Jeffrey P. Gaia, a former division president at Bank One Corp., is a traditional type of banker not the sort who might be expected to jump ship for an Internet-only bank, especially now that the dot-com bubble has burst.
And yet Mr. Gaia, who has spent his career lending to small businesses and offering home loans and most recently ran a $13 billion-a-year unit, last week became the first president of a Web-only institution called National InterBank, which opened in 1999 and has $90 million of assets. He had been out of a job for several months.
Mr. Gaia whose pedigree includes eight years at Bank One plus stints at Valley National and Citicorp is not the only well-placed banker to join National InterBank.
The bank, based in Irvine, Calif., does not even have its own banking charter, and must piggyback on the charter of a community bank, First Bank of Mitchell in Indiana. National InterBanks founders, brothers J. Randall and Richard R. Waterfield, were scions of Waterfield Bank Corp. (First Bank of Mitchells holding company) and pursued careers in finance at Goldman Sachs & Co. before founding their start-up.
To some National InterBank may look just like the dozen or so other Internet-only ventures trying to gain deposits in cyberspace. But to Mr. Gaia, the banks strategy of providing private-label banking services to other dot-coms was enough of a differentiating factor.
We build Internet banks for large portals and affinity partners, which is very different from virtually all of the other banks out there, Mr. Gaia said.
Apparently other prominent executives share his view. National InterBanks board of directors includes Gene Fife, the former chairman of Goldman Sachs International; Joe Wender, the former head of Goldman Sachs financial institutions group; Sharon Osberg, formerly the head of Wells Fargo Online; John Eggemeyer, chief executive officer of Castle Creek Capital; and Robert Albertson, the onetime head of U.S. bank research at Goldman Sachs.
The private-label strategy that Mr. Gaia found so attractive is easy to boil down: National InterBank pays its private-label partners about $25 for each customer they bring in. By contrast, large-scale marketing campaigns cost many Internet banks about $200 per new customer.
The banks partners so far include two major Internet portals, About.com and Juno Online Services, as well as the sites PNV.com, which is used by 1.5 million truckers, and InfoSpace, an Internet infrastructure provider. InfoSpace plans to bundle National InterBanks services with its wireless and broadband services, allowing nonbanks to offer banking under their own brands.
Despite the enthusiasm of Mr. Gaia, the private-label strategy is not unique to InterBank. CompuBank offers cobranded banking through GE Financial Network, Commonwealth Energy, HD Vest Financial Services, and the pFreight online transportation marketplace. VirtualBank has teamed up with a handful of high-tech companies to offer cobranded banking online to employees.
Richard Bell, director of Web banking at TowerGroup, said offering private-label services is a strategy that should have some uptake. I suspect there is room for a handful of players, but not a whole lot more.
Mr. Gaias most recent job was as president of Bank Ones national retail group and business banking division. From 1994 to 1997, he was chairman and president of Banc One Mortgage Corp.
Even though he had been gone from Bank One for several months before he was approached about the National InterBank job, Mr. Gaia said he had been reluctant to take it.
When I first got he call from an executive search firm, I blew them off, Mr. Gaia said. I have never been enamored of the thought of de novo virtual bank franchises that need to brand themselves in order to get customers. He said it was the private-label strategy that changed his mind about the job.
Mr. Gaia said National InterBank hired him because they recognized that they need someone who knows how to run a bank. The bank has a lot of good marketing and technology people, he said, but they need someone who has the hard-core skills of credit, risk, and regulatory the real guts of running a bank.