First Chicago is the first U.S. bank to offer Web-based trading.

First Chicago NBD (Chicago, IL; $109 billion; 2.5 million ATM cards) became the first bank in the United States to offer Web-based trading and investment services. The service is run by its brokerage subsidiary, First Chicago NBD Investment Services (FCNIS) www.fcnis.com, but is well integrated into the bank’s retail offering including a front-page link on the bank’s retail Web www.fnbc.com (screenshot opposite). FCNIS has 200,000 brokerage clients.

A number of banks have announced plans to launch Web-based brokerage services this year including Wachovia (July launch), First Bank System (Sept. launch), Security First Network Bank (Dec. launch), and Comerica (summer launch). Mellon is reported to be looking to acquire an existing online brokerage. Further north, where banks control the lion’s share of the discount brokerage market, market-leader Toronto-Dominion Bank introduced Web Broker earlier this year and recently lowered prices to a flat CDN$29 per trade. TD now boasts 100,000 electronic trading accounts (this includes touch-tone and dial-up users). Bank of Montreal joined the Internet brokerage fray in May.

Anyone visiting First Chicago’s Web can access delayed stock quotes, and First Chicago brokerage customers can get real-time quotes after logging in. Online traders get a 25% discount from the bank’s standard commission schedule (see table), and through Nov. 30, up to $50 off their first online trade (although this offer is not mentioned on the Web site).

First Chicago’s twin, PCFN, offers $20 flat-rate trades vs. the bank’s $50-$150+ range.

Not coincidentally, First Chicago’s Web is quite similar to that of PCFN www.pcfn.com, the second largest U.S. online brokerage with more than 300,000 users. On June 26, PCFN implemented an across-the-board price cut reducing its standard commission from $39.95 to $20 (for the first 1,000 shares, then $0.02 each). The bank’s Web site was built, and is operated with the help of PCFN’s parent, The Pershing division of Donaldson, Lufkin & Jenrette Securities.

Bank and credit union sponsored brokerages will provide a handy way for the casual trader to make a couple trades each year. The convenience of trading from the bank’s Web, and more importantly, being able to transfer funds to and from their bank account, will offset a few extra dollars in commissions.

But if you’re not a HUGE bank you may want to drop brokerage services to the bottom of your wish list. Two reasons:

1. Service quality: Both Schwab and E*Trade made front-page business news with online trading outages in June. Not only is this bad PR, but customers tend to sue their broker when trade executions are delayed.

2. Questionable volume potential: American Express reportably signed up only 10,000 customers after a $30 million marketing blitz. This month there are reports that Tradewell has bagged only 1,000 accounts after spending $2 million.

Bankers have to ask themselves whether online discount brokerage is really a business that deserves management attention and investment. Perhaps it will become a competitive necessity, but we think this is one area of online financial services that can safely be put on the back burner for now.

Here’s a novel product that financial institutions of virtually any size (regulations permitting) could mimic: a prepaid calling card with integrated call center access. The On Call card, from Premiere Worldlink, features all the latest telecom gimmicks: fax retrieval, free voice message box, conference calling, audible e-mail retrieval, speed dialing, news, weather, sports, and lest we forget, long distance.

The new On Call card is featured prominently in First Chicago’s online “store,” www.fnbc.com/store/ .

But the card is positioned not as a long-distance product but as an access device to the bank’s call centers. Here’s how it works: User’s dial the 800 number listed on the card. Then they select from a menu that includes the bank’s call center (# 4), the First Card credit card center (# 5), or the brokerage division (# 6) along with the telecom services. Accessing First Chicago services are free, everything else, including long-distance, is $0.25/minute. On Call doesn’t currently sport debit card functions, but it could. Last fall, U.S. Bank launched an integrated debit card/calling card, but the long-distance service is rather difficult to use.

First Chicago’s revamped Web is chock full of info.

In other news, First Chicago revised its once lackluster Web and now has one of the best opening pages of any large bank. We especially like the series of three drop-down menus (screenshot above), one for each major user category: consumer, business, and corporate/institutional. Each drop-down box contains a menu of key services that Web users can quickly jump to. Any financial institution using a single Web to serve disparate customer bases would be wise to adopt this approach.

Now that First Chicago has fixed its home page, it needs to do something about the Web address. Who can remember www.fnbc.com? It sounds like a new joint venture from Microsoft. Make a typo with www.fcnb.com and you end up at First Consumers National Bank. Why not www.firstchicago.com?
Even if that domain’s being hoarded, we are surprised that none of the logical phonetic variations: firstchicagobank, firstchicagonbd, firstchicagonbdbank, firstchicago nationalbank , www.chicagobank.com, or even nbd or nbdbank, point to the bank’s Web. Certainly FNBC (or is that FCNB?) can afford the extra domain names.

Contacts: Richard Hawes is Pres. First Chicago NBD Investment Services; James Grant heads the remote banking unit; Tim Kemp is Product Mgr, 312.732.4000