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The below companies launched in second-half 1999 or first half-2000 in alphabetic order.
1stWebBankDirect
1stwebbankdirect is soliciting affinity partners
directly from its Web site.
Type: Division of Sovereign Bank ($24.6 billion)
HQ: Wyomissing, PA
President: Cliff Lavin
Status: In formation; the most talked about unlaunched startup, garnering press attention since announcing Internet initiatives in March 1999; no announced launch date, parent may be occupied with acquisition of 268 branches and 532 ATMs from Fleet.
Strategy: To offer co-branded Net banking through affinity groups such as universities, community groups, employers, and retailers.
Service Providers/Software Platforms: Net banking platform from S1; bill payment from Checkfree; account approval algorithms from Equifax; core processing from Fiserv; call center and account servicing platforms from Unisys.
Mini-Analysis: We trust the bank has more up its sleeve than just affinity marketing, which has some serious weaknesses:
- most affinity groups already have credit card partners, one of the major retail banking profit drivers; for example, MBNA alone has more than 4,000 affinity partnerships
- for banking services, many affinity groups are well-served by credit unions delivering a compelling package of local convenience, personal service, low prices, and online banking
- major e-tailers will demand an equity kicker as part of any deal; for example, Amazon.com received warrants for 4.4 million NextCard shares as part of its co-branded credit card deal
A final observation: The name is too hard to remember and type. It strings together four generic concepts: 1st, Web, Bank, and Direct; that’s at least two too many.
Contact:
201 Penn Street
Reading, PA 19601-4038
(610) 520-7000
AccessNationalBank
AccessNational touts 24-hour commercial real estate loan approval on its home page.
Type: Start-up clicks and mortar
HQ: Vienna, VA
Founder: Michael Clarke, CEO, ex-Patriot Bank associate of Millennium Bank’s Carroll Markley.
Status: Application for a national bank charter filed with the OCC Feb. 16, 1999; preliminary approval received June 8, 1999; doors opened in early 2000.
Target Market: Small business with revenues of $15 million or less in the greater Washington Metropolitan market with a special emphasis on the high technology community of Northern Virginia.
Strategy: Blend of Internet delivery with a minimal brick-and-mortar presence; a single full-service branch will operate in Chantilly, VA. Access National will merge with residential lender Mortgage Investment Corporation, headquartered in Vienna, VA, concurrent with the opening.
Funding: An IPO is planned
Contact:
14006 Lee Jackson Memorial Hwy.
Chantilly, VA 20151
(703) 871-2100
AeroBank
Type: Division of non-bank financial services company, Aerofund Financial, a San Jose, CA factoring company
HQ: San Jose, CA
CEO: Scott Racusin, previously with Security Pacific Bank (13 years) and Union Bank (12 years)
Status: Launch planned for Q2 2000; AeroBank is just the fourth national bank to be approved by the OCC for national electronic delivery; the first was CompuBank in Oct. 98, the others are NextBank, a limited purpose bank accepting jumbo (<$100,000) deposits only, and CIBC National Bank of Maitland, FL, a division of CIBC (Toronto, Canada)
Target Market: Small business
Strategy: Integrating Net delivery with human loan officers
Funding: In the process of raising $18 million
Goals: 10,000 accounts by 12/31/2000; profitable within 3 years
Mini-Analysis: With the experience and client base of Aerofund Financial, this bank has a real chance to reach a critical mass of customers.
Contact:
2787 Moorpark Avenue
San Jose, California 95128
(408) 241-2462
BankDirect
BankDirect’s excellent home page includes links to both ABAecom and VeriSign’s site certification programs.
Type: Wholly owned subsidiary of Texas Capital Bank ($297 million) which launched its brick and mortar bank concurrently with BankDirect
HQ: Dallas, TX
Size: 7,000 total accounts 2/15/00, more than double the 3,000 accounts as of 10/27/99
Top Execs: Rose Hultgren is President,
Joseph Grant is CEO
Status: Launched in March, 1999, but have not committed major marketing dollars; planning an IPO spinoff in 2000.
Strategy: Affinity-based co-branded marketing programs such as the one with Excel Communications <excel.bankdirect.com>.
Mini-Analysis: First impressions are good: catchy name/logo; excellent graphical layout; good, concise copy; and so on. But they need to work on navigation. The biggest deficiencies: no links to the online demo except on the login page; Learn is a confusing name for company information; it’s unclear what the difference is between “manage” and “access,” which are both password protected but apparently not integrated.
The bank also needs to work on the loan side, currently delivered on a co-branded basis via Lending Tree. While that is a good approach for low-margin installment loans (mortgages, auto loans), the company needs revolving credit products, especially an overdraft line of credit. Overdraft credit lines are a must-have feature for serious transaction accounts and they can be big moneymakers for the bank.
Some other interesting features:
- rate comparisons
- email signup on home page
- customer service contact forms
- small animations on Apply and Login draw users attention to these important functions
- Coming Soon says they are working with PalmCentral.com to
develop Palm banking
and WarrantySuperstore.com - InsWeb for insurance
· pop-up customer service forms in five categories:
- Have a CSR call me
- Ask a question
- Make a comment
- Report a problem
- Refer a Friend
Contact:
4230 LBJ Freeway
Dallas , TX 75240
(214) 890-5835
BankZip
BankZip, “The World’s First Internet Banking Alliance” is worth a look.
Type: Spinoff from Patriot Bank ($1.1 billion); alliance of community banks; see funding right.
HQ: Pottstown, PA
Top Exec: Richard A. Elko, President
Status: In formation with early 2000 launch planned; beside founder Patriot, three other banks have signed on, Madison Bank (Blue Bell, PA; $158 million), First Penn Bank (Philadelphia, PA; $81 million), and IGA Federal Savings Bank Feasterville, PA; $190 million) all based in eastern Pennsylvania.
Target Market: Through community bank franchisees and equity owners, the banking consortium hopes to reach a nationwide audience.
How it Works: BankZip’s unique business calls for creating a co-branded “portal” licensed to community banks throughout the nation. Users attracted to BankZip.com through national advertising enter their zip code (hence the name) and are directed to the participating community bank licensing that zip code. If no bank has locked up a particular zip code, revenue from the user is shared by all affiliates.
One drawback: New users, even those coming into the system from a participating community bank, must transfer their accounts into the BankZip system. Affiliates handle customer service only.
Funding: BankZip was a wholly owned division of Patriot Bank, which invested $5 million in the venture. On Dec. 14, 1999, BankZip completed a private placement of $5.44 million of common stock and convertible debentures bringing total capitalization to $10.44 million. Through Dec. 14, BankZip has incurred $4.85 million in pre-tax cash and noncash charges that were expensed in Patriot’s fourth quarter results.
Patriot’s ongoing relationship with BankZip is limited to ownership of convertible debentures to acquire 5 million shares of BankZip.com at no further cost. An initial public offering is expected in the year 2000.
Marketing: Last fall, the company talked about raising enough capital in an IPO to fund a $70 million marketing campaign to build the brand and attract users. The strategy has been scaled back a bit, but the bank still plans an aggressive marketing campaign.
Other Domain Names Owned
insurezip.com investzip.com
zipthis.com loanzip.com
cashzip.com moneyzip.com
atmzip.com marketzip.com
americase-bank.com (America’s E-bank)
Source: Network Solutions, 11/99
Mini-Analysis: Talk about thinking outside the box —and with $5 million on the table! This concept is so unique and unprecedented, we don’t quite know how to react. It could be a huge winner. Or not. Originally, we were skeptical, but after a long discussion with Elko and Joe Major, CEO of Patriot, at BAI’s Retail Delivery we came away impressed with their knowledge, drive, and enthusiasm. They might just be able to pull it off. But they definitely need to spruce up the Web site, it’s outdated and doesn’t inspire confidence in the venture’s ability to create a compelling Web bank.
Contact:
High and Hanover Street
Pottstown, PA 19464
(610) 970-4650
Clarity Bank
Clarity’s Web site placeholder has a modern look.
Type: Start-up, acquiring existing bank
HQ: Purchase, NY (home of MasterCard)
CEO: David Arzi
Status: Formed in June 1999; launching in March 2000, following the completion of its acquisition of First National Bank (Uvalde, TX; $28 million).
Target Market: Small business initially, then consumer
Business Model: More focused on loans than transaction fees
Strategy: Will offer a full line-up of business and consumer services with bilingual (English and Spanish) delivery; an ecommerce mall will feature offerings from its small business clients and other Web sites that refer users to Clarity Bank; mall usage will be boosted with a cash-back credit card good at mall merchants.
Marketing Plan: A $1 million launch effort is planned, including a 750,000-piece direct mail, on- and off-line media; also soliciting associates who will earn $20 per customer sign-up.
Funding: $14 million in venture funding raised to date; planning an IPO this year.
Goals: 50,000 accounts “in the near future”
Mini-Analysis: Sounds great on paper; but will have to be careful not to overextend trying to be all things to all people all at once.
Contact:
2975 Westchester Avenue
Purchase, NY10577
(914) 701-2000
Clarity Bank Management Team
| Name | Position | |
| David Arzi | CEO | Darzi@claritybank.com |
| Michael Szwajkowski | President | Mcs@claritybank.com |
| Scott C. Schwartz | EVP | Sschwartz@claritybank.com |
| William F. Weaver* | EVP | Wweaver@claritybank.com |
| Dr. Aviv Orani | CIO | Aorani@claritybank.com |
| Jon Walker | Dir., Alliances | Jwalker@claritybank.com |
| Peter Quinlan | VP, Controller | Pquinlan@claritybank.com |
| Michael Watkins | VP, Technology | Mwatkins@claritybank.com |
Source: company, 12/99
*formerly President of Bank CEO of Hartford-based Advest Bank and Trust Co., a subsidiary of the Advest Group Inc. which in May 1999, sold its retail and commercial banking businesses
Direct Banking
Type: Wholly owned subsidiary of Salem Five Cent Savings ($1.1 billion), one of the first banks with a Web site in 1995
HQ: Salem, MA
Top Exec: William H. Mitchelson is CEO of Salem Five; former directbanking.com head Mike Fitzgerald was hired in January to be President of Net.B@nk
Status: Launched in Nov. 1999
Funding: Wholly-owned subsidiary of Salem Five
Mini-Analysis: Salem Five has been an innovative pioneer, winning our First Best of the Web in 1997; if they can harness this innovation in a Net-only subsidiary, it could be very successful; a wild card is the loss of its top exec to Net.B@nk
Contact:
210 Essex Street
Salem, Ma 01970
(978) 720-5325
eBank
Ebank has the best domain name in the business, now they need to build a company that can leverage it.
Type: Public (EBDC), clicks and mortar
HQ: Atlanta, GA
Size: $55 million in assets, $43 million in deposits, 1,078 deposit accounts (9/30/99)
CEO: Richard A. Parlontieri
Status: Southeast Commerce Holding Company was organized Aug. 1997 to serve a holding company for Commerce Bank; completed IPO July 1998; began operations Aug. 1998; in May 1999 acquired domain name ebank.com, changed its name to ebank.com, and announced Internet strategy; shortly thereafter the OTS found that the bank violated its charter by materially altering its business plan without prior approval of the OTS; the bank paid a $100,000 fine in Sept. 1999 and subsequently had its Internet business plan approved.
Target Market: Small business
Strategy: Originally the company planned to open a nationwide network of ebank.com centers in high-potential markets. Those plans have been scaled back to just three ebank centers in 2000, Atlanta, Charlotte and Tampa. To achieve the personal service the company believes is essential to successful commercial lending, the bank plans to partner with community banks around the country. The bank recently announced (1/31/00) an alliance with Talisman Technologies to deploy a network of Internet-enabled ATMs that would connect to the bank. Pending OTS approval, the network would be initially available in fourth quarter 2000.
Mini-Analysis: Now we understand why eBank execs kept avoiding our questions about last summer. They were in the midst of receiving a major slap on the wrist from the OTS, to the tune of $100,000, for announcing their Internet strategy prior to OTS approval. But that appears to be all behind them now, and the bank has reeled off an impressive list of strategic alliances.
They certainly have the right name, although investors have been skittish given the bank’s troubles with regulators. The stock trades about 15% under its $10 IPO price (7/98) and the company’s $12.5 million market cap (2/10/00) isn’t all that much higher than what the domain name alone might bring, based on Bank of America’s purchase of loans.com for $3 million in January.
Contact:
2410 Paces Ferry Road, Suite 190
Atlanta, GA 30339
(770) 801-0355
Millennium Bank
Millennium Bank offers a full range of services including a brokerage.
Type: Start-up, privately held
HQ: Reston, VA
CEO: Carroll Markley, previously with Patriot Bank, parent of BankZip.com
Status: Announced Dec. 1998, raised $8.3 million and opened April 1, 1999, under a national charter
Mini-Analysis: Millennium Bank www.thenetbanker.com put a “the” in front of the URL we’ve been using since Nov. 1995, www.netbanker.com In general, “the” domain names are second-tier, it kind of makes you wonder why they couldn’t afford a real domain name. It’s also confusing to customers and vendors who tend to forget “the” and type netbanker.com instead. We know, we get interesting email destined for “thenetbanker.com,” resumes, gossip, and so on.
Also, we question how Web-savvy the company is. They have never approached us about forwarding misdirected email. We weren’t even aware there was a “thenetbanker.com” until researching this report.
Contact:
1601 Washington Plaza
Reston, VA 20190
(703) 464-0100
National Interbank
National Interbank, a division of First National Bank of Mitchell, Indiana, launched at year-end.
Type: wholly-owned subsidiary of First National Bank of Mitchell (IN), a $48 million bank owned by Waterfield Bank Corp.
HQ: Mitchell, IN
CEO: Randy Waterfield
Status: Launched Dec. 1999; the bank was founded by the Waterfield brothers, Randy and Richard, formerly of Goldman, Sachs. Banking has been in the family since their grandfather founded Waterfield Mortgage Company in 1928. Later their father ran the mortgage company and acquired Union Federal Savings Bank of Indianapolis.
Target Market: Consumers
Strategy: Use best-of-class technology to provide superior services; E-Loan provides mortgage and home equity lending services
Mini-Analysis: The bank has done a good job of getting their name around the Web and on various rate comparison sites. But so far, its service offering is sparse and undifferentiated. They have their work cut out for them, as do all new Net-only banks.
Contact:
P. O. Box 1245
Indianapolis, IN 46206-1245
(877) 468-7265
j_randall_waterfield@nationalinterbank.com
NextBank
Type: Affiliate of NextCard, the first Net-only credit card company launched in Dec. 1997; parent is public (NXCD) with market cap = $1.1 billion (2/29/00); IPO May 1999; Amazon holds a warrant to purchase 4.4 million shares for $39
HQ: San Francisco, CA
CEO: Jeremy Lent
Size: NextCard has more than $500 million in assets from 275,000 credit card accounts (2/28/00); NextBank has $314 million in deposits (9/30/99).
Target Market: Consumers using credit cards and the Internet.
Status: NextCard purchased Textron National Bank in 1999; it is expected to eventually provide the base for a full line of retail banking products; but currently NextBank’s Web offering is limited to jumbo CDs (<$100,000) and a link to NextCard credit cards.
Strategy: Credit card product and infrastructure optimized for the Internet; consistently one of ten largest Net advertisers; adding value around Internet transactions which is expected to lead them into debit transactions/checking; statement aggregation and so on; co-branding with Amazon.com and others
Mini-Analysis: We have been impressed with NextCard ever since we first talked to them in early 1996; lately, they have been downplaying their interest in “traditional” Net banking, claiming to be more interested in Internet transactions than retail deposits; time will tell if that’s merely a head-fake. The relationship with Amazon.com could be used to develop interesting statement aggregation and person-to-person payment schemes leveraging Amazon.com’s 16 million customers and patented one-click payment mechanism.
Contact:
595 Market St, Suite 950
San Francisco, CA, 94105
(415) 284-9217
Pennsylvania Business Bank
The three circular graphics on the home page reveal product menus when a mouse travels over them.
Type: Start-up, private
HQ: Philadelphia, PA
Top Exec: Alan Fellheimer
Status: Bank founded, Mar. 1999; Net banking launched Oct. 1999; commercial loans added, Dec. 1999; operates under Pennsylvania Bank Charter with FDIC insurance
Target Market: Business
Strategy: Offers a full line of commercial, small business, and personal products, but clearly is targeting the business customer; Web site from Digital Insight; also uses www.bizbank.org
Contact:
7 Penn Center, 1635 Market Street
Philadelphia, PA 19103-2217
(215) 587-2200
TB.com Bank
domain name not registered
Type: Start-up, private
HQ: Wilmington, DE
Top Exec: Frank Mastrangelo, President/COO, formerly Jefferson Bank CTO
Status: In formation
Strategy: TB.com Bank is expected to be an all-Internet operation with a private-label banking relationship targeted to affinity groups such as universities and trade associations.
Funding: The Cohen family is creating a new Internet bank to add to its financial dynasty which included JeffBanks Inc., sold Dec. 1, 1999 to Hudson United, and Resource America. Bancorp.com is the holding company for TB.com Bank, which is being organized in Delaware, with Edward E. Cohen as Chairman and his son, Daniel G. Cohen as CEO; applied for a state charter Sept. 13. Edward Cohen is CEO and Daniel Cohen is COO of Resource America, a Philadelphia-based specialty finance company.
TheBizBank
Type: Wholly-owned subsidiary of Cole Taylor Bank ($2.0 billion)
HQ: Chicago, IL
Top Execs: Craig S. Dean, CEO; Dan Bleil, EVP, Relationship Management
Target Market: Small business
Status: Building a state-of-the-art product line
Contact:
1333 Butterfield Rd., Suite 555
Downers Grove, IL 60515
(630) 493-1531
Ubiquity Financial
Type: Division of Fraser Valley Credit Union ($500 million; 47,000 members)
HQ: Abbotsford, British Columbia, Canada
Top Management: Larry Davey, President
Status: Launched in Jan. 4, 2000; has attracted 400 accounts in its first month; uses Prologic platform
Target Market: The CU expects 10 to 15% of the parent’s members to join, representing 5,000 to 7,000 members; also eyeing the 150,000 Canadian customers of ING Direct.
Strategy: Paying higher rates than its brick-and-mortar parent; plans to advertise on iMoney.com, a Canadian financial portal.
Comments: The name is a bit cumbersome.
Contact:
32071 South Fraser Way
Abbotsford, B.C., V2T 1W3
(604) 850-0999
Virtual Bank
Virtual Bank is adding statement aggregation
from VerticalOne.
Type: Click-and-mortar start-up, VC funded
HQ: Palm Beach Gardens, FL
Founders: Rory Brown, CEO; Bill Decker, President
Status: Launching April 3, 2000; looks to be a major player after landing a first round investment in Feb. of $37.5 million from venture capital firms J.H. Whitney, Palisade Capital Management, and Wyndcrest Partners; General Electric, DaimlerChrysler, DLJ, MCI Worldcom CEO Bernie Ebbers, Starwood Hotels CEO Barry Sternlicht, and Miami Dolphins quarterback Dan Marino; uses Prologic platform.
Strategy: Targeting employees in the high-tech industry; plans to open offices in 12 high-tech areas in the next 18 months, including Silicon Valley, Austin, New York, and Boston; could very well be the first retail bank with statement aggregation (VerticalOne).
Contact:
2000 PGA Blvd., Suite 3110
Palm Beach Gardens, FL 33408
Virtual Bank Domain Name Holdings
virtualbank.com myvirtualbank.com
1vcharge.com 1vauto.com
1vmortgage.com 1vloan.com
Source: Network Solutions, 11/99
X.com
X.com’s Web site is typical Silicon Valley, full of selling messages and devoid of pictures.
Type: Start-up; VC funded; banking services provided through partnership with First Western National Bank (La Jara, CO, $48 million), a subsidiary of Community Bankshares, Inc. (Colorado)
HQ: Palo Alto, CA
Top Execs: Bill Harris, CEO (formerly Intuit CEO); Elon Musk, Founder
Status: Soft-launch Nov. 30, 1999; P2P payments launched Dec. 15; during Feb. became largest Net-only bank as measured by number of accounts, 50,000+ on Mar. 1; announced merger with PayPal on Mar. 2; became most-visited bank in the USA in Feb. with 1.8 million unique visitors; first public bank victim of cyberthieves
Target market: Consumers
Goal: 500,000 accounts by mid-year
Strategy: viral marketing with $20 sign-up bonus (promotion ended Feb. 18); Internet person-to-person payments including co-branded auction payment product with AuctionWatch.com no minimum S&P index fund with no management fees and a 1 basis point contribution by the company
Funding: Sequoia Capital led the first round of
$25 million; a second round is expected in March; followed by an IPO in
2000, which Elon Musk said will be the biggest Internet IPO this year (see
The Industry Standard, March 6, 2000, 86-87,
www.thestandard.com/article/display/0,1151,12192,00.html
Mini-Analysis : Although, it’s very early in the game, X.com appears to be the first company, other than Palo Alto neighbor and merger partner PayPal, following the strategy we’ve been expecting for some time, that of a truly virtual bank working in tandem with the customer’s local bank and checking account (for more on this strategy, see Building the Amazon.com of Financial Services, and Virtual Checking.
They are also the first retail banking entrant to go after eyeballs rather than selling single products such as high-rate deposit accounts (Net.B@nk, Telebank); credit cards (NextCard, Wingspan, Providian); or mortgage loans (E-Loan, Mortgage.com). Cranking up the registered user base and Web traffic has been the formula for dot com success on Wall Street, so it will be interesting to see how it plays out in the banking sector.
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