A new Internet-only bank is targeting people largely neglected by the online world: residents of government-assisted housing.

Umbrellabank.com of Westmont, Ill., which opened this month, is working with the Chicago Equity Fund to install automated teller machines in such housing in the Chicago area.

The bank will also provide representatives to teach residents how to use the machines and to foster financial planning and the use of checking, savings, and credit accounts. The new bank, a subsidiary of $391 million-asset Argo Bancorp, says the residents of such housing, who have jobs and pay some rent, are motivated to improve their financial situations and credit records.

Umbrellabank is an investor and partner in the Chicago Equity Fund, which pools investments to rehabilitate apartments for people trying to reach financial stability and get back into the job market. Those accepted into the housing program undergo a rigorous application process and are viewed as being on an upward financial track.

"Our goal is … to have a long-term relationship and grow with them as they grow," said Colleen Kitch, president and chief executive officer of Umbrellabank.com.

Ms. Kitch was previously chief operating officer at Argo Bancorp's recently sold data processing subsidiary, Online Financial Services.

The Chicago Equity Fund is also helping Umbrellabank solicit money for personal computers to be put in the government assisted facilities. The fund, along with the Chicago Housing Partnership, has raised $12 million in corporate equity and invested $50 million to develop 1,000 low-income housing units.

Umbrellabank, which will have access to Argo's network of 1,000 ATMs throughout the Midwest and East Coast, plans to install additional ATMs in many of the buildings sponsored by the Chicago Equity Fund.

Specialization and using ATMs. to establish a physical presence have been touted as promising strategies for Internet banks trying to develop a customer base. Those are "two things that will help make Umbrellabank.com successful," said Paul Jamieson, senior analyst for banking and payment services at Gomez Advisors.

Focusing on the rich is a more popular strategy. But an Internet-based bank has an advantage over branch banks in serving the poor, Mr. Jamieson said: lower cost.

"Umbrellabank.com has an offering that is designed to scale up, knowing that these people have some momentum and will move on in socio-economic categories." These people will become loyal customers of a bank that helps them do it, he said.

Richard Bell, a senior analyst at TowerGroup, said Umbrellabank has an opportunity to undercut the "huge" prices that the unbanked pay for banking services. "With support from an outside party and with the right sort of deployment schedule, there is a strong social case for providing banking services for low income consumers."

Umbrellabank hopes to pursue alliances with other public housing investment organizations across the country, as well as other types of affinity organizations. It already has formed an alliance with Synergy Inc. of Chicago, a human resources outsourcing company, which provides payroll, healthcare, and 401(k) services to its client companies.

Next month Umbrellabank plans to introduce a co-branded Web site with special products and pricing for Synergy employees. It also plans to target Synergy's client customers with its suite of small-business products in November.

"By developing an affinity relationship, their customers already see the company as a trusted relationship provider, and that gives us a step in the door," Ms. Kitch said.

Other Internet banks also are trying to build their customer bases by using relationships that consumers already have. Virtualbank.com, for example, is targeting wealthy, young technologists by offering Internet banking services through their dot-com employers. Compubank has an agreement to let GE Financial Network offer a co-branded Internet banking service through the GE Network.

Umbrellabank.com, with $7 million in equity investments, plans to build its asset base to $84 million and have customers with an average of 2.5 account relationships in its first year. It plans to hit these targets by cross-selling products to new customers immediately upon receipt of an initial application.

The bank also plans to introduce online funding of accounts in the next few months. The service would let customers use a virtual check instead of a paper check to transfer money from another bank's account to Umbrellabank.com.

Umbrellabank.com, which has only seven employees, also will leverage its relationship with Argo Bancorp to provide in-house mortgage services. The bank has outsourced 90% of its operations and has recently announced that M&I Data Service of Milwaukee will process its deposits, credit cards, loan originations, back-end transaction processing, and call center capabilities.

"We work as closely with M&I Data Services as if they were our own department at our own location," Ms. Kitch said.

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