Richard W. Vague has used his expertise in marketing and credit cards to build one empire after another first at First USA, the card monoline he founded, then at Bank One Corp., where he masterminded card and Internet efforts before taking a fall.
As his latest venture, an online bank and card company called Juniper Financial, prepares to open tonight, people are asking: Can Dick Vague do it again?
On the plus side, Mr. Vague and his longtime business partner, James Stewart, have all the right connections, know their business cold, and enjoy broad respect within the industry.
But these factors make no difference to the consumers who will soon be getting credit card solicitations in the mail from Juniper, a company they have never heard of. For many, the Juniper solicitation will be just one of several they get that week.
The lack of name recognition is likely to be a huge hurdle. Mr. Vague and Mr. Stewart said they picked the name Juniper because they were able to acquire the domain name and because, among the domain names they tested, Juniper scored highest. A juniper is a tree of the cypress family.
We knew we wanted a real-world name, not a synthesized word or one with an e placed in front, Mr. Vague said in an interview last week.
Though the Wilmington, Del., company is full of heavy-hitters from the card industry, the Juniper team must confront the publics indifference to new credit card products and its lack of motivation to open an account at a no-name Internet bank. Juniper hopes to sell low-rate credit cards that do not charge many of the pesky fees that First USA customers routinely complain about, and it wants to use these relationships to cross-sell online banking services.
Brook Newcomb, a senior analyst at Forrester Research Inc. of Cambridge, Mass., the Internet consulting firm, said that Junipers credit-card-as-point-of-entry strategy has been tried before but there havent been an awful lot of results to show for it.
Though Mr. Vague and Mr. Stewart have parlayed their experience into more than $114 million of venture capital, their business strategy has a lot in common with those of other Internet start-ups, which have universally had problems getting people to use branchless banks. The older Internet banks have claimed some milestones in customer accounts and deposits, but many newcomers crowd the field, and electronic banking experts say Juniper will need quite a magic touch to stand out.
Juniper has signed a deal with Mail Boxes Etc. to let customers make deposits in their accounts free through Mail Boxes franchises. Mail Boxes would mail the deposit overnight and issue a UPS tracking number so that the shipment can be tracked online at both the Juniper and Mail Boxes Web sites and be deposited in the customers account within 24 hours.
But even this arrangement, Mr. Newcomb said, is not enough to overcome what the consumers are looking for, which is physical presence.
Juniper comes to market with several themes. One is wireless: Mr. Vague and Mr. Stewart say their Web service will open its doors with the most sophisticated wireless account access available in banking. Customers will be able to use all manner of wireless devices to view their accounts, do transactions, and get alerts about actual and impending account actions.
Another theme is excellence in customer service. Juniper says it is hiring smarter-than-average customer service representatives and will cluster them in teams to service particular accounts. Instead of letting customer service representatives answer calls randomly, specific reps will take calls from specific customers, with the hope that they will form working relationships. You can schedule an appointment with your customer representative online, Mr. Vague said.
A third theme is, in Mr. Vagues words, that the specialist overcomes the generalist. So though it may seem logical that people would want to do online banking only with the trusted real-world bank that holds their accounts, he and Mr. Stewart think some people will be persuaded to switch to online companies that excel in particular fields just as the monoline credit card companies rose to power.
Mr. Vague took a very similar position back in the late 80s and turned First USA into one of the largest credit card banks in the world thats where the legend lies, said Paul Jamieson, senior analyst for banking and payment services at Gomez Advisors, an e-commerce research and consulting company in Lincoln, Mass.
The building of First USA took place at a time when a lot of people told him it could not be done, Mr. Jamieson said. This will be his third act.
Part of the problem is that even online customers prefer their virtual banks to be tied to a brick-and-mortar branch system. According to a Gomez report, 96% of active online banking customers today simply adopted the online channel of their existing offline bank, Mr. Jamieson said.
If you cannot touch it, if you cannot see it, does it really exist? Mr. Jamieson said, remains a consumer doubt. He and other analysts say that tomorrows consumers, who are growing up with the Internet, will be more comfortable with and trusting of online banking.
Citing other Gomez research, Mr. Jamieson said, Consumers are much more willing to open a credit card account online than any other credit account. The drawback of online deposit-taking, he said, is that people are reluctant to put funds in the accounts.
Robert Sterling, a senior analyst at Jupiter Research of New York, was more sanguine, however. He said Junipers arrangement with Mail Boxes Etc. narrows the leap that people have to make to go online. People still have to get over some other conceptual hurdles, but this eliminates some of them.
Mr. Sterling who noted that Juniper is a client said he thinks its management team has learned lessons from running WingspanBank.com, the stand-alone online bank set up by Bank One Corp. They have to find niches to exploit, he said.
Mr. Vague left Bank One after the First USA credit card division produced bad results and WingspanBank failed to ignite the publics interest.
In an interview last week with American Banker, Mr. Vague said reports of a massive advertising budget at Wingspan were greatly exaggerated. Published reports said Wingspan had spent $150 million on marketing, but Mr. Vague said, the real number was less than one-10th of that.
Mr. Newcomb of Forrester Research said the stumbles under the Bank One umbrella do not portend what will happen at Juniper. You dont want to count Dick Vague out, he said. Junipers management team has an awareness of what consumers are looking for, and theyve certainly had success putting credit card numbers out there.