If the statute of limitations on "I told you so" is seven years, then word that ING Direct is contemplating a "checkless" checking account called e-Orange comes in just under the wire. Our Virtual Checking Accounts report, which outlined just such an account, was published six years and eight months ago (OBR 50/51) (see note 1).

We've always enjoyed the ING Direct story because it defies conventional wisdom in so many ways. Here are the "rules" that the Dutch banking giant, thirteenth largest in the world, has broken:

1. Branchless, Internet-only banks can't build a large deposit base
2. Large entrenched financial institutions can't create a hip online brand
3. Mass-market banks must offer checking accounts

Worldwide, the ING Direct unit serves 15.7 million customers, and in 2005 it earned a profit of 617 million euros, about 9% of the parent's earnings. The U.S. version accounts for about 20% of the customer total, approximately three million accounts, and has been portrayed as profitable by company execs.

Why "checkless" checking?
No details are available on what an e-Orange checking account might look like. The company will only say that it's in "testing" in the United States. We've held an account at ING Direct since it opened (Q3 2000), and we haven't been approached. But it's pretty easy to guess what it would include:

1. Simple account-to-account transfers (already part of its savings product)
2. Online bill payment
3. Debit/credit cards
4. A high rate of interest, although checking is a point or so less than savings accounts

The lack of paper checks may be more a publicity stunt than a true cost savings, although if they succeed in keeping the paper out of customers' hands, it might help keep funds on deposit. Consumers facing a fat tuition bill may be more likely to pull out the checkbook connected to their Citibank account rather than arranging an electronic deduction from e-Orange.

The company, which portrays its savings account as a "companion" to the customer's existing branch-based checking account, is likely not looking to displace the typical 30-transactions-per-month checking account. More likely, they are positioning it more as a money market account with a competitive interest rate along with the convenience of paying a few major bills from it on an infrequent basis.

With ING Direct's core savings product under attack from all sides (see previous NB articles), it has to look to other avenues of growth. A unique checking account, one that bags free press and a few billion in deposits, makes a lot of sense for a company with a keen grasp of how to make bold, attention-grabbing launches (see note 2).

--JB

For more info:

• AP story on ING Direct: http://sg.biz.yahoo.com/060322/15/3zjzp.html
• Online Banking Report: Building the Amazon.com of Financial Services (#38/39, July 1998)
• Online Banking Report: Virtual Checking Accounts (#50/51, July 1999)

End Notes:
(1) The seeds of that report were published a year earlier in Creating the Amazon.com of Financial Services (OBR#38/39)
(2) The company has entered new markets with clever stunts, such as giving all transit riders a free ride (Washington DC, SF-Bay area); a free tank of gas (LA); coffee bars in prime locations (NYC, Philly); and so on.