When he's not devising some new wrinkle on the e-finance business, Richard Vague likes nothing better than to kick back and listen to jazz. Now, the former leading light at credit card company
has an Internet-banking start-up that, like Vague's favorite artist,
Miles Davis, is provoking a mixture of praise and bewildered distaste.
E-finance companies have recently made investors kind of blue. Witness the melancholic stock price performances of firms like
( EELN) and
Certainly, none of these has come remotely close to having the sort of impact on online consumers as
It's hardly an upbeat backdrop for Vague and his firm,
, which was set up this year and has received a $20 million investment from private equity firm
What I Say
But, pointing to his track record, Vague's fans assume he can do better than the pack with his new Web site, which aims to start offering financial products sometime in the fall. For most of the '90s, he was hailed as one of the most talented executives in financial services. He earned this reputation at the helm of First USA, which for several years wowed the industry with its cutting-edge marketing techniques and zestful profit growth. Bank One bought First USA in 1997, and Vague was given a senior position at the bank.
"I am betting that Dick is going to be a success," says Tom Brown, manager at New York-based
Second Curve Capital
, which invests in stocks of financial-services companies.
In an interview, Vague, who is both chairman and chief executive of Juniper, shared only the bare bones of his strategy. He says the firm will offer two main products itself, credit cards and checking accounts. Juniper doesn't aim to target borrowers with spotty credit histories, like credit card firm
( PVN), and he claims that he won't slash rates to get growth.
As well as cards, the Juniper site will also include a broad range of other financial services, from other types of loans to insurance to mutual funds, but these will be originated by other firms. The 44-year-old also speaks enthusiastically about the Internet making it possible for the first time to give financial advice to middle-income consumers. He didn't share details on this tack, saying he didn't want competitors to get an early insight into his plans.
"They've got a good model," says Jeff Runnfeldt, e-finance analyst at
in San Francisco. He reckons that the strategy of basing the site around frequently used products like credit cards and checking accounts will help to keep bringing customers back to the site. And offering a wide range of other products will give Juniper a lot of opportunities to cross-sell. Brown adds that Vague's marketing skills should enable Juniper to make more of an impact on the public mindset than its online rivals and the big banks that have Web operations.
While Vague has a lot of followers, he also faces significant skepticism. First off, some are struggling to see how Juniper will be different. NextCard already offers credit cards, Net.B@nk is growing account numbers at a reasonable clip,
( SCH) is coming to dominate the middle-market wealth-management business, and E-Loan and LendingTree already offer a spectrum of loan products.
Vague responds that Juniper's customers will come back to the site more often than those of the loan-only sites; once a customer gets a loan, she has little reason to return to a site. But that's not the case with a checking account and credit cards. As for NextCard, Vague not only believes Juniper can acquire more customers than that firm, but it will also do so more cheaply. He cites First USA's reasonably priced, rapid account growth as proof.
Still, perhaps the biggest competition he faces are the established banks, which offer customers increasingly sophisticated online services, says Peter Kuper, e-finance analyst at
in Boston. "How is Vague going to attract people? What is their hook?" he asks, adding: "Maybe they're being vague to create a buzz. But in this environment people want something to chew on."
And questions have to be asked about Vague's role in the big missteps at First USA in 1998 and 1999, when harsh fee practices prompted an exodus of customers that in turn caused a massive drop in profits. Vague says that Bank One executives stepped up profitability targets and his management team resorted to tougher fee practices and reduced marketing dollars to meet them. Bank One didn't comment.
Critics also think Vague may be further tainted by his role in setting up Bank One's
, the Internet-only bank set up a year ago that many hold to be an expensive flop. Vague, however, says the $100 million-plus sums reported for Wingspan's marketing spend are "wildly incorrect." Wingspan's first-year budget for
was $80 million, he says, adding that his team never got a chance to launch their direct-marketing campaign before he left.
Take it away, Dick.