First Union and Bank One seem to have come to essentially the same conclusion about the internet vs. bricks and mortar. The big banks may all start waking up at an increasing rate. This could be the Checkmonkey's rocket ship.
CHICAGO, May 7 (Reuters) - The Internet may become such a pervasive way for financial service firms to attract customers that Bank One Corp. <ONE.N>, the nation's fifth largest bank, may not make another major bank acquisition.
"There's a good chance that we will never acquire another bank," John McCoy, chief executive officer of $252.92 billion Bank One, said in remarks at a Federal Reserve Bank conference in Chicago. He later clarified his statement by saying Bank One could buy a smaller community bank to give it a physical presence to support Internet banking in market's where it does not have branches.
While McCoy has long been a proponent of technology in banking, he has also had a track record of growing Bank One through acquisitions, culminating last year in the merger of Bank One and First Chicago NBD Corp.
He still sees the eventuality of a $1 trillion bank in the world, but said Bank One could be able to use the Internet to continue to grow large enough to survive independently in an industry that is increasingly concerned with economies of scale.
"If I'm right about the Internet, that we can acquire customers that way, that's how we'll get our size," McCoy said.
Bank One already has experience opening accounts on the Internet. Its First USA credit card unit expects to open one million new accounts via the Internet this year.
Bank One customers can already access accounts pay bills and buy securities through the corporation's web site.
But later this year, the bank also plans to offer some products with better prices and interest rates for customers who bank over the Internet, McCoy said.
Internet banking, like other businesses on the Internet, are likely to become "commoditized," with customers looking for the best price, rather than service or a relationship with a specific bank, McCoy said.
While some Internet-only banks offer better-than-market rates as a way of attracting customers, Bank One would be among the first traditional banks to do the same.
"I don't know of a traditional bank that has taken this position within its Internet bank," Paul McAdam, manager of retail financial services for the Bank Administration Institute, an organization that provides research, seminars and other services to the banking industry.
That aggressiveness on the Internet has caught the attention of some in the analyst community.
"We believe that Bank One is the most aggressive and innovative major bank in exploiting the Internet," Morgan Stanley Dean Witter said in a research report. The firm has a strong buy rating on Bank One.
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