Fresh face in cyberspace raises the rates

The world of banking is set for a shake-up when an internet-only bank opens for business with the promise of best buy savings rates on balances of £1-plus.

first-e, set up by a Dublin-based company called enba in co-operation with the French bank Banque d'Escompte, will be launched on Tuesday. Its website is already up and running - www.first-e.com

The new bank's initial product is an online savings account paying 5.75% gross. This is identical to the rate first offered by Egg's recently-launched internet-only savings account. But Egg has now upped the ante by this week lifting its rate to 6%.

Because it is not a household name and is not even based in this country, first-e's biggest challenge will be persuading the UK public to trust it with their savings.

For those confident about using the net, the deal it is offering is certainly tempting. Opening an account is said to be simple: anyone is eligible as long as they are aged 18 or over. There is no minimum deposit - the rate of 5.75% is available on balances of £1 upwards. Interest is calculated daily and paid gross (without deduction of tax).

UK taxpayers will be liable for tax on this, and it will be up to individuals to declare this to the taxman.

first-e says: "Your money is safe with us". It has invested in state-of-the-art encryption technology to ensure complete security for people's transactions, and everyone will be issued with pass codes that only they will know, says the website.

Customers will be able to transfer money into their first-e account.

When they want to get cash, they can make an online transfer to any other bank account in the UK, although this will take three days. Transfers of money between first-e accounts will be same day.

first-e's gestation was somewhat complex. It is owned by enba, a holding company whose backers include insurance giant CGU and computer chip company Intel, but it is operating under the banking licence of Banque d'Escompte and is regulated by Banque de France.