everbank.com

The start-up bank asks,
“Is this the single best Web banking account in the nation?” We say, “It depends.”

It depends on:

(a) Whether you keep at least $1,500 on deposit to earn the 6%.

(b) What the rate resets to after the first 6 months.

(c) How the customer is served.

The Company: The St. Louis, MO-based bank officially launched on Jan. 11, 2000, after a two-month soft-launch period that brought in $8 million in deposits
. The bank was developed by start-up Customer One Financial Network www.c1fn.com Wilmington Savings Fund Society (WSFS) (Wilmington, DE; $1.7 billion) became a minority investor in Aug. 1999 with a $5.5 million investment for a 25% stake. WSFS
is scheduled to invest another $5.5 million in a
few months. The arrangement is referred to as “joint initiative” on the company’s Web site. Everbank also received $7 million in funding from private investors.

The idea for the bank began about four years ago, but actual development commenced in early 1998. EVP Marketing David Galland has experience in direct marketing of investments and expects to see the bulk of everbank’s customer base driven in through conventional direct mail techniques. Currently, a 6.01% promotional deposit rate features prominently in the bank’s sales pitch.

The bank employs 25 (mid-Jan), with eight in customer service. Initial marketing commences in mid-Feb.

The Management Team:

Three of five founding execs came from Signet Bank, an online banking pioneer prior to being purchased by First Union.

The Product: Banking products run on S1’s Internet banking platform which supports categorizing expenses online and downloading into Quicken or Money. The company has also added the following features:

•  100% Web Safe Guarantee - similar to NextCard, guaranteeing account against fraud
•  100% satisfaction guarantee
•  7 x 24 customer care center
•  free/no-fee services: unlimited bill pay, nationwide ATMs, check writing, Visa Check Card, inbound wire transfers, overdraft protection advances
•  ATM surcharge rebates, up to $4 per month
•  airline miles credit card with a low, prime +1.9% “go to” rate (not a teaser)
•  yield pledge - top 5% of all interest checking accounts and money market accounts as listed in Bank Rate Monitor
•  financial organization reports created from categorized transactions
•  investment center (in house) with $19.95 trades and access to 2,000 mutual funds
•  opening promo: 6.01% checking (no maximum balance) for first 10,000 accounts opened before Mar 31, 2000 (1% higher than “normal” APY of 5.01%); minimum average balance of $1,500 required to earn interest and avoid the $4.95/mo maintenance fee (min. opening deposit = $100)
•  15-minute mortgage application with 10-second approval and low-rate guarantee
•  insurance center co-branded with InsWeb
•  home buying research area with Realtor referrals, home listings, calculators, change-of-address service, and so on

Coming Soon

•  Web site for real estate agents to initiate mortgage applications; have signed up 500 (see screenshot upper-right)
•  home equity lending in Q2
•  Evertrade advisors in Q1; expected to be the first Net bank offering investment advice for the typical infrequent trader
•  full-service investment center with private-branded index funds

Source: interview with company execs, 1/15/00

NewMLS.com was designed by everbank.com parent, CustomerOne Financial, as a Web-based center for real estate agents. It features financing through everbank.

Marketing Strategy: The bank’s marketing messages in its initial press releases and direct mail piece include:

everbank.com Marketing Messages

Source: company press kit, 1/00

*quoted verbatim from company material

During testing in late 1999, the company conducted a 100,000-piece direct-mail drop. The test results yielded a mix of 80% of new accounts generated from marketing and 20% from referrals. Thirty percent of customers bought its credit card.

Business Model: The company expects to turn a profit in much the same way as a traditional bank, with a small interest margin on deposits, more on loans, and fees along the way. Everbank.com is counting on a cost structure lower than brick-and-mortar banks that can be reflected in lower prices without sacrificing profits.

This meter runs across the application,
growing as the application is completed.

Application Process: The application was straightforward enough, taking 7.5 minutes to complete, including downloading and printing the 33-page disclosure. It worked without a hitch and included a clever application status meter (see above) running across the top of each page.

The bank did a good job cross selling overdraft protection and a Visa Rewards card during the application. Our only complaint concerned the disclosure statement. The bank used the kitchen sink approach, throwing everything into one long document that was 155k in size and 33 printed pages. That would have been OK if it was downloaded just once. But we ended up downloading the same monster file four times, because it wasn’t clear that the single disclosure covered all products.

The account funding process was strictly paper based. You had to print and mail the application along with a check for the opening deposit, $100 minimum, $1,500 to avoid the $4.95/mo fee. The bank should come up with an ACH and/or credit card option for initial account funding.

Another serious flaw is the welcome process. After spending nearly 10 minutes filling out the application, we did receive a nice thank-you screen message. But, when we tried to log in to our just-created account to see if everything was OK, we got an error message. We can understand why the bank doesn’t give us full access to all banking functions prior to receiving the paperwork, but why not give us something to do? At DLJdirect you can make a $5,000 stock purchase immediately after completing the application. At PayPal, you can send someone up to $200 right away.

At least let us log into our account and verify application status and user profile. Even better, provide something interactive such as stock prices, weather forecasts, and so on. Don’t leave us hanging.

After Hitting Submit: Finally, our usual rant on post-application customer support. Everbank did better than Wingspan Bank, it at least confirmed out application with an immediate autoresponse email (see right). The email included an excellent benefit for returning the application in a timely fashion. If it was returned by Mar. 31, 2000 (eight weeks after we applied) we would lock in the 6.01% teaser rate for at least six months.

But then we heard nothing from the company for ten days when a snail-mail package arrived with our account information. Then a few days later we received a letter with our initial password and a concise (8-panel, 2-color), well-done brochure describing how to use online banking and bill pay.

Here’s the deal. We spend a half-hour checking the bank out, putting our privacy at risk by handing over all our personal information, printing out a 33-page disclosure, finding our checkbook, an envelope and a stamp; then sending a couple grand in the mail. We expect more feedback, for example:

1. Within minutes of receiving a deposit, send a confirmation thank-you by email.

2. Within 48 hours, send new account information via snail mail with an email telling us to be on the lookout for the package.

3. A few days later, send an email asking whether the package was received and offering to answer questions.

4. Repeat #3 periodically until we log in.

Contact:

Robert Foregger is SVP Product Development

(802) 253-4681, ext. 12 rob.foregger@everbank.com

everbank Application Autoresponse

Subject: Thank you for applying at everbank.com!

Date: Tue, 1 Feb 2000 20:20:51 -0500

From: everbank everbank@EVERBANK.com

To: jim@onlinebankingreport.com

Dear Future everbanker,

Thank you for completing the online application for the EverMoney e/Checking Account. Simply sign and return it along with your opening deposit and you are on your way to better banking... everbanking that is!

Be sure to open your account prior to March 31, 2000 because that way you’ll qualify for the special 6.01% APY (annual percentage yield) for a minimum of 6 months following your account opening!

After the initial 6 month period, your APY will vary, but you have everbank’s “best rates guaranteed” yield pledge that your EverMoney e/Checking Account yield will always remain in the top 5% of bank money market accounts in the nation.* That way you never have to wonder if you are earning one of the nation’s best risk-free yields.

So, please, to be sure of making the March 31, 2000 date, send your application and opening deposit today. You are going to love everbank.com!

It’s guaranteed!

++++++++++++++++++++++++++++++++

Vincent F. Amato

EVP, Director of Operations

everbank.com

11 Oval Drive, Suite 107

Islandia, NY 11722-1479

Tel: 1-888-882-3837

Fax: 1-888-882-6977

vincent.amato@everbank.com

All Contents Herein Are Privileged & Confidential

Visit the future of banking at http://www.everbank.com

++++++++++++++++++++++++++++++++

P.S. If you have ANY questions, or need ANY help, please don’t hesitate to give us a call at 1-888-882-EVER (3837), then press “4” at the prompt to speak to a live Customer Care Specialist. Or, e-mail us at service@everbank.com . We look forward to being of help!

* Based on the Bank Rate Monitor Index of America’s 100 Leading Banks. Fees may reduce earnings. To earn interest and avoid a $4.95 monthly fee simply maintain an average daily balance of $1,500 in your EverMoney e/Checking Account. If you do, then full interest is paid and there are absolutely no monthly maintenance fees!

everbank.com is a division of Wilmington Savings Fund Society, FSB. Member FDIC, Equal Housing Lender 141A

Source: company, 2/1/00

We’re not the only one who likes everbank.com. The bank debuted at number 10 on Gomez’s bank scorecard based on a very strong showing in the Overall Cost and Relationship Services categories (refer to Gomez.com for category definitions). It leverages this endorsement with a $50 bonus offer for new customers signing up through the Gomez site.

everbank.com’s Gomez Scores

Source: Gomez.com, 2/00

The new bank is one of the new breed of Net-based startups: part bank, part broker, part investment advisor, part lender, part mortgage broker, and part credit card issuer. From a product standpoint, it’s much like WingspanBank. But even Wingspan, with its very deep Bank One pockets, offers fewer products than what everbank is launching with.

The danger for the bank is overextending itself. With only 25 employees, running an in-house bank, brokerage, and mortgage lender will require a balancing act like no other Net-bank startup has attempted to date. We question the merits of bringing the brokerage operation in-house. We think the bank would have been better off out-sourcing that function and reassigning resources to core banking functions. But, if the bank can pull it off, it could be a key to building franchise value.

Although we like the overall look and feel of everbank, we think they could tone done the hyperbole a notch. For example:

(1) Direct mail: The DM piece looks like one of the many investment come-ons that arrive in the mail almost daily. They must work, or companies wouldn’t send them. But we think the bank would be better off with a more upscale look-and-feel to its marketing.

(2) Press releases: We like the overall positioning, separating themselves from traditional banks. But some of the material sounds silly at best, or even mean-spirited. For instance in the glossary they define pin-stripers as “AKA ‘fat cat bankers’ or ‘men with soulless eyes.’ They can usually be found in marble palaces. Asleep. Or calculating new fees to separate you from your money.”

Rate comparison, screen 1: Shows annual
return of an everbank CD compared to selected competitors and to the overall national average.
In this case, a $20,000 5-year CD.

Rate comparison, screen 2: Shows the increased return over time.

One of the best features of everbank’s sales presentation is its rate comparisons which allow users to compare rates and see how much more they earn with everbank over time (see screenshots above). But, they could be even better by allowing users to compare actual up-to-the-minute rates around the Net. There is risk to this strategy, but Net users know that this kind of hyperlinking is relatively easy to install. It raises the question, “If everbank’s rates are so hot, why don’t they make it easy for me to confirm that myself.”

Summary: Aside from a few minor flaws in the application process, we find little to fault. The product line is superb, prices are rational, the marketing strategy is solid, the Web site is excellent, and the bank has assembled a seasoned and enthusiastic management team. So we’re giving everbank.com our first “OBR Best of the Web 2000” designation for the year. It’s not perfect, but considering they’ve only been open a couple months, it’s an impressive start.

everbank’s mortgage capabilities, using M&I’s MortgageBot, set it apart from most online banks.

everbank has put extra care into its graphical elements. For example, these eye-catching and concise virtual sticky notes are an effective way to “post” the bank’s important guarantees.