Consumer Reports, the popular magazine whose product evaluations have guided many a purchase, has weighed in with its first-ever ranking of Internet banking services, naming a roster of usual suspects of winners and giving particularly high marks to two institutions that primarily do business through the Internet: E-Trade Bank (which took the top spot) and NetBank Inc. (which came in third).
The issue, scheduled to hit newsstands Jan. 15, tells consumers that the risk of identity theft should not deter you from banking online, and says that although only 22% of U.S. households bank online, this past falls anthrax scare seems to be drumming up interest. The report, nestled among a critique of boxed chocolates and an assessment of 47 vacuum cleaners, evaluated the banks by using such variables as fees charged, ease of account setup and of site navigation, privacy, and content. 
E-Trade Bank, a subsidiary of Arlington, Va.-based E-Trade Group Inc., was praised for offering free bill-pay, more than three months of transaction history, and low-balance warnings. The second-ranked bank, Citigroup Inc.s Citibank subsidiary, offered all those features plus cash payments by e-mail, but it got a lower mark on content and required a higher minimum balance.
The magazine rated 15 online banks all but E-Trade, NetBank, and the thrift company Washington Mutual Inc.s Web bank are parts of large commercial banks that have been around for a long time and said it drew its candidate list from Jupiter Media Metrixs list of online banks with the most customers.
Amanda Walker, the Consumer Reports senior editor who wrote the article, said that certain logical candidates such as Wachovia Corp. and American Express Co., which has a Web bank were not included because they were not in the top 20 at the end of last summer when the magazine received the list from Jupiter.
The monthly, published by the nonprofit Consumers Union of Yonkers, N.Y., said its staff members closely examined each banks Web site, set up accounts, and paid a bill to Consumers Union. The magazine reported that it had planned to open accounts at 20 different banks, but mergers and failures reduced the candidate list to 15.
The rankings put out by Consumer Reports are quite different from those issued quarterly by Gomez Inc., a financial research and consulting firm in Waltham, Mass., that uses a more scientific assessment. The most recent Gomez scorecard, which rated Internet banks for the fall of 2001, had Citibank first followed by First Internet Bank of Indiana (a small Web-only institution that did not make Consumer Reports list), Atlanta-based NetBank, Bank of America Corp., and Chicagos Bank One Corp. E-Trade Bank came in 20th, with a score of 4.98 out of a possible 10.
Gomez says it measures the quality of e-commerce offerings by using an algorithmic and data-driven process and a set of 150 or more criteria points. Chris Musto, a vice president of research at Gomez, would not comment on Consumer Reports methodology or results, but said the success of E-Trade Bank was a result of heavy marketing rather than quality of service.
Until recently you could look at E-Trade Bank and call it an afterthought, Mr. Musto said. Now it is driving the asset growth and profit of the company. E-Trade is cross-marketing CDs to all those customers who have backed away from the stock market during its decline since the spring of 2000.
Meanwhile, in a separate ranking, a magazine called BtoB on Wednesday released its list of the top business-to-business Web sites. American Express got top honors, and seven companies got the same score to come in second: FleetBoston Financial Corp., Merrill Lynch & Co., the Cleveland banking company National City Corp., 3Com Corp., Dell Computer Corp., International Business Machines Corp., and CDW Computer Centers Inc.
The Consumer Reports article is the magazines first major look at the banking industry in 19 months. In June 2000 it published a report from a survey of 14,000 Consumers Union members that concluded that community banks and credit unions were better than big banks at providing low-cost checking accounts and high-quality service to the average customer.
Only one of the top five in that issue reappear in the rankings in the current issue: Charlotte, N.C.-based Bank of America, which came in fifth in the earlier beauty pageant and ranked sixth in the new one. The four top banks in the subscriber survey which asked people about convenience, cost, and service were: SunTrust Banks of Atlanta; SouthTrust Corp. of Birmingham, Ala.; HSBC Holdings, which is based in London but has extensive operations in New York; and Wachovia, of Winston-Salem, N.C.
