The company that trademarked its status as "the world's first Internet bank" does not want to be just an Internet bank anymore.

In a bid for growth, Security First Network Bank is transforming itself into an engine for other organizations that want to offer Internet banking but lack the knowledge or technology to do so. It is targeting insurers, brokerages, and nonbanking companies with large customer bases, like Amazon.com and Wal-Mart, that would cross-sell Security First's banking products under their own brands.

The new direction is the latest of several that the granddaddy of all Internet banks, founded in October 1996, has pursued. It is partly an acknowledgement that the Internet-only model is not an effective way to acquire customers.

"Customers in general still want the comfort of a physical presence," said David Noble, 39, who is resigning as chief executive officer of Security First on June 1 but will remain on Security First's board. "It's very difficult to do Internet banking as a stand-alone player," he said. "The resources required are enormous."

To some observers, his sentiments raise doubts about the viability of the Internet-only model. Further fueling such suspicions are decisions like the one made last summer by Bank of Montreal to shut down its mbanx Internet-only bank.

But for Security First, the private-labeling effort is only the latest example of the bank's relentless determination to make Internet banking profitable. If successful, Security First would boost its number of customers, currently languishing at about 35,000, by an order of magnitude.

Leading the charge is Security First's newly named president and chief executive officer Ashif Ratanshi, a 14-year veteran of Royal Bank of Canada, which owns Security First, who was picked for his years of experience in putting together mission-critical infrastructures. Thirty-five thousand customers "is not the end game for us," Mr. Ratanshi, 38, said. The goal is more like one million, which Security First said it will be able to handle by yearend. It has undertaken a major reengineering of its back office to ensure it has enough systems capacity.

Security First's decision to pursue private labeling follows a long tradition of testing, learning, and changing direction as necessary. Early on, the bank was declared a "proof of concept" for S1 Corp., the Internet banking software company that became an outgrowth of the bank. Security First's founders, brothers-in-law James S. "Chip" Mahan 3rd and Michael McChesney, left the bank to focus on the S1 software business, setting the stage for the bank's next evolution.

That began two years when Royal Bank of Canada purchased Security First with the idea of making it the centerpiece of its U.S. expansion plans. Royal Bank planned to distribute its services through the Internet channels of Security First, thus avoiding expensive purchases of brick-and-mortar banks. The bank could also serve Canadian "snowbirds" who split their time between Canada and warmer climes in the United States.

Security First experienced some successes when it began aggressively courting customers last year through a series of marketing initiatives. Ninety-nine percent of customers who took advantage of an offer of certificates of deposit with 6% interest stayed with the bank. Security First also found that 45% of its customers consider the bank to be their primary or only provider of banking services. And 90% are willing to consider getting another product from Security First.

But the results of its mass marketing efforts were disappointing. Security First found cable television to be ineffective, and advertisements in national publications, such as Wall Street Journal and USA Today, to be too expensive to be used on a regular basis.

The ultimate conclusion: "We found we can attract small niches of customers with traditional marketing," Mr. Noble said. "But we can't get hundreds of thousands, or millions of customers."

That realization has brought it to its latest two-pronged course of action: to expand beyond the Internet channel so it can better acquire customers under its own label, and to juice up its infrastructure so it can begin supporting the millions of customers it expects to get through private labeling.

"The dominant thing is efficient access to customers and getting to a cost per account that is economical," Mr. Noble said.

Mr. Ratanshi was hired five months ago by Mr. Noble to complete the reengineering of a back end system that would provide premier customer service and fast transactions. The overhaul involves 14 major technical projects, including customer relationship management, personalization, improved workflow, and redesigned application forms.

The bank's highest-profile project is its customer care initiative, which is based on software from WebTone Technologies. Mr. McChesney founded WebTone after concluding that consistent, up-to-date customer service at all touch was the most difficult aspect of running an Internet bank.

"To build all that capability takes a long time," Mr. Ratanshi said.

Security First thinks it can position itself as an invaluable resource to other companies that are beginning to build an Internet banking capability. Aside from making its technology available through outsourcing, it plans to offer consulting services.

"There are still pieces missing on how you run a bank, run a balance sheet, do sales and marketing," Mr. Noble said. "There are not too many teams you could hire. We have all the strengths of a bank, but we're not a direct competitor."

Security First's recent acquisition of Prism Financial Corp., a Chicago-based mortgage company, is part of its strategy to continue reaching out to customers under its own label, but through an expanded number of channels. Prism's 150 branches will be given equal weight under Security First's new retail distribution strategy.

"We want Prism to grow aggressively and Security First to be the Internet banking platform" of Prism, Mr. Noble said.

Security First also plans to tap the marketing acumen of its parent, Royal Bank of Canada, to grow its customer base organically. Shauneen E. Bruder, senior vice president of North American markets, recently was given the added responsibility of overseeing customer relationship management strategies in the United States.

"My role is to creatively look for ways to build synergies" between Royal Bank's customer marketing initiatives in Canada and those of Security First in the United States, Ms. Bruder said.

Security First is not the only institution seeking growth by tapping the customer bases of large consumer-oriented companies. M&I Data Services offers Internet banking technology, as well as access to the bank charter of Marshall & Illsey Bank, through its Origins business. Origins recently acquired AAA, formerly known as the American Automobile Association, as its largest customer.

Brokerages are getting into the act as well. Lehman Brothers intends to have a service available by August that would deliver banking products, mainly through the Internet, to companies seeking a private-labeled solution.

The strategy of the Internet-only Compubank most closely mimics that of Security First. It too intends to rev up the number of accounts it processes through its infrastructure by private labeling its products. Compubank signed a deal last month with GE Financial Network, a division of GE Capital.

Christopher Musto, director of financial services at Gomez Advisers, said Security First, like Compubank, is well-positioned to private label its services since it has never committed serious money to marketing its own brand.

"Security First is in a position of not having developed a big consumer brand, but it is known in the industry as being good," Mr. Musto said. "Over time, Security First has gotten better and better at running a bank over the Internet."

He noted that a similar strategy might not make sense for WingspanBank.com, which has poured much more money into marketing its brand.

Jaime Punishill, senior analyst at Forrester Research, said he questioned why companies would want to hire Security First to cross-sell banking services to their customers. "They're doing it because they are under the massive delusion that they have a loyal customer base that wants to buy additional products from them," he said.

He called the notion of one-stop shopping "hellacious at its core, especially on the consumer side." Forrester's research has shown that retail customers just are not interested, he said.

Industry experts said Security First's change in direction and general difficulty in building an Internet customer base is not an indication that Internet-only banking is a failed concept. Internet banks that can master the mass marketing requirements or successfully target a niche customer base have a chance, they said.

Internet-only banks responding to an American Banker survey published this week were upbeat about their ability to win lots of customers. "The field is not crowded," said Brandi Devitt, responding to the survey on behalf of G&L Bank, which targets gays and lesbians.

D.R. Grimes, vice chairman and chief executive officer of the consistently profitable NetBank.com, said in an interview that he thinks the Internet-only bank market is "enormous," given that his bank is growing by about 300% a year. "The market is plenty big enough to handle four to five good Internet banks," he said.

But he acknowledged that making an Internet bank work is not a slam dunk. "Everybody thinks getting on the Internet is an easy way to make money. It's not. It's still a business."

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