Bank One Corp. suddenly looms larger in the fledgling Internet banking world, with a reported plan to launch a separate Internet bank through its credit card subsidiary.

Company officials would not confirm a report Friday in the Chicago Tribune that it plans to launch a new Internet bank within its First USA unit. But the plan would put into action the ambitious words of Bank One chief executive officer John B. McCoy.

Mr. McCoy said at a recent industry conference that Bank One would likely eschew acquiring or merging with other banks in favor of developing a greater Internet presence on its own.

And experts say Bank One has the clout to do it.

Though a handful of smaller banks, including Sovereign Bancorp and North Fork Bank, have announced plans to launch separately chartered national Internet banks, none have the market power or deep pockets to match Bank One and First USA. As the leading originator of credit card accounts over the Internet, First USA also brings a well-honed expertise.

Bill Doyle, research director of on-line financial services at Forrester Research of Cambridge, Mass., said that building a separate Internet bank "is exactly what the big guys have to do"-even at the risk of cannibalizing current customer bases.

Bank One has been hurtling toward Internet-based business models for months. Late last year it signed a multimillion-dollar deal with the Internet portal Excite Inc. to become the exclusive provider of banking services through that gateway. The agreement is designed so Bank One pays Excite according to the number of customers who sign up through that channel.

First USA, meanwhile, has deals with a number of Internet gateways, such as America Online, Lycos, Excite, and Yahoo, aimed at soliciting credit card customers through those channels.

A few weeks ago Bank One unveiled a revamped Web site for existing bank customers. This week its on-line brokerage achieved a ranking among the top 15 Internet brokers in a survey conducted by Gomez Advisors. (See story on page 13.)

A key factor in the new entity's success could be its ability to wage an aggressive advertising campaign, observers say.

Other Internet-only banks like Telebanc Financial Corp.-which agreed last week to be acquired by E-Trade Group Inc.-and NetBank have not yet been able to attract lots of customers. Telebank had only 70,000 customers, compared with E-Trade's one million at the time the acquisition was announced.

"More than anything else, the biggest determinant of how many customers" an Internet bank will get is a "significant and substantial" advertising campaign, said Octavio Marenzi, research director at Meridien Research, Newton, Mass.

Even if it has a large marketing budget, the new Internet bank still would face challenges.

"One thing Internet banks have working against them is the lack of a physical presence," said Christopher Musto, director of financial services at Gomez Advisors, which is based in Concord, Mass.

Even Security First Network Bank, the world's first Internet-only bank, which was acquired last year by Royal Bank of Canada, felt compelled eventually to open "city offices" in response to customers seeking a place to go.

Internet-only banks will have a hard time offering Internet services that traditional banks can't already offer through their own Web sites, Mr. Marenzi noted.

"The only thing the Internet-only banks can do is lower their costs, and that's tough," Mr. Marenzi said.

One advantage of forming a separate Internet entity is it frees a bank from having to integrate the Internet channel into existing bank systems and processes, said Rick Sellers, a partner in Arthur Andersen's financial services industry technology practice in Chicago.

"That is a monumental task," he said, noting that it involves not only systems but processes, people, and culture.

Taking a "green-field approach" to Internet banking is "an extremely bold move," Mr. Sellers said. "But that is the way to go."

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