The ING Group, Holland's third- largest bank, is invading the U.S. savings market and mortgage markets, armed with the Internet, direct mail, and a bank of phones.

The Dutch group, which has $475 billion of assets, has applied for permission to open a thrift in the United States. It has been operating a similar unit in Canada for about two years and already has amassed more than 250,000 customers and over $2.5 billion of assets there.

Canadian banking sources said that although ING's operation is still relatively small, it competes directly with Canada's Big 5 banks for deposits and banking services, such as mortgages and mutual funds.

"You really have to hand them some praise," said a spokesman for Royal Bank of Canada. "They're into a new delivery channel, and they've done an excellent job of marketing themselves and building market share."

ING declined to give details of its plans for its electronic foray into the U.S. market, but its approach here is expected to be similar to the one it is taking in Canada. An application filed with the Office of Thrift Supervision in Washington said ING and ING USA Holding Corporation have sought approval to create a thrift by setting up ING Bank FSB in Wilmington Del. Deposits would be insured by the Saving Association Insurance Fund of the Federal Deposit Insurance Corp.

The savings bank would offer a limited range of accounts, including money market deposit accounts, one- to-five year certificates of deposit, IRA accounts, residential home mortgages, and consumer loans. It would focus on the Wilmington, Del.-Philadelphia region and on the New York metropolitan area, using call centers and a Web site.

It also would offer unsecured personal credit lines that would be a "much cheaper source of consumer credit than that available through credit card or installment loan programs," the application stated.

The company bases its strategy on research that says 30% of consumers will become direct banking customers in the next seven to 10 years. Despite the praise from its Canadian competitors, some Canadian bankers describe ING as a poacher. "They advertise that they offer higher savings rates and no service fees but they really don't offer any service," said the Royal Bank spokesman.

Though ING remains small in Canada, it clearly has become an uncomfortable gnat. Some Canadian bankers grumble that ING is riding into Canada on the back of the established clearing banks by not offering basic bank clearing and cash services. Some Canadian bankers, refer to it as a "cherry picker" or a "parasite."

An ING spokeswoman in Amsterdam acknowledged that the bank is very selective about what it will offer both in Canada and in the United States. "We tell customers to continue to do their payments through their current bank but bring their savings to us," the ING spokeswoman said.

"You can call it direct banking but the real focus is going to be on savings products, insurance products and investment products like mutual funds," said Matthew Czepliewicz, an analyst in London with Salomon Smith Barney, the investment banking unit of Citigroup Inc.

The bank plans to name Arkadi Kuhlmann, currently president and chief executive officer of ING Bank of Canada, as chief executive of the U.S. operation, according to the application.

Banking, via phone, direct mail and the Internet is seen by some as a relatively inexpensive way into enter a market. By eliminating most of the overhead costs of traditional retail banking, and by offering a limited range of products, Internet-based banks can undercut established banks by offering higher interest rates for deposits and lower interest rates on loans.

In Canada, for example, ING offers a 4.3% savings rate, compared with around 1% percent offered by most Canadian banks. The bank has used extensive multimedia advertising to publicize its debut in Canada, including newspapers, television, direct mailings, and billboards.

Analysts said they believed that ING's primary motive is not to make a direct profit from its Internet/phone/mail initiative, but to create a vehicle for distributing a broad range of financial services to consumers in the United States and Canada, especially insurance.

ING is a big insurer. In fact, five years ago it was forced to relinquish its U.S. banking license because of its extensive insurance activities. At the time banks were prohibited by U.S. law to own insurance companies.

In recent years, ING has acquired several U.S. life insurance companies, including Equitable of Iowa Companies, Inc, Golden American Life Insurance Company, Locust Street Securities, Inc., USG Annuity & Life Company, and Life Insurance Company of Georgia.

The group also runs corporate and investment banking operations in the United States through its securities unit, ING Barings. Two years ago it acquired Furman Selz Asset Management , a New York-based fund manager.

As a result of the enactment this year of the financial modernization act, banks are allowed to own insurance companies, as well as the other way around.

The Dutch bank is the fourth foreign financial institution to move into branchless banking in the United States. The others are Canadian: Royal Bank of Canada, Toronto-Dominion Bank, and Canadian Imperial Bank of Commerce. ING Group's asset total of $475 billion included $355 billion of banking assets at June 30. As a financial conglomerate, it offers a broad range of financial services, including life and non life insurance, retail banking, commercial banking, investment banking, and asset mangement in more than 60 countries.

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