Don`t Sweat the Web Stuff (Even If It Seems It`s All Web Stuff)

A year ago small banks were scrambling to sign on with newly minted Internet banking companiesu00e2u20ac”companies awash in VC and IPO money. Large banks were hell-bent to get their own products out the door. Some, like Bank One, were spending millions a month promoting an entire new bank name, in their case, Wingspan Bank. It was frankly hard to make a call on where all this was going. Was a bank that failed to grab a seat on the train quickly destined to miss out on the greatest transformation of the banking industry in history? Was it such a unique time in banking that the smart move was actually to bet the bank on a whole new way of doing business? Things are a lot clearer now, and if you didn`t panicu00e2u20ac”in fact, if you didn`t do much of anything related to your Internet banking productu00e2u20ac”you`re not looking all that dumb. Not to diminish, let us hasten to point out, the effect of the Internet. It`s not going to go away. The Web, and specifically banking on the Web, will be part of our lives, and all banks will need to contend with its impact. But what looked like a horrifying cyclone is in fact a powerful but slow-moving hurricaneu00e2u20ac”the kind that has winds of 150 miles an hour, but moves at 10, and hovers off the coast for longer than anyone expects. Then, when it finally hits the coast, it`s not much more than a strong rainstorm for which the locals have, when all`s said and done, prepared for pretty well. Here`s what didn`t happen as the hurricane of Internet banking crossed land last year:

• Wingspan Bank, Bank One`s standalone Internet bank, hasn`t exactly blown away the competition. Once touted to have a $150 million advertising war chest, ads for the bank have become hard to find, and the bank has had to scurry to make alliances so customers could also use branch systems and ATMs. A recently announced mandatory fee structure seems certain to cut its already unimpressive account numbers dramatically.
• Not one of the companies that sell Internet banking software and services to community banks has made a dent in the market. Transactions to date are paltry, and virtually all of the vendor companies find their stock in single digits and facing Nasdaq delisting or find themselves unlikely to pull off the IPO that could be critical to their survival. Meanwhile, core processors like Fiserv and Jack Henry have made steady inroads with products for their own client bases.
• No bank we`re aware of has gained meaningful market share by aggressively offering an Internet banking product. A typical bank is arguably better off building a new branch to gain customers than in launching a Web banking product.

All of this isn`t to say that Bank Director urges anyone to be complacent. It does seem, though, that what we are seeing in banking mirrors exactly what we saw last year in business-to-consumer retailing on the Web: The fast-moving, marketshare-grabbing darlings like eToys.com and Amazon.com find themselves without a sustainable business model, while their brick-and-mortar competitors like Toys “R” Us and Barnes and Noble have managed to establish Internet strategies that view the Web as just another distribution channelu00e2u20ac”one that must be reckoned with, but one that fits neatly into their companies` overall marketing and growth strategies.We think the lesson of 2000 in e-tailing will be repeated in 2001 for Internet banking. You need a productu00e2u20ac”your customers expect it and demand itu00e2u20ac”but you`ve got more time than any of us thought a year ago to build this high-tech brand with the same care you`ve built, tested, and marketed much less-sexy products in the past