Analysts Undecided On Web Bank Success
While Octavio Marenzi, of Celent Communications, sees online-only banks as "a bunch of abject failures", Richard Bell, of Tower Group, believes virtual banks can succeed if a solid business model is in place. Although Marenzi says "the vast majority of them (Internet banks) are doomed, that is clear", Bell argues "the growth prospects are pretty good" if banks focus solely on their business. Yet, Bell found only 3 to 4 virtual banks to be turning a profit, with about 30 per cent of those studied by Tower, being Internet-only.From Marenzi's viewpoint, Internet-only banking is insufficient for long-term prosperity, since neither check clearing, nor deposit accounts on their own, are particularly lucrative businesses. Meanwhile, Bell concedes that "from a pure numbers point of view, barring some extraordinary initiative, Internet-only banks in this country will remain a relatively niche phenomenon". Jupiter Research, for its part, expects Internet banking users to triple within five years, from the current 14.6 million, to 43.5 million by 2005.
On the basis that Internet banks need "at least 12 months to settle in", Gary Evans, CEO of Bank of Internet, holds that "if it's a lower cost distribution channel, why shouldn't it work?" NetBank CEO, D R Grimes, confirms the point with last year's USD 8.6 million in revenues, almost triple those for 1999, even when operating "with about 50 per cent of the expenses of a traditional bank". But, given customers' preference for bank branches, Internet-only banks are unlikely to threaten older institutions in terms of assets. Related Links
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