In another sign of the retrenchment of the personal finance dotcom segment, the unprofitable online bank Compubank agreed to sell its accounts to a profitable competitor, NetBank. The sale is a sign of the continuing consolidation of Internet banks, as strong banks swallow up the weak in an increasingly-difficult market. Both Compubank and NetBank were early entrants in the field, but NetBank reached $1 billion in assets while Compubank had only $64.2 million in deposits and lost $26.2 million in 2000, despite the latter's heavy marketing activities.
In the online brokerage group, rumblings are afoot about the long-term viability of A.B. Watley and a few other of the smaller players on that crowded playing field. With the bear market in full swing, there will probably be many more acquisitions and mergers before 2001 is over.
In such a rapidly changing industry, it's hard to know which emerging companies will be around in another year or two. That makes it hard for consumers to choose -- particularly when it comes to financial institutions. The unfortunate side effect of massive industry consolidation is that it may raise consumer fears, and thereby drive customers into the eager hands of the larger and more-established firms, away from innovative startups like Compubank and NetBank. And it would be a shame if the evolution of online personal finance was stifled as a result.
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