million in deposits in about three weeks by ambitiously marketing its certificates over the Internet for the first time. Its effort has been successful in part because it offers some of the highest rates in the country on several maturities, in competition with such aggressive giants as Providian Bank, Advanta, and Flagstar. But the community bank has also run banner ads on a variety of Web sites and placed its rate quotations with Web quote services, where it is often among the top banks. Carolina First says it is launching an Internet bank and that its initial use of the Web is part of its learning experience, which began on about Sept. 15.

"We're targeting newbies, that is, people who are new to the Internet," says Robert Bauer, senior vice president for retail banking. "We believe the veteran users already have their favorite sites and services." Carolina First is exceptional in its use of the Internet to gather deposits. Many community banks either do not need additional funding or believe they cannot afford the high rates required to be successful in attracting outside money. But for those that want to try Internet funding, there are plenty of opportunities. Geri Forehand, president of ExpressData Corp., which operates the Web site and the quote network, offers some encouragement to banks that fear their rates may not be competitive. "Banks down to No. 125 on the rate list have been getting funds," he says. "Large institutions that are geared toward maintaining deposit insurance on their portfolios can exhaust their options pretty quickly." Others point out that banks can conduct rate surveys using quotation services and may discover that rates are lower in other parts of the country than in their home market. Thus, funding costs could actually be reduced. Mr. Forehand says that being a small institution is no handicap in the CD market. "Most of our customers have under $1 billion in assets," he says. At the upper end, he notes, "we've had some institutions raising $100 million a year." Banks and thrifts interested in trolling the Internet for deposits face a number of decisions. One is whether they want to target individuals, institutions, or both. Another is whether they want to deal with brokers, with placement services, or with the public. Indeed, banks that are not adequately capitalized may not accept brokered deposits and will have to avoid sites used by brokers. High levels of brokered deposits by adequately capitalized institutions may also attract regulatory attention. Well-capitalized institutions are not restricted in the acceptance of brokered deposits. Express Data warns that institutions "may have a broader exposure utilizing the Qwick-Rate Network to publish to multiple brokerage firms across the U.S." The site's users are diverse but include many brokers. One low-cost way to promote CDs is to provide your rate quotes to This is an editorial-driven, advertiser-supported Web site formerly known as Bank Rate Monitor. The site compiles a list of the 25 highest offering rates on various maturities of CDs. It also compiles financial quality ratings for each institution. To participate, banks need only call or write to the company or visit its Web site. Greg McBride, a financial analyst there, says there are only a few requirements. "They must have at least one physical presence, somewhere that people can walk into to do business," he says. "They must also be FDIC-insured and accept deposits by mail or phone from all 50 states. And they need to have a phone system that can handle the expected volume of calls." The only cost involved is a nominal fee for an optional link to your own Web site. On Oct. 11, the highest yield quoted for a one-year CD was 6.34%, while the No. 25 yield was 5.85%. Top rates as quoted by other services were similar, with the spread between No. 1 and No. 25 fairly consistent at 40 to 50 basis points. This compares with a national average of 5.31% on one-year CDs that day. Perhaps half of the top 25 rates were offered by community banks or thrifts. The figures suggest that a bank willing to pay half a percentage point above the national average, or even a bit less, would be able to gather institutional funds, assuming its safety rating is adequate. Promoting your CDs on your own Web site may appear attractive to some institutions, but effective use requires some marketing savvy. An all-purpose site to promote a bank's products will not be effective. Links to bank sites provided by quote services frequently lead to a generic site that, some four clicks down the line, simply says the bank does indeed offer CDs and investors should call for rates. The investor could have called the phone number provided rather than bothering to check the Web site. Kenneth W. Wanek, chief executive of DataTrac Corp., operator of, says lack of follow-up is the weak spot in Internet marketing by banks. "We did a customer survey a few months ago, and the biggest complaint was that banks were not responding to the e-mails being generated. If banks are going to market effectively, they must not only use the channels that are out there but have a system behind their efforts." Mr. Wanek says there are three stages in the use of Web sites by banks. "First is brochure ware. Then comes a response system. And finally, there's an interactive system. Most banks are still at the first stage." USA BancShares is one of the innovative users of the Internet, operating a site called The Philadelphia-based company conducts an auction for a different maturity CD every day, 365 days a year. Bidders enter the lowest yield at which they would accept a particular CD. The winner gets a CD of $1,000 to $10,000 at that yield. Up to 100 runners-up are offered the same deal, so the issuer could theoretically take in as much as $10 million a day. While a daily auction may be too much for smaller banks, a weekly or even monthly auction, properly promoted, might be effective. In the final analysis, the Internet is a marketing tool, not a magic wand. It can be used effectively to collect deposits, but requires marketing and management skills.

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