I am curious to know any newer stats on this.

Thank you for your thoughtful and entertaining blog.

Our company provides lending and fund management systems in Australia.

I was surprised to read your comment that email support costs up to 2.5 times phone support. One of our customers is investigating increasing their proportion of email support because of the more efficient queuing it offers and the increasing reluctance of customers to wait for a voice operator, which can only be solved by expensive over-manning.

Could you elaborate a little on why you believe email costs so much?

Thanks and regards,

David

And indeed, the marketing budget of ING Direct is considerable. As you mention in Canada ING Direct is omnipresent in the offline world. Same in all other countries. In Australia the highly popular Scottish comedian Billy Connolly was behind a strong TV and other “traditional media” campaign.

In each country ING Direct’s traditional media marketing campaigns are rather strong and win many prizes.

For an Internet bank in the early 2000 up till now, the delicate mix between Internet and offline presence could still to be a critical differentiator for success.

But there are some Internet-banks-only. They use the phone as call center support; in Japan for example think of eBank, an e-Mail payment oriented bank. Also Sony Bank, Japan Net Bank (Sumitomo Mitsui Finance Group), IYBank (Ito Yokado group – a department store group with wide coverage of ATMs) renamed Seven since October last year seem heavily Internet-only positioned. All these banks became profitable after 3-4 years.

In Japan further, Yahoo Japan entered the trading business last year through a partnership with Nikko Cordial and online brokerage E*Trade Securities and together with Aozora Bank Yahoo Japan is moving into online financial services this year.

Except for eBank (run by President Taiichi Matsuo, former LTCB) all other Internet banks had strong parents with deep pockets to establish the online brand or leverage the existing brand (Sony). Although these banks are definitely not modeled after a phone bank, they are marketed strongly in the offline world. And eBank is marketed and operates more like a Paypal.

Are the Eggs and First Directs doing their positioning in the offline world as well as the Japanese examples or ING Direct?

Perhaps the “Internet” part is not the main success factor of successful design – not even for an Internet bank.

ING Direct chooses over-banked countries where ING has no retail bank presence. ING is not always offering the best savings rates and is mostly not the first direct bank in a country. In Italy, for example, Comdirect launched 6 months earlier with an interest rate of 6% whereas ING Direct would offer 5% on the savings accounts. Yet after 4 months ING Direct had 32,000 customers and Comdirect only 800.

What ING Direct does well for itself, indeed as mentioned in earlier comments, is to create limited amount of products. Products that do not require large back office operations and support. In fact, these services are often outsourced to the back offices of other banks as customers ‘connect’ their checking accounts from there to ING Direct.

What ING Direct does well for its customers is providing an experience. ING Direct is as much a brand as it is a distribution channel; in fact, it is a branded distribution channel into which its products and prices have merged. ING Direct is an online experience which penetrates the offline reality. The offline reality, the phone, has played a crucial role in the ING Direct success. The off line traditional marketing campaigns (TV commercials and such) were another key strategic pillar to build the brand in a way it became preferred to other brands.

I doubt if an Internet only bank, if defined as only accessible via a web site, will work for the current generation of customers.

An interesting way to study if an Internet only bank would work would perhaps be to test the thought to its extremes: open up a bank in Second Life and see what happens.

You might as well ask a bunch of airline mechanics to tear apart a 747 and make it into a helicopter. Just doesn’t work. You have to get helicopter people, and you have to give them helicopter parts to work with.

Your arguments are all the correct ones, and I think that they agree with the point I was making also… that the Egg thing is about management and that their losses are not only in line with the market at present, but have nothing whatsoever to do with the internet-only nature of their business.

As you correctly point out ING have a successful internet only bank. Hard to argue that the business model is broken given that data point.