Don’t Bet Against Cap One + ING Direct
Much of the blog coverage of yesterday’s announcement that Capital One Financial Corp. will purchase ING Direct lauded the $9 billion deal, or at least didn’t knock it.
The reviews should be far more positive. Cap One is going to knock this deal out of the ballpark.
A read through yesterday’s coverage essentially boils down to this: Cap One is a great marketer, and therefore it will market ING Direct well. See The New York Times, WSJ, Bloomberg, Financial Services Club, The Street and NetBanker.
But I could find no article that mentions the fact that Cap One is, to my knowledge, the only major financial services company in the world that is now on its second purchase of an internet-only financial services venture. In September 2001, Capital One acquired PeopleFirst Inc., a revolutionary, online-only auto finance company, for about $150 million. PeopleFirst eventually became the cornerstone of Cap One’s auto finance business, which today ranks in the Top 20 in the US.
Was the PeopleFirst deal seamless? No, there were hiccups, mainly in that PeopleFirst’s business model didn’t have the legs that some industry observers expected, but my point here is that Cap One has previously taken the bold step of acquiring an internet-only financial services venture. Richard Fairbanks, Cap One’s CEO, was engaged on the PeopleFirst transactions; I’m sure the lessons learned in that deal will be applied to ING Direct.
And even if Cap One had never acquired PeopleFirst, this is a fantastic move. It catapults Cap One to the lead pack in banking innovation, and still allows it to leverage its core strengths: marketing and credit card finance. There’s much talk about how ING Direct is such a “successful” online bank, but the hard truth is that ING Direct has not exactly been a fount of innovation since the credit crisis hit and the European Commission put the clamps on its operations in 2008. ING Direct has some work to do. I have no doubt that Cap One will get that work done.
For a discussion on the deal’s valuation, click here.
See a post on customer loyalty and ING Direct here.
