During second quarter, many of the developments have been negative. No surprise there. Several of the more well-funded entrants bailed out including: CompuBank sold its accounts to NetBank; BankZip folded leaving its four community bank founders with millions in losses; Sovereign ended its foray into Net-only banking folding its 1stDirectBank effort back into the parent Web site; and Brookline Bancorp announced that it was throwing in the towel after spending $25 to $30 million on its Net-only brand Lighthouse Bank. The brand will be sold or incorporated back into the parent site.

On a more positive note, there was one new launch in June, New Jersey-based interStateNetbank. And a number of companies turned in positive numbers including NextCard, which increased its account total to 881,000 accounts as of Mar. 31, Juniper Bank with 140,000 accounts in its first 6 months, and LendingTree, which transmitted 350,000 good applications to its lender network in first quarter.

For the past year, we’ve been reporting Web traffic at online financial institutions under a license agreement with PC Data Online. In April, PC Data Online went out of business, with some of the company’s assets, including our account, being transferred to the newest player in the Net traffic game, NetScore  www.netscoreonline.com  a joint venture of ComScore Networks, and Diameter, a DoubleClick-owned company.

Consequently, March was the last month of traffic reports using PC Data’s online panel and methodology. This month we begin reporting traffic through the NetScore methodology, which is very different than that of PC Data. The primary difference is that NetScore counts Web access on the machine level, whereas PC Data counted at the individual user level. While individual usage is the better gauge as far as online banks are concerned, NetScore’s machine counts do have some distinct advantages compared with PC Data:

• Includes at-work and at-school access, whereas PC Data was primarily a home-based panel.
• Includes Worldwide traffic, whereas PC Data only tracked U.S., Canadian, and Italian usage.
• Includes a much larger sample size, tracking 1.5 million machines, compared to 110,000 individuals at PC Data.

For more detailed information on NetScore’s methodology, go to www.netscoreonline.com/public/methodology.htm .

Regardless of which methodology is better, much of the value comes from the trend lines. For now, there are only three months of NetScore data available, Feb., March and April, so we’ve also shown PC Data historical data even though it is not directly comparable (see Table 1).

In April, only seven Net-only banks made NetScore’s top-10,000 list, compared to 13 Net-only banks in PC Data’s March top-13,000 list. Minimum traffic level to make Netscore’s list was 54,000 unique U.S. users in April. By comparison, it took at least 91,000 unique U.S. visitors to be included in PC Data’s March top-13,000 traffic report.¹

According to NetScore figures, NextCard is by far the busiest financial site. This is hardly surprising given the ubiquity of its banner advertising. PayPal held down the number-two spot, while Juniper Bank remained at number three.

The fourth busiest net-only bank is newcomer, Virtual Bank, which had 425,000 unique machines access its Web site in April. The average U.S. visitor appeared somewhat interested in what Virtual Bank had to offer, visiting 4.1 pages during the month and spending slightly more than 4 minutes at the site. Non-U.S. visitors bailed after 1.6 pages on average and about 2 minutes. In comparison, NetBank had far more involved users, each spending more than twenty minutes on the site during the month (see Table 1).                                                     

¹In March, NetScore reported only 10,000 sites with at least 60,000 unique U.S. users.

Table 1

North American Web Traffic at the Busiest Net-Only Banks

thousands of unique users by month

Source: NetScore, 5/01  www.netscoreonline.com    PC Data Online, 4/01     n.m. = not measured     ina = info not available    
international = users accessing from outside of the U.S

*min:sec; average time spent at the site by each unique user in April

1.)    Includes duplicate (non-unique) users across different companies

2.)    By our definition, myciti.com is not a Net-only bank, because it is clearly being marketed as a Citibank service.

3.)    By our definition, OnMoney and PayTrust are not Net-only banks because they don’t hold customer deposits, either directly or indirectly; PayTrust’s PayMyBills.com also received 179,000 worldwide unique visitors in April.

Table 2

Status Reports on Publicly Launched Net-only Banks (alphabetical order)

Source:  Online Banking Report from published reports and interviews, 5/01

¹ Since PayPal is paying interest on balances held in PayPal accounts, it will continue to be classified as a Net-only bank.

Table 3

Status Reports on Truly Virtual Banks¹ (aka “Transactional Portals)

Source: Online Banking Report, 5/01

1.)      To make our list, a truly virtual bank must not have a bank charter; must not call themselves a bank; must not hold customer deposits or assets; must market directly to end users; and offer at least 2 of these 3 banking services: account aggregation, payment services (bill pay, bill presentment or email payments), interbank electronic funds transfers

2.)      Date when a specialized personal finance informational area was launched

3.)      Date the specialized financial area first qualified as a virtual bank under the definition in footnote 1

Table 4

Status Reports on Net-only Banks in Formation (alphabetical order)

Source: Online Banking Report from published reports and interviews, 5/01

DeepGreen Bank’s banner ad campaign on Yahoo’s Loan Center.