Wingspanbank - introduction and analysis

Table of Content

1. Executive Summary

2. Bank One Corporation
2.1. Bank One’s History
2.2. Corporate Profile

3. Internet Banking
3.1. The Development of Internet Banking
3.2. The Growth of Internet Banking
3.3. Internet Banking as a Strategic Necessity
3.4. Driving Factors of Internet Banking
3.5. The Opportunity for Internet Banking
3.6. The Biggest Obstacle to Success

4. WingspanBank.com
4.1. WingspanBank’s Introduction
4.2. WingspanBank.com`s Implementation in Bank One Corporation
4.3. WingspanBank.com’s Features
4.4. WingspanBank’s Alliance with Lycos
4.5. WingspanBank’s SWOT-Analysis
4.6. The Reintegration of WingspanBank.com into Bank One Corporation
4.7. The Failure of WingspanBank.com

Bibliography

Appendix

1. Executive Summary

Bank One Corporation the number four among the nation’s largest banking and financial institutes made a fundamental shift in its strategy by introducing a Internet-only bank as a separate division of Bank One Corporation in June 1999. Richard Vague, formerly the CEO of the credit card conglomerate First USA, and James Stewart set up the new and additional Internet division of Bank One which was named WingspanBank.com.

The objective of WingspanBank.com was to offer convenient, comprehensive, and objective solutions to customers at competitive prices. The national scope was to extend Wingspanbank.com beyond the 14 states in which Bank One already operated. Additionally WingspanBank.com targeted on a segment Bank One could not reach with its branches - the growing group of Internet users who disdained traditional banks. Both, the present and future users of Internet banking should have given WingspanBank.com as well as its parent company Bank One Corporation a competitive advantage over its main rivals such as Bank of America, Citigroup, US Bankcorp., NetB@nk, chase.com and wellsfargo.com.

The one million new accounts for WingspanBank.com expected by management were a very unrealistic objective. WingspanBank.com’s strategy and an alliance with Lycos continued to focus on Internet users only and not on establishing any branch system even though surveys indicated the desire of customers to have branches and a physical contact to banks as well. Unfortunately WingspanBank.com was reintegrated into the Bank One Corporation holding structure by June, 2001. This resulted also out of problem with First USA, a bad press about Bank One and the resignations of several Wingspanbank.com executives.

2. Bank One Corporation

2.1. Bank One’s History

Bank One Corporation was founded in 1868 by F.C. Session as Commercial National Bank in Columbus, Ohio. After two major acquisitions of National Bank of Commerce in 1929 and First Chicago NBD in a $30 million stock swap in 1998 Bank One Corporation is today headquartered in Chicago, Illinois.¹ Numerous additional acquisitions during the banks history make it currently the sixth largest holding company in the United States with more than 140 financial institutions represented by Bank One Corporation (See Appendix pg. 26). Currently the company is the number one Visa® card issuer, the number two in asset-backed trustee and mortgage-backed trustee, the number three credit card provider in the U.S., the number three bank provider of direct home equity loans, and the number four lender to small businesses .² It ranks among the top five commercial banks in the U.S. and with $24,527 million in revenues (See Appendix pg. 27) and 73,519 employees it is currently the number four among the nations banks after Bank of America Corp., J.P. Morgan Chase, and Wells Fargo and ranks 79th among the 2001 Fortune Five Hundred companies.³ Bank One Corporation’s credit ratings range from A by Standard & Poor’s over Aa3 by Moody`s to A+ by Fitch in senior debts.⁴

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Source: Fortune Five Hundred, 2002

2.2. Corporate Profile

Bank One Corporation is a multi bank holding company that provides domestic retail banking, finance and credit card services, world-wide commercial banking services, and trust and investment management services. Bank One operates banking offices in Arizona, Colorado, Florida, Illinois, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Texas, Utah, West Virginia, Wisconsin, and in certain international markets such as Australia, China, Mexico, South Korea, and Canada.

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Source: Bank One Corporation

Bank One also engages in other businesses related to banking and finance, including credit card and merchant processing, consumer and education finance, real estate-secured lending and servicing, insurance, venture capital, investment and merchant banking, trust, brokerage, investment management, leasing, community development and data processing (See Appendix pg. 28). These activities are conducted through bank subsidiaries and non-bank subsidiaries.⁵

3. Internet Banking

3.1. The Development of Internet Banking

For more than 15 years, industry experts have predicted that home electronic banking would finally reach a critical mass of consumer acceptance and that it would soon be commonplace to pay bills and access financial accounts from home. Every year, the banks and financial institutions that believed the predictions spent millions of dollars developing, marketing and supporting their untimely home banking systems. The investments they made were not just the multi-million dollar expenditures for the custom consumer software applications that many developed. They also had to create massive new IT departments to design and support the proprietary back-end systems, and install and maintain the hundreds of dial-in lines and racks of modems their customers would use for access. Almost without exception, these home banking systems failed to meet expectations and were soon scaled back in scope or totally abandoned.

Today, online banking is finally a reality, both in the rapidly growing consumer acceptance and in the financial results which can be seen by institutions that are deploying state-of-the-art electronic banking.

What is different nowadays? First, the huge investments required in proprietary IT have disappeared almost entirely. With the rise of the Internet and standard TCP/IP networking, banks can now offer online banking without dial-in lines, modems and all of the necessary equipment and people needed to support them. All that's needed now, from an IT standpoint, is a standard connection to the Internet, at a cost that can be as low as $1,000 per month. Second, the development of universal standard protocols such as OFX and Integrion Gold make it easier today for financial institutions to support online banking without any investment in client software development.

Today, developing an online banking solution using OFX, for example, allows a bank to please both types of consumers while removing all of the costs associated with the development, distribution and support of client software. A well-designed solution will automatically allow users of the major consumer financial software packages such as Microsoft Money™ and Intuit's Quicken™ to access statements, pay bills and initiate transactions. At the same time, the system permits access via the Internet for customers who do not need full financial planning, but want a full range of transaction and account access features like bill payment, fund transfers and a statement review.

The third major change affecting the acceptance of online banking is the availability of effective and especially reliable transaction security systems. One of the biggest concerns about online consumer banking has always been the security of the systems and the protection of sensitive transaction data (such as account numbers, balances etc.). While security remains a major issue for both, the bank and its customers, there are solutions today that are cost effective and allow an extraordinary degree of security, reliability and protection from misuse.

3.2. The Growth of Internet Banking

Internet banking is growing faster today than most financial service institutions had ever expected it to and causes a decline in branches and traditional banking institutes (See Appendix pg. 29). Today, around 4.5 million households use Internet banking and or bill payment at least once a month, and that number is expected to increase to 33.5 million nearly 31% of all U.S. households - by 2005.

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Source: Online Banking Report, January 1998

What’s contributing to this growth in online banking and bill payment? First, Internet usage is on the rise. Today, hundreds of million of people have an Internet access worldwide, and that number is increasing daily. And second, improvements in technology and customer acceptance have propelled the role of electronic commerce. By today millions of people have made at least one purchase online, and that number is still increasing. “Today one third of American households are using the Internet,” said

Mr. James Stewart III, former president and chief executive officer of WingspanBank.com in 1999.⁶

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Source: Online Banking Report, January 1998

3.3. Internet Banking as a Strategic Necessity

Given the wealth of opportunities that the Internet creates for financial service companies, and the accelerated pace with which banks are going online, having an Internet presence has become a strategic necessity for most banks, thrifts and other financial service institutions.

To understand this, one has to consider the affect of ATMs on the banking industry. From 1977 to 1988, Citibank, an early adopter of ATM technology, increased its market share in New York City from 4% to 13.4%. Many analysts agreed that ATMs were a substantial driver of that impressive growth. Indeed, in its early stages, the ATM was a source of strategic differentiation for Citibank and other early adopters. But as the technology was deployed more widely, the source of value associated with having ATM technology shifted. Today, ATM technology does not differentiate a bank - it is expected by customers as a basic service to be offered. ATMs have migrated from a differentiator to a strategic necessity.

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¹ Thompson A. A., and Strickland A. J., “Strategic Management: Concepts and Cases”, (New York: 2001), pg. C-370.

² Bank One Web Page, “Bank One Rankings”, www.shareholder.com/one/releases.cfm. March 7, 2002.

³ “America’s Largest Corporations: Fortune Five Hundred 2002”, (2002), pg. F-46.

⁴ Bank One Web Page, “Credit Ratings”, www.shareholder.com/one/releases.cfm. March 7, 2002.

⁵ Bank One Web Page, “Corporate Profile”, www.shareholder.com/one/releases.cfm. March 7, 2002.

⁶ Bank One Web Page, “WINGSPANBANK.COM Opens Virtual Doors Today: Internet Bank Revolutionizes Online Banking Experience By Providing Unparalleled Services with the Click of a Mouse”, www.shareholder.com/one/releases.cfm. 1999.