IF a picture paints a thousand words, a sketch would do for you

Halifax pays $1m for IF.com address

Halifax, the UK's biggest mortgage bank, has splashed out $1 million for the domain name address IF.Com.

This will stand for Intelligent Finance, the name for its new standalone Internet and telephone banking operation, announced on Friday (Feb 18). IF also comprises two middle letters of Halifax, the bank helpfully points out. So there you have it, instant brand heritage for a spanking new non-mortgage operation. (Also, IF is no worse than Smile or Cahoot or Egg, other daftly-dubbed British Net banks.)

But what about the low-value, low-wage customers left behind within the Halifax bricks and mortar network (as a mortgage bank it's going to have plenty of those kind of people)?

With IF, the beating Internet heart, ripped out of the Halifax, are these people now to bank with the Halax? Or is to be UFnondotcom. As in "Unintelligent Finance"?

What IFs

Halifax's Internet plans were responsible for the company's market cap increasing £3.8 billion at the end of last week. This is dumb. Egg, the Prudential's online bank, could be valued at anywhere between £2 billion and £4 billion, when it floats this year. And this is a "real" British Internet bank with "real" customers and "real" losses.

Q: How can IF.com be worth as much as the upper high-end projections for Egg, when it is still at the starter's gate -- along with dozens of other British financial institutions, crowding into the net banking scene?

A: Easy -- IF's conjured up a magic ingredient -- a new product said to be "on the scale of the invention of credit cards".

But what could it be? Halifax ain't saying just yet, because that would give the game away. Or maybe it would get hauled up before the Magic Circle, for revealing trade secrets.

"It's the uniqueness of the proposition that stops us from giving you any details of it," says Jim Spowart, who left Standard Life to run IF, in Saturday's FT.

Hmm...
His boss, Halifax chief executive James Crosby, is equally bullish: "We believe that we will make real money (from IF). That is real money. Not Internet money."

Halifax aims to poach 500,000 customers from rival banks for IF, which launches in July, by the end of the year, and it's gunning for two million customers by the end of 2004. Crosby says the company has a target after-tax return on capital of 15 per cent. These figures may come back to haunt him.

So how will the company achieve its targets -- especially when IF, together with esure, Halifax's new online insurance company announced on Thursday (Feb 17), will cost only £150 million (and £1.5 billion of capital to underwrite the business).

IF is kicking off with a £30 million media blitz "shortly", so that leaves only £120 million to spend on developing the databases, setting up and running the customer call centre, and crucially to offer cut price borrowing to savers, and premium savings rates to investors. In Internet banking terms this is not a lot of money.

Some IFs and lots of Buts

To attract well-off and wealthy customers, IF will need to offer better than average rates. Much better than average. But how does it retain these customers, who have already shown that they are footloose by setting up an account with the bank in the first place?

And how does it persuade these customers to buy other more profitable products, such as life insurance, pensions from what will still be seen as essentially a the subsidiary of a mortgage bank (whose parent announced on Friday that it was making £19m of provisions to cover compensation for pensions mis-selling).

Generally speaking, banks are crap at bancassurance - the one-stop personal finance shop - because a: they don't offer best of breed products and b: their customers mistrust them.

Punters with money will continue to use financial advisers and accountants, and they will continue to spread their money around multiple bank accounts. If not necessarily with IF. ®

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