Ameritrade's OnMoney Appears to Be on Track
By Caroline Humer
Staff Reporter(street.com)
6/21/99 7:00 AM ET
For two years, and through numerous postponements, Ameritrade (AMTD:Nasdaq)
has been planning a new project that would allow investors to use the Internet for
more than just trading stocks.
Now, facing new competitors from every corner of the financial world, the No. 6 online
brokerage may have a new sense of urgency in developing the unit it calls OnMoney
Financial Services, a project it holds close to its vest.
Ameritrade executives have said only that OnMoney will consolidate into one
package multiple firms' banking, trading and bill payment offerings as well as news
and other services like mortgages, insurance and mutual funds. Thus far, though,
there has been little evidence that it's much more than an idea. And Omaha,
Neb.-based Ameritrade faces plenty of hurdles in making OnMoney into a full-fledged
operating company.
"I think in theory that OnMoney is potentially a very powerful tool. I think the
challenge is truly aggregating all of these offerings," says Scott Appleby, a financial
services analyst at BancBoston Robertson Stephens, which hasn't performed
underwriting for Ameritrade.
OnMoney may be launched as early as this fall, at least according to a sideline chat
with Ameritrade Chairman and Co-Chief Executive Joe Ricketts earlier this month at
Putnam Lovell de Guardiola & Thornton's online brokerage conference. But first it
will have to find providers willing to team up with another financial services company,
not to mention find a CEO to replace Joe Konen, who's leaving at the end of the year.
Ameritrade wants to overcome concerns other financial services companies may have
about working with a competitor by spinning off OnMoney into a separate entity either
late this year or early next year. It also has set up the unit's offices in White Plains,
N.Y., far away from Ameritrade's Nebraska headquarters. Thus, Ameritrade would
stick with its core business. But it also would lose the chance to diversify through
OnMoney, though that seems fine with Ricketts. "We want to be known as a
discount online brokerage," he said.
Still, OnMoney's launch may be just in time. The rush to the Net has turned the
online financial services field into a scrum of brokers, bankers and a variety of other
providers trying to stake out positions, and online brokers are right in the middle.
Competitor E*Trade (EGRP:Nasdaq), for instance, recently reached an agreement to
acquire online banking firm Telebanc (TBFC:Nasdaq), opting for the "buy" over the
"build" strategy.
Ricketts, however, has been building. He said separately last month that about 200
customers were beta testing OnMoney.com but didn't name any participating banks
or brokerages. Ameritrade declined to comment for this article.
And if the vicious competition among online brokers isn't enough, there's no shortage
of OnMoney rivals.
Microsoft's (MSFT:Nasdaq) MoneyCentral.com and Intuit's (INTU:Nasdaq)
Quicken.com are two. Both offer mortgage, banking, tax, investment and retirement
centers that direct users to different providers. The two sites say they have seen
strong growth, with Quicken saying it had 181 million page views in April, up 546%
since its October 1997 launch.
Then, there's the hot province of online bill payment and presentment that's
dominated by CheckFree Holdings (CKFR:Nasdaq). Both it and competitor,
Transpoint -- owned by Microsoft, First Data (FDC:NYSE) and Citigroup (C:NYSE)
-- say they're not working with OnMoney.
Most small and regional banks also already have an online strategy of some sort,
says Nancy Bush, an analyst at Ryan Beck. And the cost of setting up online
banking through a third-party provider can be as little as $40,000, she says. After
that, it's a question of how much the company wants to spend developing the Web
site and branding it.
Banks also may have another problem working with Ameritrade. "It's tough for a bank
to turn its customer list over to a competing provider of financial services," Bush says.
E*Trade's pending acquisition of Telebanc came after it tried for three years to create
partnerships with traditional banks and met "bureaucracy, politics and vested
interests" at every turn, according to Chairman and Chief Executive Christos
Cotsakos. The deal with Telebanc, however, came together in less than two weeks.
Ameritrade has no plans to buy an online bank. But that doesn't mean that OnMoney
won't tap into any of the new online banks out there.
Bringing NetBank (NTBK:Nasdaq), of which Ricketts is a director, into the OnMoney
network is a possibility. That firm's head of marketing, Eve McDowell, says: "I'm
aware of it and we're looking at it," before adding that she had received written
materials.
That, a beta test on the Web site, its new offices and Ricketts' word will have to do for
now as evidence that OnMoney is on the way. |
