Intelligent Finance: An intelligent idea that ran out of steam and faces uncertain future

The future of internet bank Intelligent Finance (IF) has again been placed in doubt after the brand was dropped from a deal with the Co-operative.

It is understood Lloyds may be forced to run the IF business down to appease European Union rules on state aid in a move that would mark the end of the 12-year-old brand.

IF was due to be offloaded alongside the 632 branches as part of the divestment requirements by the EU, but was not included in the final Co-op deal.

In a statement to IF customers, Lloyds said: “Following detailed discussions with The Co-operative Group, our Intelligent Finance business will no longer be included in the transfer of part of our business. This is because it did not fit with the Co-operative’s strategic requirements.”

It is understood a key issue in the decision was the additional funding requirements needed by the Co-operative to take on IF.

Customers and staff are being told it is business as usual for IF until further notice. But the news leaves a question mark over the future of what was once hailed as the pioneer of online banking. IF hoped to change the world of banking when it launched in the autumn of 2000, as an early enthusiast of offset mortgages.

It has since been somewhat sidelined after first pulling out of selling direct mortgages in 2007 and then exiting mortgages altogether two years later, under a Lloyds restructure.

The group has since offered savings products only, but rarely appears in the best-buy tables as it has been pushed out by building societies keen to attract savers with attractive rates.

Price comparison firm Moneyfacts said while it did not always have the top introductory rates, IF still had some good deals.

“IF may not have a market-leading account, however they do offer a relatively decent rate on their ISA of 2.5 per cent that is just shy of the top paying cash ISAs and it doesn’t include an introductory bonus to keep track of, unlike many of the best buy ISAs,” said the publication.

IF was founded by Jim Spowart who previously helped launch Direct Line and Standard Life Bank.

It was one of the original pioneers of online financial products and, in its first year, 250,000 accounts were opened helping it become the first ever bank to break even in the first three years of trading.

One year after launch some analysts valued IF at £700 million and it was seen by then HBOS chief executive James Crosby as a key part of the group.

Lloyds has not disclosed IF’s staff or customer numbers although in 2009 Livingston MSP Angela Constance raised concern over job losses at the bank’s site in the constituency and at the time she said there were some 1,000 people employed within the business in the town.