FRAMINGHAM (07/07/2000) - Online financier VirtualBank will become a player in the physical world this fall, when it opens two branches to serve its niche customers - employees of high-tech firms.
The Palm Beach Gardens, Florida-based bank went live on April 17 and recently signed deals with three high-tech companies for which it will provide Internet banking as a convenience to employees.
Virtual Bank is not the only one to move online banking off-line. In March, Royal Bank of Canada, which owns online bank Security First Network Bank in Atlanta, agreed to buy Prism Financial Corp., a mortgage bank. That deal would give Security First access to 150 branch offices.
And Menlo Park, California-based ETrade Group Inc., which offers banking services in addition to online trading, recently purchased retail space in Minneapolis-based Target Corp.'s Super Target department stores. ETrade also bought about 8,500 automated teller machines.
But analysts said VirtualBank is the first online bank to offer itself to employees as a credit union would.
In addition to putting up a physical branch in or near each of the companies, VirtualBank will also create a co-branded Web site to serve those companies' employees, said President William Decker.
The first one, EMCVirtualBank, will serve the 18,000 employees at EMC Corp. in Hopkinton, Massachusetts. Later this year, VirtualBank will launch other Web sites to serve the 70,000 employees of Compaq Computer Corp. and the 68,000 workers at financial services provider Textron Financial Corp., a subsidiary of Textron Inc.
Decker added that VirtualBank hopes to reach 5% to 25% of the employees at each company it partners with.
"VirtualBank is doing a number of things that we would suggest online banks do," said Paul Jamieson, an analyst at Lincoln, Massachusetts-based Gomez Advisors Inc. "They're partnering with known brands - in this case, employers - with built-in trust and a built-in constituency. And they are developing a physical-presence strategy."
According to Jamieson, this lets VirtualBank address some issues that have been affecting online banking: awareness, trust and customers' wish for a physical presence.
"Our focus has been to go out and target companies that have good corporate brands," said Decker.
Internet banking can help a company's image, which is what attracted EMC.
"We offer a number of benefits," said EMC spokesman Rick Lacroix. "This provides an extra benefit to our employees and helps them balance the time demands of their work life and their personal life."
VirtualBank also assigns each customer a "relationship manager," who is responsible for handling all the customer's business with the bank.
It also has some of the best rates in the nation. VirtualBank offers 6.5% interest on money market accounts, according to Bank Rate Monitor in North Palm Beach, Florida.