Brick-and-mortar banks' Web sites saw a far greater increase in use during the past year than online-only banks, according to a report released today that predicts the demise of Internet banks that don't embrace a particular niche audience or build physical locations.

Analysts have said for more than a year that online banks must offer either branch offices or automated teller machine (ATM) kiosks if they intend to survive, and a report from New York-based Jupiter Media Metrix Inc. that examined Web traffic for each of the country's leading online and traditional bank sites in July 2000 and July 2001 seems to back the analysts' assertions.

Visits to the Web sites of banks that offer physical locations and online services rose from 6.4 million in July 2000 to 13.4 million in July 2001, a 110.5 percent increase. Traffic at online-only banks fell 8.1 percent, from 1.2 million "unique" visitors to 1.1 million, during the same period, Jupiter Media Metrix reported.

The report also showed that online traffic at all bank sites grew 77.6 percent between July 2000 and July 2001, compared with an 18.9 percent overall rise in Web traffic.

James Van Dyke, research director at Jupiter, said that the new data confirms that online banks must begin to offer "physical distribution or audience specialization to survive" and suggested that traditional banks are now reaping the benefits of greater consumer comfort with online banking.

"Consumer surveys show that too many people value things like physical access to money, customer service and how long a bank has been in service," Van Dyke said.

In April, Needham, Mass.-based market research firm TowerGroup released a study showing that although the Internet has reached a critical mass among U.S. consumers, the traditional bank branch remains the primary source for delivery of financial services. Only 17 percent of households bank online, according to TowerGroup.

According to Jupiter Media Metrix, New York-based Chase Manhattan Corp.'s Chase.com was the most visited multichannel bank in July 2001. It also posted the largest year-over-year gain, with a 281.1 percent increase in unique visitors, up from 957,000 in July 2000 to 3.6 million last month. Wells Fargo & Co. and Citibank rounded out the top three most-trafficked multichannel banks in July 2001, with each site drawing approximately 3.5 million unique visitors.

Van Dyke attributed Chase's popularity to the success of its online credit card advertisements on other Web sites rather than to customers logging in to conduct banking online.

Of the top four online-only banks, only Alpharetta, Ga.-based NetBank Inc. has reported consecutive quarterly profits, according to Van Dyke. And it purchased ATMs along with Clearwater, Fla.-based Market Street Mortgage, a brick-and-mortar mortgage lending business, this spring so it could create physical locations.

WingspanBank.com was folded back into parent company Bank One Corp. earlier this year, ETrade Bank saw a significant drop in volume during the past year, and Juniper Financial Corp. has seen no movement in Web site use since the middle of last year, according to Van Dyke.

"Online banking has moved from being a competitive edge to a commodity," he said.

Van Dyke pointed to banks such as the Navy Federal Credit Union, which caters to retirees, and the Gay and Lesbian Savings Bank in Pensacola, Fla., as institutions that have successfully taken advantage of niche audiences with special needs to turn a profit.

"Gay couples can't get married in most states, so when they want to take out a loan, their assets aren't treated as pooled," he said. "[Traditional] banks aren't used to that audience's needs."