The Internet may be global, but that does not mean expanding abroad is easy for financial services companies.

Executives from US brokerage firms - the industry group pursuing international markets most aggressively - lament their travails with differences in language, regulation and product mix in foreign lands.

Mr Frank Petrilli, president and chief operating officer of TD Waterhouse Group, which has operations in Canada, Australia, Hong Kong, India, Japan and the United Kingdom, said it was a misconception that the US model for offering financial services was exportable.

"You have to pick markets where you can scale by buying, building, or forming partnerships," he said. "It's about thinking global but acting local."

To attack continental Europe, where, Mr Petrilli says, "you definitely have to be", TD Waterhouse announced in July that it would set up a pan-European joint venture with Banque Generale du Luxembourg that will target high net-worth individuals seeking to invest internationally.

Mr Albert Bashawaty, managing director of JP Morgan, says his company is "starting to run into issues as we develop our prototypes", as the Morgan Online service is launched in Japan and five European countries.

Rather than viewing the world as a "giant land rush, we're rounding up lots of partners with local behaviour and knowledge", he said.

Continental Europe is a tough market, with more than 120 brokers vying for market share, according to JP Morgan. The UK accounts for one-third of all European stockholders, but only 7 per cent of European online brokerage customers, the company estimates. Germany has 54 per cent of the online brokerage market, and France and Sweden about 11 per cent each. Italy is experiencing the most rapid growth; it now represents 5 per cent of the market, and the number of customers in Italy grew 275 per cent in the first half of the year.

JP Morgan estimates there will be about 17 million online brokerage customers in Europe within three years, mostly in Germany, the UK, France, Spain, and Italy.

The path taken by E-Trade Group, which started expanding into international markets four years ago, may map the way for other firms.

E-Trade initially took what Judy Balint, its chief international officer, describes as a "low-risk approach" by forming joint ventures and local licensing agreements.

Now that E-Trade's overseas operation has grown, it is seeking majority ownership of its international ventures "so we can control the development of our network and consolidate our revenues", Ms Balint said.

The firm now has a presence in 13 countries, and by the middle of next year it hopes to add Israel, Germany, and Hong Kong to its portfolio. It also has plans to re-enter France, where its previous relationship broke down when another institution acquired its partner.

E-Trade currently allows domestic trading in all of its countries, except Sweden and Norway, where it allows retail investors to buy and sell equities in US-traded companies. Next year it plans to offer access to multi-currency trading, following its acquisition in July 1999 of TIR Holdings Limited, headquartered in Dublin's IFSC, which offers global multi-currency securities execution and settlement.

"We will be the Coca-Cola of the online financial services industry," Ms Balint said. Education and indigenous competition present barriers to expansion, she said. Though the United Kingdom is one of the largest potential markets for E-Trade, online investing has not taken off there to the same extent as in the US. "There is still a lot of education needed in the UK," Ms Balint said.

In Europe, E-Trade is going up against some formidable local players, especially in Germany, Ms Balint said, where companies like Consors Discount Broker, Comdirect, Direkt Anlage Bank and Brokerage24 have all consolidated their positions and each has expanded into at least three countries.

"Five or six years ago, no one would have said Germany would be the centre of Europe's discount brokerage industry," said Roland Folz, joint chief executive officer of Direkt Anlage Bank in an interview in New York two weeks ago.

"Now, out of the seven largest in Europe, five are German."

Explaining why most of these companies' accounts have doubled in the last six months, Mr Folz said: "There has been a shift in the population away from savings. . . and toward mutual funds."

The huge opportunity that has opened up in Europe has not been lost on American companies seeking a piece of the action, but the Europeans are running away with the game, even if some are modelling their businesses on Charles Schwab & Co.

Now that the continental European market has taken off, US brokers are seen as "late entrants," Mr Folz said. "They need deep pockets to succeed."

Domestic companies are doing so well, he maintained, because banks and insurance companies lead the market, not independent brokers along the lines of Schwab, E-Trade, and Fidelity Investments. "This is something that is strange for Americans," Mr Folz said. "Companies don't need to be a bank; they just need to have a banking status. Banks are weak in securities distribution in the United States and the United Kingdom compared with continental Europe."

Until recently US banks were prevented from getting heavily involved in brokerage by the Depression-era Glass-Steagall Act, which was repealed by the Gramm-Leach-Bliley Act of 1999. For many years in Germany, banks have dominated the brokerage market, and six years ago many of them set up standalone firms.

"But they don't have a global vision," Ms Balint said, "which will limit their long-term growth opportunities. We are still the only true global online player."

Still, Octavio Marenzi, managing director of the research firm Celent Communications in Cambridge, Massachusetts, said US brokers had been caught off guard by the way online investing had swept Europe.

In addition to having local licences and capital investments, US firms seeking to expand in a foreign country must set up actual offices there, said Mr Kamal Mustafa, chairman of Trade.com, which has sold trading platforms to 50 banks in 50 countries.

"Global finance sounds great, but global transactions require a physical presence," he said.

Kay Dapper, managing director of Consors, Europe's number two-ranked discount brokerage by number of accounts, said in New York recently, "local management is needed to treat your customers the right way."