bank, North Fork Bancorp is beating a retreat.
Along with other larger and midsize institutions making similar moves, North Fork attracted considerable attention this spring simply by wrapping a strategy around the Internet. In some cases, the stock market reacted favorably, though North Fork shares are currently toward the low end of the $19 to $22 band where they have been trading since April.
Like Bank One Corp. with its WingspanBank.com, but on a smaller scale, North Fork expected to succeed by dedicating a relatively autonomous business unit, undeterred by "legacy" concerns, entirely to Internet activities.
But now John Adam Kanas, chief executive officer of the $11 billion-asset holding company based in the Long Island suburbs of New York City, says the Internet-only approach "is just not viable."
In the debate over whether to have a self-contained on-line banking unit separate from branches and other distribution channels of the parent bank, Mr. Kanas has come down firmly on the side of integration, and North Fork has scaled back its plan dramatically.
The main drawback, he said in an interview, is that every bank tends to look alike in cyberspace. "There can be no unique Internet banking model," Mr. Kanas said, "because the Internet is a commoditization of everything. It is itself commoditized because it is ubiquitous."
North Fork had planned to turn a telephone bank that it owns in Connecticut, Superior Savings of New England, into its Internet bank.
North Fork would have funded a multimillion-dollar marketing campaign to reach a national audience -- based on the notion that the Internet can make any company of any size a national, even global, competitor. But Mr. Kanas has soured on that idea.
"Every Internet bank is basically the same, so what are they marketing? A pretty name?" he asked.
Around the time North Fork was talking up the Internet, midsize peers such as Sovereign Bancorp of Wyomissing, Pa., and Synovus Financial Corp. of Columbus, Ga., announced similar Internet-focused ventures. Their plans are still in place, but attempts in recent days to reach the executives heading those efforts were unsuccessful.
Since North Fork went public, Bank One opened WingspanBank.com with a splashy mass-media advertising campaign said to be budgeted at $150 million. Citigroup Inc. followed with Citi f/i, introduced quietly in advance of what is expected to be an aggressive marketing campaign early next year. American Express Co.'s Membership Banking program, also begun in the summer, indicated that interest in Internet banking is not limited to traditional banking companies.
Countering assumptions about the leveling power of the World Wide Web, Bank One officials have argued that on-line success requires establishment -- and significant investment in -- a brand name or names.
WingspanBank.com was developed to appeal to people who spend a lot of time on-line and may not be attracted to a traditional banking service, but Bank One and its First USA credit card subsidiary -- the nominal parent of Wingspan -- have also committed hundreds of millions of dollars of marketing and cobranding investments with Web companies to reach various populations.
Mr. Kanas said one reason for his reconsideration was the money North Fork would have to spend to compete with such big names.
Christopher Musto, director of financial services at Gomez Advisors Inc. of Lincoln, Mass., said his firm is advising regional and community banks to use the Internet as a complement to their core strengths.
"Instead of asking customers to migrate completely to the Web, these banks would do better to launch an Internet offering that blends well with branch services," Mr. Musto said.
Only 4% of the five million people banking on the Internet in September were customers of Internet-only banks, Mr. Musto said. "While we see Internet-only banks starting to gain traction with consumers, it is still much easier for a branch bank to get its existing customers to try Internet banking than it is for an Internet-only bank to steal those customers away."
North Fork has not repudiated the Internet altogether. It said it still plans to develop Internet services for existing customers of North Fork and Superior Savings.
"We'll have what everyone else has. We're just not betting the farm on it," Mr. Kanas said.
He said he is looking toward the next big thing -- banking over wireless devices and interactive television. He said banking via cable TV could bring in an entire new population and popularize home banking.
