writing » sympatico launches online bank
There's a new kid on the banking block. The CIBC has teamed up with Internet portal Sympatico/Lycos to offer Canadians a broad range of banking services centred around the World Wide Web. The new offering, operating under the banner Amicus, officially threw open its virtual doors today.
Amicus hopes to attract customers by offering a selection of products and services it feels are unique to consumers. The bundle includes no fee chequing and high interest savings accounts, access to CIBC's 4000 bank machines across Canada, and the ability to use the Interac debit system to make direct purchases at retailers.
Amicus will have no branches. Customer contact will be online and over the telephone.
Amicus' mandate, according to spokesperson Rod Cummings, is to be a profit centre for its partners. The venture is not seen as a new distribution network for CIBC products, but as a stand alone business.
“Customer acquisition and operating costs are cheaper online. We can also leverage existing things like our banking networks and technologies to keep costs down. Our main target is to put Amicus in front of Sympatico/Lycos' 4 million users and grab a market share there. Initially we will make our money in the traditional banking way - the spreads between deposit and loan interests”, said Cummings.
Online banking has had a tumultuous ride on the Internet. Only a couple of years ago industry analysts were predicting it would massively shake up the financial services industry. The reality has been somewhat less revolutionary. In the U.S. dozens of pure play Internet banks opened up, and the vast majority of them have scaled back, folded or re-aligned their business models in recent months.
In March of last year Royal Bank pulled back on its e-bank strategy in the U.S. Royal owned Security First National Bank (SFNB) was scaled down, as Royal bought Prism Financial Corp. (with its 150 branches), to complement the offering. The thinking was that for banking to succeed on the Internet, it needed a physical real world presence.
Beyond the early hype, the reality for e-banks has been uninspiring. U.S. companies EBank, Wingspan, and Netbank have all had a luke warm run at the business, both in the capital markets, and with customers. Canada has not seen a serious pure play online bank - Amicus will be our first consumer oriented e-bank.
Amicus' hope is that its bank machine network and point-of-sale debit system will provide it enough presence in the real world to attract a customer base - but a reality of banking is that these core services don't make banks money. Carol Kirk, Business Head for Amicus, says that they plan to roll out other products that have better margins such as credit cards and mortgages, and that Amicus has a mandate to examine their business carefully and listen to consumers.
“We're trying to explore this sensibly. We have some time to look at options, we want to get this in front of our customers, get their feedback, and fold that back into the offering. It's about testing new models - but we're able to be optimistic with the strength and commitment of our partners,” says Kirk.
Another challenge for online banking is customer retention. Many people sign up for these services, but practice has shown that many also never use them or abandon them - customer churn. According to a recent report by research firm eMarketer, about half of all customers who sign up for online banking cancel, or never use the service.
Discount brokerages, on the other hand, have had enormous success online. In the financial services sector the achievements of online trading ventures was often used as the bench mark for e-banking, but the businesses are very different. Current industry thinking has it that the value of online trading is obvious to consumers (lower and lower commission fees for trading), while e-banking is just another distribution channel for a banks products - not a stand alone business proposition.
On the other hand, Canadians are among the world's most enthusiastic online banking customers, according to a global survey about online banking from the Angus Reid. We certainly have taken very quickly to things like ATMs, debit cards and online bill paying. If Amicus can prove to have a suite of services and products that Canadians like, then they have a good chance to be successful. Time will tell if their mix makes sense to consumers.
