KEVIN COHEE
Starting a ‘movement’

In a deep baritone voice, Kevin Cohee, chairman and CEO of Boston-based OneUnited Bank, began inviting radio listeners to join OneUnited last month. OneUnited calls the pitch its Dignified Invitation Campaign, which is intended to attract new consumers now that the bank has added a virtual bank to reach beyond the four cities in which it has physical branches.

The ads first ran in Boston, Los Angeles, Miami and Ft. Lauderdale, Fla., the four cities where the bank already has brick-and-mortar offices. Last week the bank started airing the spot in other metropolitan areas, hoping to woo customers to its Internet banking platform.

OneUnited is the largest black-owned and -managed bank in the country, and now has laid claim to being the first black-owned Internet bank.

Competition in the far reaches of the World Wide Web might be lurking right around the corner, however. BankBlackwell, also based in Boston, is another black-owned bank currently in formation, working to raise the $16.5 million it needs in start-up capital. Jim Mundy, president and CEO of BankBlackwell, said the company is about a third of the way toward reaching that goal. He said he is confident his start-up Internet bank will raise the necessary funds, and once the virtual doors open, BankBlackwell also will be seeking to attract black bank customers from around the nation.

Cohee said OneUnited will act as an Internet-only bank in areas where there is not an office. But knowing the bank has a physical presence and an established name in some parts of the country, Cohee said he does not think the new strategy will face as many obstacles as a bank that is completely Internet based. Cohee also said that being the largest black-owned and -operated bank in the country carries significant weight in the black community, which may help overcome the reluctance of some consumers to bank with an institution that does not have a nearby office.

“Now we married that [appeal of OneUnited ownership] with the Internet,” he said, adding the community at large can “sign up and become part of the movement.”

Cohee laughs a little when he refers to OneUnited’s quest for consumer market share as “the battle for silver rights.” But Cohee said OneUnited has a serious mission: creating an Internet entity that aims not only to service consumers but also educate them on financial literacy and how to grow stronger as a minority group. He said the more people with saving accounts the more stability will arise in black communities.

The bank, however, is not relying on intangible loyalty factors in its plans to win over new customers. OneUnited is offering 3.75 interest for to its customers with online savings accounts, a rate of return Cohee called attractive and said is drawing in new customers.

“We thought it would be successful. We thought black America would be particularly receptive to this vehicle,” said Cohee. “It’s finally, for African-Americans, a dream come true. The word is getting out there. Feel the flavor of what we are doing.”

He said the idea of encouraging people to start savings accounts creates a sense of stability in any community. Black Americans, according to Cohee, have tended to be late adopters of technology, but are now at a point where they are ready on a large scale to participate in Internet banking.

“You’ve now got someone using the Internet to make financial transactions, engaging in an act of financial literacy,” Cohee said. “People have always been interested in what we are doing, but they couldn’t access us [in other part of the country], and we couldn’t access them. Look at it this way, we are everywhere in the United States right now. We are everywhere there is a computer.”

New Wave?
Mundy, of BankBlackwell, said the plan for his institution locally is for many of the investors to be customers and help market the bank. Mundy said the bank has formed relationships with several area African-American churches that have also become investors in the bank. And he said he is hoping a large portion of the bank’s business will come from black faith-based organizations.

“It can definitely work,” said Mundy. “We believe it is all about market segment. One of the bank’s core missions is to promote wealth in the African-American communities.”

According to Mundy, there are just under 50 black-owned banks nationwide. He said BankBlackwell is not out to directly compete or take away business from any of them. The model, he said, is for people to use BankBlackwell as their secondary, Internet bank account.

Mundy said one of the problems with Internet-only banks in the past was that they were run by technologists, not bankers. Ironically, his most recent banking experience was at OneUnited, where he served as chief financial officer until 2003 when he left to start his Internet-only bank.

“They [OneUnited and BankBlackwell] are obviously trying to pursue an opportunity. There was a first wave of internet banks that did fail. However there are others that have been able to last,” said Jim Jones, founder and president of First Wellesley Consulting, a bank consulting firm.

To have a lasting Internet bank, establishing a niche is important, The most prominent example of a successful internet bank is ING Direct, Jones said. When ING launched in 2000 it aggressively marketed its niche as a secondary bank specializing in Internet offerings and offering high rates of return, said Jones.

“They [ING] truly have decided not to be a full-service bank,” said Jones. “Everyone has seen the success of ING. Unless it [new Internet banks] is going to be a [similar] model, it will not be successful.”

Jones said the main problem with a lot of Internet-only banks is that it is not always convenient for consumers to make deposits. Customers must have already established an account somewhere else to transfer money in, or must use mail.

“We’ve got enough to deal with as business owners and consumers without wondering, ‘How do I know if my money will get there?’ It’s one thing to borrow money. It’s another thing to give them your money,” said Jones.

Jones said it will be extremely difficult to convince customers to join a bank via the Internet as their primary bank, as OneUnited is attempting to do. But he said he thinks there may be more attempts in the future from Internet-only start-up banks vying to be the secondary bank consumers use to obtain higher interest on their deposits.

Kevin Timmons, a senior bank analyst at CL King & Assoc., said he does not envision second wave of Internet banks succeeding better this time around. He said there may be a few examples, but they are exceptions to the rule.

Timmons said so many banks are offering more competitive rates as a way of attracting deposits that there is probably something consumers can find in their local banking area that is comparable to what Internet-only banks can offer. While Internet-only banks have traditionally offered great interest on savings accounts, Timmons said that might not be enough anymore.

“If your only pitch is we pay a great rate, you’ve got to do better,” said Timmons, warning, “It’s a tough time right now, period, to start a bank.”