For Immediate Release:
For Immediate Release:
BETHESDA, MD (May 2, 2000) - E-banking pioneer A. Bruce Cleveland, President and CEO of Presidential Bank, FSB, (www.presidentialbank.com), is completely unconcerned about stock market gyrations. Not only is he CEO of a successful online bank, but as majority owner of the privately held bank, he can remain serenely indifferent as the stock market ebbs and surges. In fact, Cleveland believes that deposits tend to go up as the NASDAQ falls, from money seeking a safer haven.
According to recent studies, nearly 6 million people bank online at brick and click banks, while only 250,000 depositors are willing to go the Internet-only banking route. A community bank's personal service, coupled with a private company's insulation from stock market concerns, may bring added value to consumers. Banks like Presidential are free to focus on their customers' needs and take a long-term approach to business.
The nation's very first online bank, Presidential opened its virtual doors on October 6, 1995, introducing the world to a completely new way to manage finances. And after nearly five years of operation on the Internet, it's still alive and thriving with a stable customer base, a fact that flies in the face of current online banking behavior, according to the GartnerGroup's K. Kerr. Kerr cites that "the churn rate for online banking is high, with annual estimates between 15 percent and 33 percent." A sizable number of people turn away from online banking almost as quickly as they log on to the concept.
Cleveland attributes the bank's online longevity and customer service success to five key points that may help others in the startup venture market.
1. High-Tech/High-Touch - "We're online, but not out of touch," he says. "We feel our online customers should enjoy the same level of personal service they would receive walking into one of our brick and mortar branches. When an email comes into the web center or the call center is contacted - customers get answers immediately."
2. No Gimmicks or Surprises - "I've seen other online banks, seeking to get business at all costs, offering promotional rates that obviously are not sustainable. Some banks even pay as high as 10 percent in temporary promotions to lure customers. But there always seems to be a catch. Usually there is a time limit and a relatively low amount on which they pay the high rate. We offer consistently high interest rates (now 6 percent APY) on checking account balances up to $25,000 (3.04 percent APY on greater amounts). We are the only bank in the country, probably the world, with a 5-year track record of high interest rates on Internet checking accounts. And we don't limit withdrawals."
3. Serving Both Businesses and Consumers - "Small businesses are also key customers of Presidential. We make it easy for small business owners to get commercial loans. Once they apply online using our "2 minutes/$2 million" qualification process and are accepted, we usually board a plane and fly out to meet the business owner before committing on the loan. The customer literally never has to leave the office to secure up to $2 million or more in loans. Yet the customer and the e-banker get to know each other face-to-face. And, we have a separate online deposit banking product for business customers, suitable for handling their higher transaction volumes."
4. Offering Peace of Mind - "Security goes a long way toward establishing trust. From early on, we hired security experts to attempt penetration of our system, and they weren't able to do it. Our emphasis on security gives our customers peace of mind. And, of course, their accounts are FDIC insured."
5. A Contrarian Business Model That Spells Profit - "Many other online banks have a business model that inevitably produces a low return on equity. Amid all the current hype about the Internet, they hope their stockholders won't notice their built-in low returns. So these banks raise a lot of deposit money over the Internet at high rates, but they don't know how to produce high yielding assets over the Internet to make an adequate profit on the deposits they take in. They end up buying most of their assets in the open market at relatively low yields or with higher credit risks, and the result is a low net interest spread, locking in low long-term profitability. Over time, the stock market is going to figure this out."
PresidentialBank.com continues to serve as an online innovator, offering a full line of consumer and business services, while pushing the envelope as it moves all its lending products, as well as deposit banking, online. "We haven't forgotten that the physical world still exists, and customers want both innovation and a high level of personalized service. We try to provide both." Cleveland explains.
Current best estimates by Dataquest indicate that more than 1,300 online banks are expected to proliferate by 2001, and most will probably follow the start-up, sell-out cycle. Even so, Jupiter Communications bets an estimated 28 million households will be banking online in 2003. America's first online bank, PresidentialBank.com, will be ready for them.
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