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Canadian bank's Net proposal ratified

Canada's largest bank slips in the back door of the US retail market, winning preliminary approval for an Internet bank offering financial services electronically and through kiosks in Florida grocery stores.

Canada's second largest bank is slipping in the back door of U.S. retail banking, today winning preliminary approval to set up an Internet bank that will offer financial services electronically and through kiosks in Florida grocery stores.

The Office of the Comptroller of the Currency go-ahead moves Canadian Imperial Bank of Commerce another step toward launching the Internet bank this fall.

Under an agreement announced last month, CIBC will install banking kiosks in 40 Winn-Dixie stores in Florida, starting with the Orlando area. The store-based operations, to be called Marketplace Bank, form a key part of the Canadian outfit's strategy.

"This is not a pure Internet financial services offer targeted at Winn-Dixie customers," said David McGown, CIBC's director of public affairs, noting that the kiosks are a critical piece.

"The offer we have rests on both factors being present. The in-store piece is very important in terms customer recognition and acceptance."

The Winn-Dixie arrangement mimics a CIBC arrangement with Canadian grocery chain Loblaws, where branches called President's Choice Financial operated 135 stores as of May, with more opening every week. Another CIBC source said the Net-based bank in the grocer is adding 4,000 customers a week.

Internet banking has drawn interest from other major U.S. and European banks. In March 1998, CIBC rival Royal Bank of Canada bought Atlanta-based Internet-only bank Security First Network Bank. Last month Bank One announced it has set up a separate online-only bank called WingspanBank.com.

Other big U.S. banks have tried to move their brick-and-mortar brand names into Internet banking by adding online banking to their menu of services. Bank of America, Citibank, and others fall into that category. In recent months, Chase Manhattan and Wells Fargo have set up separate Internet divisions within their companies, in an effort to focus one group exclusively on the Net.

Internet banks have been viewed as potential acquisition since E*Trade on June 1 acquired online-only bank Telebanc Financial for $1.8 billion in stock. Some analysts questioned the deal because it didn't give E*Trade a physical presence. In this spring the stock of online-only Net.B@nk went on a wild ride after acquisition rumors.

For CIBC, an Internet bank with supermarket kiosks gives it a cheaper way to move into the U.S. market, saving on real estate as well as on staffing physical bank branches. Customers of CIBC's planned bank will be able to access their accounts online or over the phone, and the in-store operations also will include ATMs.

For Winn-Dixie, which has 1,180 stores in 14 southern states and the Bahamas, the deal with CIBC will bring banking into more stores than the 250 supermarkets that currently house bank operations.

"We like to have banks in all our stores," said Winn-Dixie spokesman Mickey Clerc. "It's an added convenience for our customers."

The lower costs of operating online and in supermarkets will allow CIBC to offer free or low-cost services through Marketplace Bank, McGown said, giving them an edge over brick-and-mortar competitors. CIBC intends to rely on partners to offer some financial services, including iOwn, formerly called HomeShark, for online mortgage offerings. CIBC is a minority investor in iOwn.

CIBC hopes to expand to other Winn-Dixie stores if its 40-store pilot goes well but isn't committed online to that chain exclusively.

The OCC analysis of CIBC's application indicates that regulators see the bank as falling between a traditional branch and a pure-play Internet bank. But before CIBC can open consumer operations with Winn-Dixie, it must gain approval of the Federal Deposit Insurance Corporation, which insures bank deposits, and the Federal Reserve Board.

CIBC has U.S. commercial operations for businesses based in New York, and several years ago purchased an investment bank that now operates as CIBC Oppenheimer.