Citibank's online-only arm waves
goodbye -- trend or aberration?
By Holden Lewis • Bankrate.com

Dearly beloved, we are gathered here today to pay our respects to the recently departed Citi f/i.

The online-only service of Citibank has breathed its last after a long struggle with managerial drift. The hermit-like banking site will not be missed much because it apparently had few customers.

Just more proof that change is endemic in this most mercurial form of banking and vigilance can be as important as a healthy balance if you bank virtually.

Only financial colossus Citigroup (Citibank's owner) knows how many depositors Citi f/i attracted during its uneventful life. Citigroup quietly activated Citi f/i a year ago and marketed the service in Austin, Texas. Then, amid management turmoil, Citigroup treated Citi f/i like the crazy aunt in the attic, hoping everyone would forget about it and waiting for it to die a discreet death.

On Aug. 1, Citi f/i stopped accepting applications for new accounts. Existing customers will automatically become regular Citibank customers, and they'll be able to use Direct Access, the online service for Citibank account-holders.

Citi f/i customers paid fewer fees and got higher interest rates on deposits in exchange for not trekking into branches, which are called "financial centers" in Citibankese.

But declaring branches off-limits didn't work, spokesman Mark Rodgers says: "We've learned, for the most part, that customers want at least some access to our financial centers."

Citi f/i was intended to serve a "small niche" of Internet-only customers, Rodgers says. Apparently, the niche was too small. About 600,000 U.S. residents bank online regularly with Citibank, and almost all of them use Direct Access instead of Citi f/i. That's as specific as Rodgers gets with the numbers.

And what about those lower fees and better interest rates? Will former Citi f/i customers continue to enjoy them, even as they are shuffled into the mainstream Citibank fold? Rodgers says that has yet to be decided. Meanwhile, if you received a Citi f/i promotional offer that hasn't expired, you can sign up for a Citibank account under the terms of the promotional deal by visiting the Citi f/i site.

x not X
If you really, really want to, you can still sign up for a checking account through X.com. But the online-only financial services company doesn't make it easy.

And no wonder. In a remarkably shrewd move, X.com bought sort-of competitor PayPal a few months ago, then promoted PayPal's online-payment services while allowing its online banking services to languish. Now when you go to the X.com home page, the PayPal logo is featured as prominently as X.com's.

More than 3 million people do business with X.com, and the "vast majority" are PayPal customers, spokesman Vince Sollitto says. Presumably, that means that a tiny minority has checking accounts and mutual funds through X.com. And X doesn't seem to be doing much to encourage people to open checking accounts and invest in mutual funds.

For the record, if you want to get an X.com checking account, you go to X.com's home page, click on the "X Finance" radio button, click on the "Login" button, click on "Help" on the resulting page, then click on "How do I register for an account at X.com?" Or you could just click here.

So Citigroup is giving up on its online-only bank and X.com is soft-pedaling its banking services. If you have an account at a virtual bank, should you worry that a shakeout is coming?

Not necessarily, says Richard Bell, an analyst who heads TowerGroup's e-banking group. Look at NetB@nk, Bell says: It has been profitable for eight quarters running and it's sticking around. "If that bank can do it, others can," Bell says.

Afterword
Beware scammers who set up fake bank Web sites.

In July, someone slavishly copied PayPal's site, graphics and all, posted it to a fake site called PayPai.com. Then the would-be thief sent e-mails to unsuspecting people, informing them that they had received money. The e-mails told potential victims to go to "PayPaI.com" -- that's "PayPai" with a capital "I" -- and type in their PayPal username and password.

According to Bob Sullivan's excellent article on MSNBC.com, this scam fooled some people, and PayPal (the legit company) quickly reassured customers that they wouldn't lose anything. The scammer was apparently based in the Russian city of Chelyabinsk (motto: "Most contaminated spot on the planet"). The fake site's Web hosting service quickly shut it down.

On a related note, watch for typographical errors when you type Web addresses into your browser. If you forget to type the dot after "www," you could end up going to a site you don't intend to visit.

-- Posted: Aug. 18, 2000