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Is ING Direct to Capital One what PayPal was to eBay?

By Jim Bruene on June 16, 2011 6:55 PM | Comments (1)

image Given that ING Direct had to be divested (by agreement with the Dutch government), it couldn't have gone to a more interesting buyer. Capital One was my favorite banking company in the pre-Internet days as it was an absolute direct marketing machine (and still is).

But Capital One has not leveraged the Internet to the extent I'd expected and as recently as last November, didn't even have a mobile app for the iPhone.  

ING Direct is the opposite. Much of its 7.6  million customer base and $82 billion in deposits can be attributed to an innovative brand optimized for remote delivery.

Will ING Direct's online chops boost growth at Capital One like PayPal did for eBay when it introduced epayments into the online marketplace? Wall Street gave it a modest thumbs up, sending Capital One shares up more than 2% on a day when financials were flat. That's a $0.5 billion positive swing in market cap. Not a bad start to the relationship.

The combined entity will be the fifth largest U.S. bank by deposits (at more than $200 billion) trailing only BofA, Chase, Wells and Citi (table here). However, Capital One would need to acquire six more ING Directs to catch Chase, another one to reach the Wells level, and two more after that to best BofA. 

My take: I'm not going to pretend to be able to predict the future performance of a $22 billion company paying $9 billion for another. There are so many variables, it makes my head spin.

But from a remote delivery perspective, they look very complementary. ING offers primarily savings and mortgages acquired online. Capital One is huge in credit cards, auto loans and traditional branch-based banking services.

So there is one prediction I'll make: The combined entity will be an online marketing powerhouse, and I look forward to seeing how that unfolds.

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Don't forget to calculate in customer outrage and a mass exodus of people from ING Direct as more and more learn that they are owned by Capitol One.

-Disgruntled ING Customer who was previously very happy...

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