www.onecore.com

The OneCore.com home page complete with credibility-building quote and picture of founder, prominent link to a demo/tour, and a ho-hum fictional testimonial.

The graphics are excellent, the site is fast, and it does a good explaining features and benefits.

We knew it would happen (see OBR 6/98, “Creating the Amazon.com of Financial Services”) and frankly we’re a bit surprised it took this long, but the first truly virtual bank has opened. It’s not really a bank by the traditional definition, but the services offered, right down to the night depository, are exactly what a traditional bank would offer, and then some.

The Companyy:

Barry Star, Founder

OneCore Financial Network, Inc.

800 West Cummings Park, Suite 2800

Woburn, MA 01801

Phone: (781) 938-1001

Fax: (781) 938-0205

Email: info@onecore.com

Description: OneCore.com is a small business bank that’s not bogged down by a bank charter, bank capital requirements, bank CRA requirements, bank overhead, or bank compliance issues; it simply ports the best bank products to the while offering 250 times more deposit insurance protection than the FDIC $100,000 limit.

History: OneCore Financial Network, formerly known as the Boston Financial Network, was formed in August and launched in December 1998. Founder Barry Star was the developer of Fidelity’s pioneering online brokerage service, Fidelity Online Express from 1989 to 1994. Other key execs include: Jack Littman-Quinn, founder of PCs Compleat which hit $255 million in sales before its sale to CompUSA in 1996; Larry Armstrong, formerly COO of Fidelity Brokerage Services; and Christopher Hill, formerly Marketing Director at Farsight Financial Services, an online brokerage owned by D.E. Shaw. First-round investors, Holden Capital and Crown Venture, both in Chicago, kicked in $3 million in 1998. A $7.5 million second round was completed in February with an investment from CMGI, an early backer of Lycos and GeoCities.

The Products

The virtual financial services company is currently offering banking, cash management, lending, investment, 401(k), credit card, and payroll services. They are the first company to deploy Checkfree’s commercial bill payment service (see OBR 9/98, for more ideas on small business services).

Current Products & Service Providers

Source: New York Times, 2/4/99

Announced Future Products

Source: company, 4/2/99

Service Attributes: Email 7 x 24; phone: 8am to 6pm EST Monday through Friday.

Security Attributes: $25 million in insurance per account; $500,000 from Securities Investor Protection Corporation (SIPC) plus $24.5 million from Travelers Insurance.

Account Pricing: The company has established a base “membership fee” of $25 per month per company which includes a money-market account paying market rates, along with unlimited paper check and debit transactions, reports, access controls and downloading. Prices for individual services are summarized in the following table (upper right):

OneCore Ala Carte Services¹

¹On top of $25/mo base fee

Business owners can set up various levels of
access and transaction abilities for employees.

Analysis

We don’t see the bank charter as so all-important when dealing with a segment such as small businesses that could care less if you have FDIC insurance. The key is credibility, a real weakness at OneCore.com or any other unknown financial institution. While $25 million in account protection is a good start, we need to know when we get reimbursed. If someone breaks in and wipes out a $300,000 balance needed to make payroll, how long will it take to get it back? Hours? Days? Weeks? Months? The answer to that question could mean life or death to a small business.

We also wouldn’t buy until overdraft protection was available from a line of credit. And even then, the $25/mo plus $0.90 per bill paid doesn’t particularly motivate us to change banks. We think a stronger value proposition is needed to get small business owners to move to a new bank.

But the OneCore product combined with the credibility of an existing financial institution could be a hit. If you are looking to make inroads into the small business market in 1999, you would be advised to talk to Star now. Negotiate an exclusive deal to market a co-branded OneCore service in your market.