About 18 months ago, Randy Waterfield, like many others, thought he could make a killing by setting up an Internet-only bank. But today, also like many others, he has found that the ones getting killed are the investors.His venture, National InterBank, now has about $85 million in assets.

But he is giving up on stand-alone Internet banking, at least for now. Instead, Waterfield is shifting gears, focusing on offering outsourcing services to financial institutions: banks, brokerages and insurers.

Waterfield says National InterBank had planned to offer this sort of service from the beginning, and used the stand-alone bank to "dip its toes in the water."

But he also admits that in 1999 he thought Web banking would make a fortune on its own. In those days, he says, Bank One was forming its WingspanBank with a lot of fanfare, and Telebank was being sold for more than $1.6 billion to E-Trade.

A lot of people, including Wingspan's owners, have sobered up since then. Who ever thought, says Waterfield, that it would cost up to $500 to snare an individual customer. That's "insane," he says.

National InterBank has entered outsourcing agreements with several portals, including InfoSpace, Waterfield says. The banking services will be offered under the portal's name, but the business will go to National InterBank. The bank will pay only for customers who actually sign up and fund their accounts, Waterfield says.

Good luck.

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