Centura Bank and Commercial Federal Corp. were among financial services portal pioneers. Both signed on to America Online s banking center when it opened in 1996. It presented an opportunity to gain valuable Internet knowledge for free and post informational pages on their banks.

But both dropped their AOL relationships last year, when it began charging for the service. We didn t have a huge number of customers interested in accessing us this way, explains Jim Evans, on-line banking channel manager for Rocky Mount, NC-based Centura.

Adds Bob Stastny, financial systems project manager for Commercial Federal in Omaha, Eventually, it could be a marketing vehicle to consider, but the price has to be right versus the returns generated, and right now, it s simply not worth it.

If the results of a recent survey by market research firm Cyber Dialogue and Booz, Allen & Hamilton are any indication, then that eventuality is coming sooner than later. It found that consumers consider portals such as AOL, Quicken.com and Yahoo! crucial in managing their finances. More than 2 million people about 32 percent of all digital investors rely on AOL s personal finance area alone.

on-line market booms

This is evidence of the importance of generic portals as entry points for financial management information on-line, says David Howe, vice president in Booz, Allen s financial services group.

For aggressive banks, the growing power of portals opens the door to intriguing affinity marketing opportunities. The flip side, says Cyber Dialogue CEO Mark Esiri, is that banks should be feeling threatened. Esiri believes that portals marketing clout will grow over the next five years, sparking a new round of competition among institutions for customers.

For banks reeling from the migration of profitable customers to on- line brokerages and other competitors, this presents a daunting challenge. Many have launched their own Web sites aimed at customer retention. But Howe says that might not be good enough in an increasingly portal-dominated world. Most bank profits emanate from regions where they have strong branch and ATM presences.

Portals allowing tech-savvy banks to attract comparison shoppers with customized messages are breaking down geographic constraints. There was a barrier to exit for a consumer, which was location, Esiri says. That has vanished in a way that potentially can have a very dramatic impact on your business.

Esiri expects this will lead to specialization among top-tier banks. One bank may be recognized as the national leader in small business lending, for instance, and another tops in deposit taking. That could cut into some profitable bank businesses. If I was in the banking business, the defensive strategy would be, I ve got to have a presence on all portals; I ve got to have reach on a national basis, because other people are coming into my footprint, he says.

Edgar Brown, senior vice president in charge of Internet banking at First Union, agrees, but says that banks must think and act judiciously in using portals.

First Union has had an AOL link to its own Web site for two years, and while he won t divulge its results, Brown concedes that the potential to get substantial numbers of new customers via the relationship exists.

The reason is simple, Esiri says: AOL and other portals have strong brand recognition that smart banks can leverage to their own advantage. The power of a brand like America Online or Yahoo! has transferability in terms of moving customers from one bank to another, he explains.

Portals also have credit information about their customers and can track the chat rooms and services they use.

This is potent stuff, and it s buttressed by the numbers. The Internet s 58 million users are becoming more adept at shopping on-line for financial services. Some 4.1 million people are active Internet traders, up from 1.2 million just over a year ago. The number of users conducting any type of on-line banking activity soared to 6.4 million from 3.6 million during the same period.

Yet Cyber Dialogue s statistics show that only 40 percent of users proceed to a branded Web site. The rest access a portal or search engine.

Affinity cautions

Banks need to think carefully before jumping headlong into a full- fledged affinity relationship, says Brown.

The biggest concerns are brand disintermediation and commoditization. As the consumer accesses their products and services through AOL, is it possible that the consumer begins to identify with AOL and not the bank? he says.

Esiri argues that, given the information portals have at their disposal, banks should forge actual business partnerships with them.

Banks are leery of violating the privacy of their customers, however. If they do share information, then they risk having it fall into the hands of competitors who might create their own, more-comprehensive portal alliance in the future.

Even so, a growing number of banks are concluding that portal brands and the number of eyeballs they deliver are too strong to ignore. To strike the proper balance and avoid becoming mere repositories of information delivered through somebody else s interface, Brown suggests banks place a strong emphasis on building Web sites that provide everything from bill payment and brokerage services to real-time credit approvals. The portals are very powerful, and we have to learn to play with them, he says.

J.Engen

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