WingspanBank.com, the Internet-only bank that Bank One Corp. opened two years ago "with the promise of revolutionizing the way people manage their finances," is shutting its virtual doors.
Chicago-based Bank One, the No. 5 U.S. bank, said Thursday it will close Wingspan after mid-September to cut its "substantial expense."
Spokesman Thomas Kelly wouldn't quantify the expected savings. He said customers were notified by e-mail that their 225,000 accounts will be shifted to Bankone.com, the company's main Web site.
The demise of Wingspan, a bank without branches or tellers, underscores how Internet-only banks have failed to live up to claims that they would snare technology-savvy customers, cut banks' service delivery costs and fuel profit. Competitors such as TeleBanc Financial and CompuBank have been sold or shut.
"Banks have not proven they can operate without a branch model," said Lisa Welch, a banking analyst at John Hancock Advisers. "People still want to be able to go to a branch to get cash or see a teller."
Bank One spent as much as $150 million, including a national advertising push, to start Wingspan, Kelly said. Yet the Internet bank was flawed because people found it difficult to deposit and get money, and transactions at automated teller machines often carried fees, analysts said.
"It was too much, too soon in an effort to gain an online advantage and they spent more than they should have," said Mike Mayo, an analyst at Prudential Securities. "I can't imagine how this got close to breaking even."
John B. McCoy, Bank One's chief executive when Wingspan opened for business on June 24, 1999, had predicted the unit would boost company earnings by 5 cents a share in its second year and by 20 cents in the third year. It's not known if Wingspan ever made money because Bank One doesn't disclose separate financial statements for the business.
Jamie Dimon, who succeeded McCoy as CEO in March 2000, has been critical of Wingspan. Dimon, the former Citigroup president, was hired three months after McCoy retired amid a slump in Bank One's profit and shares.
Bank One (ticker symbol: ONE) rose 52 cents to $35.52 Thursday on the New York Stock Exchange.