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Banking In a Box Gets Real

By Adam R. Dell

My checking account number at California Federal Bank is 737 406 7797. Send me your address and I'll mail you my ATM card. The PIN is 5643. You can have all the money in the account-all $0.00 of it.

There was a time when more of my dollars resided with that institution. No longer. I wanted to benefit from the efficiencies of online banking; however, in order to register for Cal Fed's online banking service, customers must sign a physical form, wait to become registered, and download client software. The Internet is better than that. Online banking should mean online registration and instant account creation. The client should be the browser and the data should reside on the network, updated in real-time and accessible anywhere.

True Internet banks have emerged that fulfill my wish list, such as CompuBank and Netb@nk. The process of switching banks got me thinking about what other financial services could be offered online, and what these new services may mean for banks, other service providers, billers, and consumers. It's amazing how much the market will likely change.

Building a financial dashboard
Over time, online financial service providers will deliver Webpages that serve as personalized "financial dashboards." Numbers will flicker in real-time, relaying account data for everything from your checking account balance to your credit limit, from your bill payment status to relevant news and stock information. Instead of "You've got mail," you will see "You have a lease payment. Click here to pay." In the mortgage section of the dashboard, below the equity-to-interest quotient and payment schedule, a Re-Finance button will flash if your mortgage can be underwritten on better terms. Your bank may also select a mortgage product for which you are pre-approved and you can merely "Click Here" to initiate execution.

Sound far-fetched? It isn't. Online analytical processing tools like those developed by HNC Software provide this back-office technology today. And Bank of America offers a Build Your Own Bank (BYOB) site, where customers get personalized news and product information. It will eventually provide financial products with real-time client data that determine eligibility for things like an increased credit line (see "Debate: Charles Sanford," Oct. '98, p124).

Priceline.com enables individuals to post rates they are willing to pay not only for travel and hotel arrangements but for mortgages. GetSmart.com and BanxQuote use the flip side of this model, offering rate quotes from multiple institutions for everything from home equity loans to life insurance. Over time, these service models are likely to merge on your financial dashboard. Smart agents like those developed by Amazon.com acquisition Junglee will likely scour the Web for the products best suited to your financial needs.

Financial service providers will pick market segments they wish to target, though some will encompass risk profiles beyond a particular bank's appetite. As companies such as Priceline.com shift consumers' leverage, banks that seek to own this dashboard will offer products from multiple vendors. This will shrink the gap between the rates you pay for a second mortgage from your bank and for a home equity loan from The Money Store. Although your bank may not underwrite the loan, if it owns the dashboard, it may very well take a piece of the origination fee. And that is very much what the online financial services game will be all about.

Meet your new analyst
Whoever owns the financial dashboard owns some precious real estate. Just as Yahoo! commands millions of advertising dollars for the billions of page impressions it generates, financial dashboards will capitalize on the marketing and transaction revenue generated by financially focused eyeballs.

Companies such as Intuit and Microsoft, which offer online financial accounting, planning, and bill payment, and NextCard, which offers a low-rate credit card online, are making a play to own the dashboard. Partnering with companies such as CheckFree and TransPoint (a Microsoft, First Data Direct Banking, and Citibank effort) that provide bill presentment and payment back-ends to billers, will be key to grabbing this real estate.

From a consumer's perspective, it's all good. Interest-free checking, no-fee ATMs, and low-rate credit cards are just the beginning. Imagine a day when no-fee banking and bill payment will be exchanged for just eyeballs. Buy.com already takes this approach with consumer goods-it engages in a zero- or less-than-zero-margin business in exchange for the aggregate traffic it yields (see "Zero Hero," p56). When things really get rolling, these dashboards will have enough of our financial data to be able to analyze spending habits, prepare taxes, and serve as financial advisers.

Regulatory hurdles facing this land grab are falling fast. The Office of the Comptroller of the Currency has granted online banks de novo banking status, allowing them to satisfy capital requirements without a relationship to a physical bank. As with most forms of regulation, rules heed the economy.

Companies willing to abandon antiquated service models will win ownership of the personal financial dashboard. Those requiring a physical registration form will not. Fast and furious Web-centric companies will serve as bank, financial adviser, and advocate all in one. It will be amazing to watch and, as a consumer, excellent to experience.

Adam R. Dell (adell@crosspointvc.com) is an associate partner with Crosspoint Venture Partners, which has no stake in any of the companies mentioned.

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