Poor returns from today’s walled-garden iDTV have disappointed UK finance firms, but instead of abandoning the channel, firms should use interactive advertising to generate leads in a multi-channel environment, according to a new report by Forrester Research (Nasdaq: FORR). But Forrester warns that only the UK’s biggest banks have the reach to make TV transactions and customer service pay.

“Use of iDTV will gradually grow from today’s 11 million users to more than 21 million UK adults by 2004, but TV banking will only reach 2.2 million users by 2004,” said Forrrester Senior Analyst Benjamin Ensor. “Britain’s consumers need several more years of watching enhanced TV programmes, playing TV games and responding to broadcast ads before they get used to banking or applying for financial products through the TV.”

Instead of trying to create Web offerings for consumers without PCs, Forrester advises finance firms to focus on what iDTV can do. Because iDTV has many limitations — it is not a good way to convey complex information, such as the details of a mortgage or a life-assurance policy, for example — financial firms must use it to complement other channels like the post or branches. But to generate returns from interactive TV, financial firms must use the TV for what it is best at: creating awareness. However, iDTV will only favour the UK’s largest banks because only they can absorb TV costs across big customer bases, make existing TV campaigns interactive, and use TV banking to pull customers to their walled-garden sites. Forrester estimates that the six banks that have set up TV banking spent an average of £1.4 million each building their services, before payments to operators. Few other firms should follow them.

“While adding interactivity to a TV ad is relatively cheap — about £25,000 per campaign — TV advertising itself is not cheap,” Ensor added. “This gives banks like Abbey National and Lloyds TSB that already use TV advertising extensively a big advantage over smaller firms that would have to fund big increases in their marketing budgets. Large banks can offer interactive-TV customers the content that they want to see often, such as their bank balances. Big banks will then exploit this traffic by offering further products and services to their existing customers inside their walled-garden sites. Other firms, such as insurance companies and building societies, don’t have similar compelling content to drive traffic to their iDTV sites.”

For the report “Big Banks Dominate iDTV,” Forrester spoke with 23 of the 33 firms active on interactive TV during November 2001 about their experiences.