet bank manager but us, the consumers.

• Huw van Steenis, e-Finance Strategist at JP Morgan, has recently published Invasion Of The Customer Snatchers: Online Finance In Europe'.