Shrinking the Portal

By Joseph A. Giannone

Banking's once-grandiose portal projects have come to naught, but some of the concepts and techniques have found a place in today's Web sites.

Where have all the bank portals gone?

Far from a "long time passing," it's been only a few years since some of the largest U.S. banks, swept up in e-commerce mania, were spending millions to build Web sites that would contain enough ancillary attractions — news, weather, games and the like — to serve as home pages for online financial customers. They spent additional millions as they raced to forge marketing agreements with popular nonbank consumer portals such as Yahoo! and Lycos.

In the wake of the dot-com crash and subsequent economic downturn, "Nobody is talking about portals anymore," says Jeanne Capachin, a financial services analyst at Newton, Mass.-based Meridien Research. "The portal strategy was not a good investment."

That's an understatement. Plenty of people visited the portals, some even clicked on banner ads, but few actually bought anything. As banks withdrew funding, most portal experiments were quietly swept under the rug, along with the more elaborate online banking platforms such as Wingspanbank.com.

It wasn't all for naught, though. Banks learned some valuable, albeit expensive, lessons: define your strengths as a business, provide services customers actually need, and don't waste precious capital for the sake of buzz. Today, the best portal-related ideas are reflected in the broader Internet offerings of banks.

The "community of interest" concept, for example, lives on at the "resource centers" Wells Fargo & Co. maintains at its Web site for student loans, retirement planning and mortgages. FleetBoston Financial Corp. operates a Web site for small business customers. Even some of the advertising in nonbank portals lives on, albeit with a difference. This time, banks are driving harder bargains by conditioning their payments on factors such as actual referrals, sales and relationship profitability.

"That makes sense," says Octavio Marenzi, manager director at Boston-based Celent Communications. "What made no sense was expecting people to come to your site to check skiing conditions, buy flowers or get the weather report."

Land Grab

Back in the late '90s, many bankers viewed the Internet as a land rush that was being won by virtual upstarts such as America Online, Yahoo!, Lycos and Microsoft Network. Web sites operated by these companies seemed to dominate the Web, the most popular among them attracting about 15% of all Internet traffic with news, chat rooms and search engines.

Known as "portals" because they served as primary entry points into the Web, these sites mix rich content and utilitarian features to attract users on a mass scale, as opposed to a niche audience. Former Bank One Corp. chairman John B. McCoy Jr. likened them to a city's most valuable real estate, the idea being that once prime land was taken for development, it was gone forever.

Worried that they would be crowded out of the action, banks leapt into action. "We had to preserve market share. We were trying to understand what this phenomenon was all about," says Sami Siddiqui, head of consumer Internet services at Citigroup Inc.

Individual approaches differed, but a bank portal strategy usually involved one or two main elements. The first was to advertise heavily on nonbank Web sites to attempt to draw prospects to the bank's own Web site. The other, more ambitious, approach was to try to establish the bank's own Web site as a portal — in other words, a primary destination for customers when they browsed the Web.

Both courses of action were very expensive. Chicago-based Bank One inked a $125 million pact with Excite, while its First USA credit card unit signed a $500 million deal with America Online. Bank One's Internet-only subsidiary, WingspanBank.com, then agreed to spend up to $135 million to advertise on Lycos. A Bank One spokesman says the company spent less than the stated amounts because of performance conditions in the contracts.

Citigroup, meanwhile, signed a five-year deal with AOL Time Warner Inc. in 2000, reportedly valued at $100 million, giving the New York-based bank top billing on America Online's financial pages.

These payments were agreed upon before banks and everyone else realized how ineffective Internet advertising actually is. While it is true that lots of people view the banner ads flickering on their screens, few bother to click on them and visit advertisers' sites — only about 1% by some estimates.

Still, Siddiqui maintains Citigroup's marketing agreement with AOL yielded useful lessons. "We learned a lot of new things about consumer preferences," Siddiqui says. "We learned about what places to run a banner ad, and what types of offers are needed to get a higher response."

Banks still advertise on nonbank portals, but in a more discriminating manner. They drive harder bargains with the consumer portals, linking payments to actual referrals, sales and even profitability per-customer. "Portal alliances haven't died off, but they're under intense scrutiny," says Forrester Research Inc. analyst Catherine Graeber.

Portal Proliferation

Some banks went beyond advertising on portals to build destinations of their own, a process that included securing memorable (and usually expensive) domain names and then beefing up site content with news, sports scores, weather and, later on, account aggregation.

The most ambitious of these efforts was spearheaded by Citigroup, which formed a special e-commerce "incubator" in 1997 under the direction of former cable television executive Edward D. Horowitz. Appearing to focus more on experimentation than on near-term, bottom-line results, the unit known as e-Citi launched Citi f/i as a standalone, virtual bank along the lines of Bank One's Wingspan and Atlanta-based NetBank Inc.

E-Citi also sponsored the development of more than a dozen independent portals promoting different products or services. These included bizzed.com, for small businesses, and finance.com, a consumer portal that didn't mention its connection to Citigroup but professed to offer unbiased personal financial advice and links to other providers. The problem was, each of these sites generated its own expenses, confused Citigroup's overall branding message and didn't connect with the rest of the bank.

By early 2001, e-Citi had amassed 1,100 employees and an estimated $1 billion in operating losses, which proved unsustainable even for a company as large as Citigroup. Horowitz departed and e-Citi was broken up, with operations such as Citi f/i parceled out to Citigroup's mainstream Web sites. Today, if you type in finance.com on your browser, you'll end up at Citibank.com. Visitors to bizzed.com are re-routed to citibusiness.com.

Bank officials say the company's banking, investment and insurance units
still support about 40 different Web sites, but they expect that number to keep shrinking. While the major citibank.com and citigroup.com sites continue to support plenty of hyperlinks to external providers, the emphasis now is clearly on reinforcing Citigroup's own stable of financial services businesses.

Charlotte, N.C.-based Bank of America Corp., likewise, once touted plans to build four portals focused on consumers, businesses, capital markets and money management. It even forked over $3 million for an Internet domain name, loans.com, in order to develop a multi-lender portal. But if you visit loans.com today, you'll find yourself at a site that offers credit card, home equity and mortgage loans from just one provider — Bank of America. And the four portals have been condensed into two: the commercial bank's home page, and a site maintained by the company's investment banking and capital markets division.

Bank One also ended up dismantling its portal strategy as represented by the standalone Wingspanbank.com. Typing in that name today brings you to bankone.com's home page.

Smaller banks were no more able to make the portal strategy work than large ones. USABancshares, a tiny, Philadelphia-based thrift, deployed video game-quality graphics on a portal site that sold both financial-related and music CDs and provided links to such eclectic material as the National Space and Aeronautics Administration and Boolabong surfing apparel. But the expense of developing these services ultimately proved the thrift's undoing. Bleeding deposits and capital, USABancshares spent months under the watch of regulators before selling out in March to Berkshire Financial Holdings, a private investor group.

No Blank Checks

All of these players eventually learned that while customers might have enjoyed getting ski reports, sports scores and local weather on their bank sites, the hits didn't translate into real business in the form of, say, higher loan volumes and new checking accounts. Meanwhile, these elaborate operations consumed valuable computer resources, network capacity and lots of cash. "It's not that the services weren't popular, it's just that the banks weren't getting paid for providing them," says Forrester's Graeber.

Gomez Advisors, an e-commerce research firm based in Concord, Mass., last year surveyed banking customers regarding bank Web site features they valued the most. Entertainment and other ancillary information ranked very low compared with services that helped people manage their financial lives.

"We found that customers' awareness of their bank site offering weather reports, sports or news didn't correlate with their happiness with the bank," says Gomez analyst Christopher Musto. "Banks got burned badly trying to beat the mainstream portals. They were paying a lot for non-performance."

Even services that could be considered more relevant have fared poorly. Small business portal sites, which offer discounts on office supplies and links to lawyers and consultants, apparently have so far generated little customer interest. One problem, analysts say, is that people don't expect such services from a bank Web site and consequently don't assign value to them.

All of these ventures are being scrutinized in today's more austere economic environment, where budgets are under a tight leash. "Blank check time is over," Graeber says. "Now there's pressure to show value."

Despite the expensive misfires, bankers say their portal efforts did yield some valuable lessons that are now being applied to improve customer service and develop more compelling Internet offerings. "We're getting away from the Buck Rogers futuristic solutions, to the 'Help me to do the day-to-day things easier solutions,' " says Kevin Watters, head of consumer Internet services at Bank One.

WingspanBank innovations retained by Bank One, according to Watters, include e-mail alerts telling customers when a statement is ready for viewing or when a credit card bill is due. Bank One is also working to create a more efficient "one-click access" to all of its services from the home page.

Wells Fargo is currently expanding its single sign-on access to include banking, brokerage services, credit cards, mortgages and other services. "Our focus has shifted to 'back to basics.' We try to increase the usability of the site," says James Smith, senior vice president at Wells Fargo in charge of consumer Internet services. "We were learning on the Internet. It was a lot of R&D."

Sometimes that learning process means cutting out programs that are popular. About five years ago, Wells Fargo occasionally sold non-bank products through its Web site, such as flowers on Mothers Day and candy on Valentine's Day. Now those amenities, considered a distraction, have been discontinued.

Some vestige of a portal strategy remains at Wells Fargo in a series of "resource centers" that reside on the bank's home page. Visitors can click on links that take them to sites focused on retail banking, student loans, retirement planning, mortgages, insurance and investments. The mortgage center, for example, features links on refinancing, advice on selling a home and applications for home equity credit lines. Links for tools, calculators and search applications are displayed in the margins.

Citigroup likewise still manages dozens of Internet sites and applications linked to the many banking, insurance and investments businesses under its red umbrella corporate logo. That includes retail banking on citibank.com, capital markets exchanges run by Salomon Smith Barney, and wholesale services, such as online cash management. Citibank.com itself is still designed to attract a broad audience and route those people to areas of increasingly specific interest. And some of Citi f/i's innovations, such as customized Web pages, have been retained.

All this underscores how bankers have learned that bells and whistles don't constitute an effective online financial services strategy. The key requirements, rather, are a tight focus on a select audience, i.e., the bank's own customers, and the delivery of information and services those customers really care about.

Mr. Giannone is a freelance writer based in New York City.

Copyright © 2003 by Banking Strategies, published by BAI.

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