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Net bank Juniper Financial nabs $94 million

The online banking start-up tomorrow plans to announce a whopping $94 million second round of financing led by J&W Seligman.

Online banking start-up Juniper Financial tomorrow plans to announce a whopping $94 million second round of financing led by J&W Seligman, according to the company.

Juniper is headed by credit card company First USA's former chief executive Richard Vague and its former president Jim Stewart. The pair also for a time ran Bank One's troubled online banking subsidiary,, after Bank One acquired First USA in 1998.

Analysts said they were surprised by the size of the deal. Consumers have been slow to adopt online banking, which typically offers higher interest rates on accounts but fails to match the convenience of traditional banks. Net-only banks have fallen on hard times, facing growing competition from traditional banks and suffering from a renewed focus on Internet security.

Jason Lind, a research analyst at U.S. Bancorp Piper Jaffray, said that the weakness of online banking is a lack of access to cash and easy deposits.

"Net only banks are a tough sell," he said. "Everybody likes better rates, but if you can't get to (your money) that doesn't matter...People would rather not have to look around to find an ATM than get one or two extra points on their accounts."

Lind said the market for online banking as a stand-alone business is "questionable" and pointed to integration of online financial services as the biggest opportunity for Net banks.

Juniper's Stewart admitted that rivals offering integrated services, including E*Trade, have a lead in the market. But he said few online banks have executed well. Countering service concerns, he said Juniper will launch this fall with both an online and an offline component. For example, Juniper has partnered with Mailboxes Etc. to provide customers with a storefront to make deposits.

He also said that Juniper's management experience gives it a leg up over competitors. According to Juniper's Web site, First USA grew from a virtual start-up in 1985 to the largest VISA credit card issuer in the world with 57 million credit cards issued, $70 billion in loans and more than 20,000 employees.

"There are a lot of Internet-only banks, but not many have got consumers to go over en masse," said Stewart, adding that he believes that spells opportunity.