Internet-only banks targeting specific segments of the population have never really caught on, but organizers of one aimed at African-Americans say theirs will, because African-Americans prefer to do business with black-owned companies.
BankBlackwell, to be based in Boston, is looking to open by late summer and target African-Americans who earn more than $50,000 a year. In an offering circular sent to potential investors last week, the organizers gave a glimpse of their marketing strategy.
“We believe the shared experience of growing up black in America has made many African-Americans keenly aware of their ethnic identity and arguably more inclined than their white counterparts to make purchasing decisions based on community or race,” the circular said.
BankBlackwell is the brainchild of James R. Mundy, the former chief financial officer of the black-owned OneUnited Bank in Boston. The start-up received approval from the Office of Thrift Supervision in December and is seeking to raise $17.3 million by the end of June.
The offering circular did not say how much had been raised, nor would a spokeswoman for the organizers. The 13 directors, mostly African-Americans, would own about 10% of the outstanding stock, according to the circular.
Once it is up and running, BankBlackwell plans to launch a direct mail campaign and to advertise on Web sites frequented by African-Americans. Among its board members is Omar Wasow, the executive director of BlackPlanet.com, an online community forum that claims 14 million members.
Joseph Gladue, an analyst who covers minority-owned institutions for Cohen Bros. in Philadelphia, said it could be hard for BankBlackwell to attract customers. He said that though there are more than enough affluent African-Americans using the Internet, many of them already have banking relationships or might be indifferent to an Internet bank — even if African-Americans run it.
“I certainly think some segment of the African-American community wants to keep business in the community,” he said “But most people tend to focus on what’s best for them and not what’s best for the community.”
Robert Patrick Cooper, the senior counsel at the $479 million-asset OneUnited, said a black-owned bank needs branches in black neighborhoods.
“African-American-owned banks are more than financial institutions. They are a beacon of hope and esteem in the neighborhood to show how far we have come as a people,” Mr. Cooper said.
The Federal Deposit Insurance Corp. classifies 47 banks in the country as black-owned, but few have expanded beyond their local markets.
Most were started to fill a need in poorer neighborhoods that had no banks, Mr. Gladue said, and serving their communities “remains an important part of their mission” for most of them.
BankBlackwell would be the first trying to attract customers from coast to coast.
Target-market Internet banks that misfired include G & L Bank and USABancshares.com.
G & L aimed at gays and lesbians. It opened in 1999 with high expectations but voluntarily liquidated two years later after losing an average of $280,000 a month.
USABancshares.com, also a 1999 start-up, aimed for the technology-savvy. It had partnerships with the rock star David Bowie and the Internet service provider EarthLink Inc. But in 2000, facing regulatory restrictions after a $3 million loss, it changed course and became a traditional community bank.
By far the most successful Internet bank in this country has been ING Bank FSB, a Delaware unit of the Dutch giant ING Group NV. Less than five years old, the U.S. bank, which uses the brand name ING Direct, has already pulled in $30 billion of deposits by targeting a mass audience in some of the nation’s largest markets. It has also made more than $10 billion in mortgage and home-equity loans.
Like ING, BankBlackwell intends to keep things simple. It will offer only savings accounts, certificate of deposits, mortgages, and home equity loans, all at favorable rates. BankBlackwell also plans to market to black churches through a program called BlackwellChurch Loan.
William Cunningham, the chief executive of Creative Investment Research Inc. in Washington, said that by offering only these four products the bank would escape most of the risk in banking. Unlike checking accounts, savings accounts and CDs have low transaction volume, he noted, and the loans would be secured by real estate.
