online bank
Online/online banking
Bricks click.
The combination of virtuality and reality
February 6, 2007 438+0 | new york
Excerpt from The Economist print edition.
Citigroup started working on eggs.
Citigroup takes "eggs"
"If your bank could start over, what would it be?" So is the slogan of WingspanBank.com, a pure Internet service launched by First Bank (now part of JPMorgan Chase) at 1999. However, instead of completely reforming the banking industry, it closed its web wing within two years, not long after Citigroup closed its own online company, Citigroup F/I.
From 65438 to 0999, the First Bank (now a branch in JPMorgan Chase) set up a WingspanBank.com institution, specializing in network business. "Start over, as you wish" is his slogan. However, it did not bring revolution to the banking industry, but lost its wings in less than two years on the Internet. Prior to this, Citibank's online adventure "Citi f/i" also suffered contraction.
Now, Citigroup has shot again. 1 29, it decided to buy Egg, a struggling online bank under the Prudential Group, a British insurance company, which nailed another nail to the coffin of independent online banks. How much is this deal worth? 575 million US dollars (1.1.30 million US dollars) has given Citi 3 million credit card customers in the UK and a way to absorb deposits at low cost in this country with many branches. This also highlights the increasingly attractive "brick-and-click" banking business. Since Citi launched its new online bank, CitiDirect, in May, it has absorbed more than 1 1 billion dollars in deposits, which is equivalent to opening 150 branches.
Now, Citigroup is making a comeback. Egg is a struggling online bank, originally owned by Prudential. Citigroup decided to buy at 65438+1October 29th. For those independent online banks that are already half dead, this is undoubtedly worse. The transaction value reached 575 million euros, or165438+300 million dollars. The transaction will bring 3 million British credit card users to Citigroup and provide a low-cost way to absorb deposits in a country with branches. This move also shows that the "bricks" of the banking industry can arouse people's interest more and more. Since Citi launched its new online bank CitiDirect in May, it has absorbed more than 1 1 billion dollars in deposits, which is equivalent to opening 150 more branches.
Attracting cash online is not cheap. Citigroup pays an interest rate of 4.75% for Internet deposits, which is several times that of its deposits in branches. The British bank HSBC pays its online customers up to 6%. Competition from mortgages, credit cards and insurance banks such as Washington Mutual Bank, First Capital Bank and Costco Bank means that interest rates may remain high. But high interest rates are still cheaper than setting up branches and staffing them.
Attracting cash online is not cheap. Citigroup paid 4.75% for online deposits, which is several times the cost of branches. HSBC pays up to 6% for its online customers. Competition from mortgage banks, credit card banks and insurance banks, such as Washington Mutual, Capital One and Allstate Bank, also makes it difficult to increase the high ratio. However, it seems that the high proportion of the cost is still lower than the cost of establishing branches and dispatching employees.
According to the data of Celent, the online core deposit (the balance is less than100000) was162 billion in 2006, which is still less than 4% of the national core deposit. But by 20 1 0, this figure is expected to swell to $377 billion. Sanford Bernstein, an investment bank, said that in the past year, Internet customers contributed more than one-tenth of new deposits; In the next four years, they may account for more than half of the growth.
According to the data of Celent, the number of online core deposits worth $654.38+062 billion in 2006 (the balance is less than $654.38+10,000) is still less than 4% of the US core deposits. However, its total amount is expected to increase to $377 billion in 20 10. Sanford Bernstein, an investment bank, said that online customers contributed 10% of deposit growth last year, and may account for half of the growth in the next four years.
The most successful independent boycott is ING Direct, one of the pioneers. The subsidiary of the Dutch bank attracted $60 billion in deposits by offering free online savings accounts with no minimum balance and high interest rates. In the United States, its actual existence is limited to a few fashionable, neon orange Internet cafes, providing free Internet access and tolerable coffee.
Among those online banks that fight alone and would rather die than surrender, ING Direct, one of the pioneers in the industry, is the most successful. The subsidiary of ABN Amro has attracted $60 billion in deposits by providing free online savings account service with unlimited balance and high interest rate. In the United States, there are many Internet cafes decorated with orange signs, which provide Internet access and acceptable quality coffee. Only here can we see the heroic battle of ING Direct in America.
But Bruno Paulson of Sanford Bernstein says that hybrid banks that provide Internet services have made life difficult for pure online banks by generating higher returns. He said that ING Direct invested most of its deposits in high-quality (and therefore low-yield) securities, which provided it with a relatively low return on equity of 12%. It is setting up an online mortgage business to find more profitable uses for its cash, but it may be difficult to compete with companies that have sold mortgages, credit cards and commercial loans through its branches.
Bruno Paulson of Sanford Bernstein said: "Due to higher returns, hybrid banks that provide Internet services have affected pure online banks. ING Direct invests most of its deposits in high-quality and low-yield securities, and its stock return rate is only 12%. At present, it is setting up an online real estate mortgage loan business to find a more effective way to use the cash on hand. However, many banks have oversold mortgage loans, credit card loans and commercial loans, which may cause ING Direct to get into a bitter battle with these banks.
However, hybrid banks also have their own headaches. One is killing each other; For example, about one-fifth of CitiDirect's deposits come from its own branch customers. The other is to know when to sacrifice branches. Washington Mutual recently announced that it will close 4% of its branches-partly because it has successfully absorbed deposits on the Internet. For the world's largest bank, Citigroup's branch network is surprisingly small, which may be nothing to worry about.
Hybrid banks also have their own headaches. One of them is cannibalism. For example, one-fifth of CitiDirect's deposits come from customers who originally belonged to their own branches. Washington Mutual Bank has a plan when to sacrifice its branches. It recently announced that it will close 4% of its branches-partly because it has successfully absorbed deposits online. Although Citigroup is a large international bank, its branch network is surprisingly small. So, I saved a lot of heart.