(REUTERS) Size, household name boost Bank of America's Web clout
By Mary Kelleher
NEW YORK, March 8 (Reuters) - When ABR Services Inc's
landlord phoned to complain about a late rent payment, the head
of the direct mail firm soon found the check in his online
account at Bank of America<BAC.N> and set the landlord straight.
"We have it hooked up to ring in all of our bank
transactions," said ABR President Mark Thompson, whose company
has about $10 million in annual revenues. "We can look up any
check and see when it cleared. It probably saves us money and it
definitely saves us time."
Charlotte, N.C.-based Bank of America, one of the largest
U.S. banks and also one of the biggest online banks has been
ahead of the curve in turning millions of people into Internet
clients, helped by its vast base of 27 million customers, its
familiar name and tailored offerings, analysts say.
"They're big, and that always works in your favor," said Rob
Sterling, a senior analyst at research firm Jupiter
Communications. "In terms of online offerings, Bank of America
is always in the top couple of banks. They have been aggressive,
and smart."
FIRST MOVER ADVANTAGE
Bank of America, which has about $642 billion in assets and
3.1 million online customers, says it ventured online in the
early 1990s, giving it an edge over competitors. It also worked
to form alliances rather than develop all the technology itself.
"We started early on, and we started rather narrowly with
online banking, which included bill payment," James Dixon, who
runs Bank of America's online operations, told Reuters.
The bank's Web focus started in the early 1990s, he said.
"On a continuous basis, we've added more to the offering. And
each time, we've extended the offering without making it more
complex."
Today, the bank is adding more than 130,000 online consumer
banking customers a month, Dixon said. Customers can log on to
open checking and savings accounts, check account balances, buy
stocks and mutual funds, transfer funds between accounts, and
pay and receive bills.
THE BRAND MATTERS
Its household name, along with its reach on both U.S.
coasts, has played a key part in the bank's success, enabling it
to snare customers where smaller banks have failed.
"One of the tricks in Internet banking is branding," Thomas
Theurkauf Jr., an analyst at Keefe, Bruyette & Woods, said.
"Clearly, Bank of America has a brand identity. If you look at
brand awareness as a measure of clout, Bank of America is
distinctly advantaged versus some of the smaller competitors."
But others say Bank of America is no different than other
big banks with Internet units, except that it is larger, and it
might lag behind rivals like Citigroup Inc. <C.N>, the world's
biggest financial services company, and San Francisco-based
Wells Fargo and Co. <WFC.N>.
"Bank of America has been a little more sluggish," Avivah
Litan, vice president of financial services at research firm
Gartner Group, said of the online arm.
"It doesn't have the senior management attention Citigroup
has...The bank was pretty slow in integrating the NationsBank
and BankAmerica platforms though the online bank."
Formed in 1998 from the merger of BankAmerica in San
Francisco and NationsBank in Charlotte, there was a power
struggle between management on the East and West U.S. coasts
over how to run the online business, Litan said.
Dixon, from the NationsBank side, eventually prevailed, but
the turf war delayed some Web efforts, Litan said.
"Bank of America has been a little slower than Citigroup and
Wells Fargo," Litan said. "Citigroup was faster in online credit
cards, and very aggressive in aggregation services."
Citigroup's Internet venture, e-Citi, had faced criticism on
Wall Street for spending hundreds of millions of dollars without
producing results. But Citigroup's chairman, Sanford "Sandy"
Weill, fired the unit's top management, and folded the online
operations into the company's various divisions.
Citigroup's Internet advances came at a price. Its e-Citi
unit spent $527 million in 1999 and $378 million in 1998. Bank
of America, for its part, declined to comment on how much it has
shelled out on Web efforts.
ALLIANCES IN TECHNOLOGY
The Bank of America's strategy has been to focus on
alliances rather than invent costly technology from scratch.
"We decided early on last year that there were a lot of
wonderful applications that had been built," Dixon said. "As
opposed to trying to build out all these competencies ourselves
... we created some 30 alliances with a number of product or
service products where we will use their technology or
offerings."
Among its key alliances, Bank of America last year teamed up
with billing services provider CheckFree Corp. <CKFR.O> to
enable customers to pay and receive bills online -- seen as a
crucial application in the online banking world.
"At first the bank made a misstep when it tried to do its
own bill presentment solution, but then it made a smart move by
joining up with CheckFree," Jupiter's Sterling said.
While there is no data to show how much money Bank of
America has made or lost from Web banking, analysts say all
banks need online offerings to keep customers.
"Very few banks will admit they make any money on Internet
banking -- I doubt that any do, or at least any of the full
service providers," Theurkauf said. "But the adjoining issue is
defense. Were you not to offer an attractive online experience,
do you risk customer attrition and migration out of the bank. I
think the answer is 'Yes.'"
((New York Financial services desk +1 212-859-1644))
REUTERS
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