CompuBank

» see compubank.com as it lived, on the wayback machine

~ the goodbye ~

Internet banking reached me from the other direction entirely. The Turkish banks were on the web early, from the late nineties, but what they put there was the branch you already used, with your existing account number and the same manager down the road. Nobody in Ankara was proposing a bank made of nothing but a website. CompuBank was american down to the charter, so there was never a version of it i could have opened.

Frank Goldberg started it in Houston in 1998 and put it on the internet that October, from an office in Greenway Plaza. The genuinely new thing was the paperwork. The Office of the Comptroller of the Currency granted it a national bank charter to operate solely on the internet, which had not been done before in the United States. Everything else about the launch was ordinary. Even the site was thin, closer to a page of links than a bank.

It arrived into a two-year window when this looked like the obvious future. NetBank was already trading out of Atlanta and Bank One was about to build Wingspan, and every plan in the category ran on the same line: no branches means no branch costs, so we can pay you better interest. The arithmetic was sound. The customer behavior was not.

~ the chronicle ~

~ the decline ~

CompuBank's specific failure was that it had almost nothing to sell you except a place to keep money. Banks make their living on the spread between deposits and loans, and CompuBank barely had a loan side, so every account it opened was a cost. It tried a late pivot into small business banking and that did not take either.

The deposits it did attract were second accounts. The average balance was 1,328 dollars, roughly a fifth of what NetBank's customers were holding, which is the signature of people testing something rather than moving into it. Meanwhile the banks with branches spent 1999 and 2000 building perfectly adequate websites, and the entire proposition evaporated. You no longer had to choose between a website and a branch.

~ the day it died ~

On 29 march 2001 NetBank closed on the deal, paying about four million dollars for all 57,000 funded accounts holding 75.7 million dollars. One analyst quoted at the time put it plainly: CompuBank was going under, and NetBank bought the accounts cheap. A week after the sale CompuBank filed for bankruptcy protection.

The customers had the worse end of it. NetBank's conversion of the CompuBank book went badly and kept going badly, and about five thousand accounts were frozen during identity checks, some for weeks, while the bank tried to reconcile records it could not match against people it could not reach. Three former customers sued in federal court in Seattle. NetBank had spent another 1.1 million dollars on the conversion, which worked out at about 110 dollars per account acquired, and then spent a year explaining itself on message boards.

~ what remains ~

NetBank itself was closed by regulators in september 2007, the largest American bank failure since the eighties, so the buyer outlived the seller by six years and then went the same way with more noise. The charter CompuBank won is the part that survived. Once a regulator has written down that a bank may exist entirely online, that page does not get torn up, and every neobank chartered since has walked through a door somebody had to open in 1998.

compubank.com does not resolve. Its actual monument is that nobody now finds the idea of a bank without a building remarkable enough to name a company after it.

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