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"The Online Finance 40," (Institutional Investor, April 2000)

From the archives of Institutional Investor, we bring you the first ever Tech 50 ranking.  Originally published as the Online Finance 40, the ranking profiled the movers, shaker, innovators and agitators making the greatest impact on "e-finance" in the year 2000.

Here's the full story below:


As the Internet transforms the world, an elite corps--veterans and upstarts alike-- is transforming finance.

No business - not bookselling, not airline ticketing, not even pornography - seems so perfectly suited to the online world as finance. Financial instruments and products, after all, are nothing more than words and numbers, bookkeeping entries, exchangeable in a virtual marketplace without the worry of storing and shipping physical goods.

Thanks to the sheer power of the Internet and to an inexhaustible bull market, traditional finance is being remade, as Web applications sweep into every corner of the business, from retail brokerage to mortgage banking to the underwriting of corporate securities. But this transformation has not been instantaneous or easy. Even executives who foresaw the revolution have had to grapple with the resistance to change of ingrained corporate cultures, as well as with fierce and unrelenting competition.

In the pages that follow, Institutional Investor profiles the individuals making the greatest impact on e-finance today. They are a diverse group in terms of age, experience and where they were when the Internet started to change their world. Charles Schwab Corp. co-CEO David Pottruck (age 51, No. 1) was already a leader in financial services, and Financial Engines co-founder William Sharpe (65, No. 11) was a Stanford University professor with a Nobel Prize. But Matthew Andresen (29, No. 8), now president of Island ECN, was fetching coffee for Lehman Brothers commodities traders. Says Andresen, "That was on a good day."

The Internet, however, has a way of tying people and compavies together. A number of those on our list are explicitly in the convergence business. Yahoo! Finance head Timothy Sheehan (No. 5) is building an online gateway that will soon cover the entire financial landscape, aided by pay menu and software allies such as Checkfree Holdings Core. (represented by Peter Kight, No. G) and Intuit (Mark Goines, No. 30).

Convergence is happening not just among consumer aggregators. Instinet Corp. (Douglas Atkin, No. IG), which historically served the institutional and equity worlds, is moving into bonds and retail. E*Trade Group CEO Christos Cotsakos (No. 3) first gained notice a few years ago by predicting the demise of traditional brokerage firms; now he says he would rather merge with a mainstream financial outfit than with an online competitor.

Some of the approaches championed by our online elite may turn out to be pipe dreams; others may lead to long-elusive killer apps. But a half decade into the financial Internet revolution, the field remains dominated by people who think the greatest changes have only just begun. That's ultimately what ties them all together.



Co-chief executive officer

Charles Schwab Corp.

Start with the obvious. David Pottruck of Charles Schwab Corp. runs the biggest online brokerage business in the world and is building a much-anticipated private electronic trading network with archrival Fidelity Investments. But his ambitions hardly stop at online trading.

Even as traditional investment houses chase after his brokerage business, Pottruck, 51, is doing the opposite: employing the power of the Web to transform what was once a middling discount brokerage into a full-service (albeit lowprice) powerhouse. Next stop: using his vast online brokerage operation to wedge his way into the tight-knit world of Wall Street underwriting. "We believe we're going to be very successful and change who gets to participate," says Pottruck. "Retail investors have been underrepresented."

Last November Pottruck announced an ambitious plan to build an online investment bank called Epoch Partners with major venture firms Benchmark Capital, Kleiner Perkins Caulfield & Byers and Trident Capital, as well as discount brokerage rivals TD Waterhouse Group and Ameritrade Holding Corp. The bank already has 60 bankers and analysts out chasing deals, according to Pottruck.

Expanding his reach, Pottruck shelled out $2.7 billion to acquire old-line private bank U.S. Trust Corp. in January. He followed that up in February by snagging, for $488 million, the day-trading firm Cybercorp, whose souped-up technology allows increasingly demanding retail customers to execute their orders via the exchange or electronic communications network of their choice.

If anyone doubts Schwab's clout in the marketplace, consider its highly public stand against a push by major investment banks, especially Morgan Stanley Dean Witter, Goldman, Sachs & Co. and Merrill Lynch, for a centralized national electronic trading system. A few years ago Schwab represented a niche of investors; now it's the chief spokesman for online investors. And it's not keeping quiet. Says Pottruck, "The problem with the proposal from what some call the MGM group is that it would eliminate competition."

Next big thing: "We have barely scratched the surface in understanding how to improve the client experience in terms of integrating technology and people. The people who do that are going to be the people who win."



President and CEO

Softbank Finance Corp.

Softbank Corp. may be headquartered in Tokyo, but the heart of its global Internet financial empire is in the U.S. That was where the action was when Yoshitaka Kitao began a personal crusade to push his native country's financial sector into the 21st century.

Kitao's first step was a decision in 1995 to join Softbank from an investment banking job at Nomura Securities Co., which he thought too complacent and inbred to become a global financial powerhouse. Even then, he says, Softbank had the makings of a company that could be "No. 1 in Japan and No. 1 in the world."

As CFO, a title he holds along with that of president and CEO of the Softbank Finance subsidiary, Kitao became a key adviser co chief executive officer Masayoshi Son. Within a year he began to direct one of the world's biggest and most aggressive e-finance investment portfolios, initially with a strong U.S. bias.

"The Internet is about a power shift," says Kitao, 49. And much of the power of the shift in finance is in Kitao's hands. Softbank is the largest shareholder of E*Trade Group, Yahoo! and ZDNet. Through various funds, such as Softbank Venture Capital and Softbank Capital Partners, it holds positions in more than 300 Net companies, among them, E-Loan, Geocities, InsWeb Corp., and the transaction security company VeriSign. In the tradition of the Japanese keiretsu, Softbank promotes synergies and joint ventures among its holdings.

Kitao, says Omar Amanat, CEO of, a New York-based electronic trading systems company backed by Softbank, is "brilliant at finding and developing companies. He is the brains behind Softbank's financial investments."

Kitao is eager to modernize the Japanese financial system as well. A Softbank joint venture with the U.S. Nasdaq market, Nasdaq Japan, will open in June and challenge the Tokyo Stock Exchange. Softbank is also backing E*Trade Japan and Morningstar Japan, both expected to go public this year, and is promoting links between Softbank-connected U.S. companies and international Internet business development programs that Softbank launched in 1999 with Rupert Murdoch's News Corp. and French utility conglomerate Vivendi. Most prominent of these is a joint venture with the U.S. over-thecounter market to create Nasdaq Europe.

Next big thing: Smallness. "With this Internet revolution, I think scale is in the past world. "



Chairman and CEO

E*Trade Group

Even by Silicon Valley standards, Christos Cotsakos can seem unconventional. To build camaraderie among his executives, he dispatches them to cooking school and to a Formula One racing track. And he flies to London once a month to do Ph.D. coursework in economics at the University of London. "There's nothing academics enjoy more than grilling a CEO," says the 51-year-old free spirit, who recently inked a deal with HarperCollins to pen three books: on leadership, investing and the Internet.

But there's nothing quirky about Cotsakos' success. A former co-CEO of A.C. Nielsen Corp., he joined E*Trade Group on the eve of its 1996 initial public offering. His hyperaggressive style and natural showmanship helped to catapult the little-known online company into the front ranks of Internet brokerage. With 15.3 percent of daily online trading volume, E*Trade ranks second only to Charles Schwab & Co.

Whether the online brokerage model can sustain itself is an open question: The sector is plagued by high customer-- acquisition costs and ongoing losses. E*Trade's share price has plunged along with its rivals', trading at 32 in March, down from a high of 72114 last April, following a fourthquarter net loss of $5.5 million on revenues of $246 million.

Cotsakos and his rivals want to turn their operations into one-stop financial centers offering everything from brokerage to financial news. In January E*Trade plunked down $1.8 billion to buy the online-only bank Telebank. Last month, to augment his online banking business, he purchased Card Capture Services and its 8,500 ATM machines.

Still, it remains unclear if E*Trade will emerge as one of the winning financial hubs. It reportedly held merger talks with American Express Co. last month and is rumored to have discussed ally ing with Goldman, Sacks & Co. Cotsakos, intent on controlling his own destiny, says he might consider a merger, although he would prefer a traditional financial institution to a dot-com partner. "A merger in the online space doesn't bring us a lot," he says. Next big thing: "You'll see the World Bank or a consortium of companies bring connectivity to everyone on the planet - an altruistic infrastructure."



Group executive vice president

Wells Fargo & Co.

Wells Fargo & Co. executives like to boast that they have been at their online business longer than any other bank. This being the Internet, that means they started about six years ago, developing payments systems for pioneering online merchants and enabling consumers to perform banking transactions on a Web site. Since then Wells Fargo has continually ranked at or near the top in quality surveys by Gomez Advisors and other research groups.

Bank of America's 2 million online customers tops Wells Fargo's 1.6 million, but the latter's customer penetration rate is easily the highest in the industry - about 20 percent of its checking account households (BofA is closer to the national rate of about 7 percent). An additional 250,000 or so Wells Fargo customers do their banking not via the Net but through dial-up connections to Microsoft Money or Intuits Quicken software in their personal computers.

"We think we are the best," says Clyde Ostler, group executive vice president and head of Internet services since 1994. "If we keep it up, we will grow almost 100 percent this year, and that is without advertising much. And we see an even bigger opportunity in small business and B2B."

The San Francisco bank's proximity to Silicon Valley has helped spur business, but Ostler, 56, a Wells Fargo veteran who kept his job after Norwest Corp. acquired the bank in 1998, says location doesn't explain everything. "I see no lack of propensity to use the Internet in our Midwestern franchise," he says. "Somebody in North Dakota, where is it 20 degrees below zero, can't have a greater propensity than somebody in San Francisco to want to go out to do their banking."

Committed to a "clicks and mortar" approach - CEO Richard Kovacevich has publicly criticized the Internet-only model of Bank One Corp.'s - Wells Fargo consolidated its Web organization in December. Wholesale services, investments and business banking, each headed by a senior or executive vice president, were all placed under Ostler, formerly CFO at the bank. Ostler himself took direct charge of a fourth area, retail. "We are trying to create integrated solutions and shared strategies," he says. "With other business units, we are an equal partner at the table." Next big thing: "Another wave of major Internet deals and a shakeout in this industry."



Director of production

Yahoo! Finance

With 120 million people coursing through its network each month, Yahoo! has plenty of potential leverage in any business. But Tim Sheehan, overseer of the Yahoo! Finance portal, says financial services firms have little to fear in the way of direct competition.

"We have no intention of ever moving into the brokerage business or anything that will get us regulated," says Sheehan, 31, who joined Yahoo! in November after a stint at E*Trade Group, where he headed the U.S. Web site product management team.

What Yahoo! Finance does offer is a wide array of linked services: brokerage through Datek Securities, mortgages through E-Loan, online insurance from InsWeb Corp. In January Yahoo! Finance expanded into taxes through a partnership with H&R Block, and in March the company launched a new online financial network offering original programming produced in-house and live broadcasts of the morning calls of research analysts. Yahoo!'s millions of eyeballs - the exact number drilling down into Yahoo! Finance is not disclosed - and product breadth make it a unique force in Web finance. Some view it as a valuable partner, others as a nettlesome rival.

Though many companies, notably America Online and E*Trade, are vying to be the top financial portal, Sheehan insists that Yahoo! will keep its lead by making sure all new financial offerings satisfy the company's "four pillars" of service - speed, ease of use, breadth and personalization. Execution, he believes, will trump originality as the key to winning on the Web. "You don't spend much time here on things that sound good but aren't very useful," he says. "It's rare that you have an idea that someone else in the financial services industry didn't think of."

Yahoo! Finance will continue to diversify away from pure investing and toward all types of personal finance, such as bill payment and portfolio management. So far its customers seem anxious to try anything the company puts up. Next big thing: "Working with financial institutions to make peoples interactions with their financial accounts fast, easy to use and personalized." 6


Chairman and CEO

Checkfree Holdings Corp.

If electronic billing and payments become the financial Internet's killer app, then Pete Kight will be the prime conspirator. The chairman and CEO of Atlanta-based Checkfree Holdings has long been a true believer in the power of the back office. In 1981, when he was all of 24, he started a payments processing business in the basement of his grandmother's house in Columbus, Ohio. Nineteen years later Checkfree, which went public in 1995, boasts 2,100 employees, delivers bills electronically for about 100 companies and reaches 3 million consumers through such partners as Intuit, Yahoo! and Charles Schwab & Co.

Checkfree's allure is simple: Market research shows that consumers will use bill-paying services as the centerpiece of their online financial activity if utilities and other frequent billers offer it. But a multitude of products, processing methods and technical standards have caused so much confusion that little progress has been made. Bankers and billers have circled warily, each afraid the other might grab too much control of the customers or transactions.

In February Kight broke the stalemate by agreeing to take over his biggest competitor, Transpoint. By late summer he expects to close the $1 billion deal to buy Transpoint from its co-owners, First Data Corp., Microsoft Corp. and Citigroup. "If we're absolutely sure we have established our position as a leader, then we must do what is necessary to speed up the market," Kight says.

The deal, says Silicon Valley technology analyst Michael Killen, "shifts the center of power" in electronic billing away from banks and toward Checkfree. Deutsche Banc Alex. Brown e-commerce analyst Gary Craft agrees that the consolidation will both enhance Checkfree's market power and accelerate electronic billing over the Internet.

Checkfree remains unprofitable on $250 million of revenues, but Kight says his goal of serving 30 million households by 2003 is within reach. It would help, he says, if bankers stepped up and promoted online bill paying.

"Bankers huff and bluff about being leaders in e-commerce," says Kite, but "they tend to wait until the consumer demands something. You have to be ahead of the market." Next big thing: "Several more big things. I would call them deals, not necessarily consolidation, that can help move this market forward faster."




Ameritrade Holding Corp.

Among online brokers, Ameritrade ranks sixth in daily trades but first in personality. Its television commercials created a pop icon in Stuart, an exuberant 20-something employee who teaches his boss how to photocopy his face - and trade stocks. But chairman Joe Ricketts is in business for more than laughs.

Ricketts, 58, has been running this once low-profile brokerage for 19 years on a simple, consistent principle: cheap trades. His $8 commission on any size trade is low even by Internet standards. When rivals like E*Trade Group rushed to diversify into banking and other product lines, Ricketts stuck to his knitting. Ameritrade flourished as customers flocked to the Net, and Stuart (played by actor Michael Maronna) reached celebrity status, appearing in People magazine and on the Tonight Show with-jay Leno.

Now Ricketts is broadening his business lines with a separate company. He unveiled with a pricey TV spot during the Super Bowl in January. Designed to give consumers access on a single Web screen to all their financial data, regardless of where the account is held, OnMoney is the kind of financial aggregation service that many traditional institutions fear will diminish their customers' loyalty.

Ameritrade reportedly sought cooperation from banks to service customers' aggregation needs. When those efforts failed, it bought "screen scraping" technology - which pulls data from bank and other financial firm Web sites - from Vertical One Corp., a subsidiary of SI Corp. (see No. 9). To attract customers, Ricketts is marketing OnMoney as independent of a bank or brokerage firm.

Ricketts, who recently purchased a bison ranch near Jackson Hole, Wyoming, says he plans to hand over the reins of Ameritrade to co-CEO Thomas Lewis Jr. and reduce his workload. "fm wealthier than I ever thought I would be," says Ricketts, who holds more than $2 billion of Ameritrade stock. "I may not work as hard in the future as someone who still wants to accumulate wealth. Wealth can be corrupting."

Next big thing: "Broadband. Its going to sweep the Internet, and it' going to change our business dramatically. "




Island ECN

The undisputed poster boy for upstart electronic trading systems, Matt Andresen may one day do as much for shaved heads in finance as Michael Jordan did in basketball. Two years ago Andresen, a former Lehman Brothers commodities trading assistant, was a self employed day trader. Then he was plucked by online brokerage Datek Online Holdings co-founder Josh Levine to become president of its newly launched Island ECN electronic trading system. "I was a nobody," says Andresen. "I was going to work for a nothing company in a nonexistent business."

No longer. Relying on orders from electronic brokerage and day-trading shops, Island, one of 12 so-called electronic communications networks, now accounts for about 12 percent of all transactions in the Nasdaq market. It routinely handles the largest volume in such sizzling New Economy stocks as, DoubleClick and Yahoo!.

Now Andresen is eager to break into new markets. Island is expected soon to win Securities and Exchange Commission approval to become a fully accredited exchange, which will open the way to trading of issues listed on the New York Stock Exchange. And later this year Andresen is planning to begin a major drive to attract order flow from institutional investors. While ruffling the feathers of established rivals, the charismatic 29-year-old manages to charm many. Says Big Board chairman Richard Grasso: "There's a perception that every time Matt walks by the building he has to look up and see if I'm throwing thing down at him. Matt is a terrific guy, and I like him."

And Andresen has turned into a skilled promoter of the new online trading industry, testifying before Congress and providing insights - and color - for network news programs like ABC's Nightline, which recently pictured Andresen eating a pizza in the back of a taxi on his way to lobby Congress. Soon after, at a congressional hearing, SEC chairman Arthur Levitt Jr. approached Andresen to ask, "Did you enjoy that pizza, young man?"

Not as much as eating into his competitors' market shares. Next big thing: "Companies will track consumers by the coordinates of their cell phones and e-mail them sales offers as they're driving by stores and malls."




S1 Corp.

As a community banker in Lexington, Kentucky, James (Chip) Mahan III recognized one Internet business opportunity very early, but he couldn't sell it to Netscape Communications Corp. founders James Clark and Marc Andreesen. Back in 1994. Mahan approached them with an idea to build a virtual bank, operating entirely in cyberspace, using their Web browser as its entryway. The pair liked Mahan's idea, but they wanted to own the source code.

Unwilling to pay that price, and unwavering in his vision of browser as banking portal, Mahan went to work on the programming with his brother-in-law Michael McChesney, an Atlanta software developer. In the fall of 1995, they opened Security First Network Bank.

But the "world's first Internet bank" may turn out to be just a footnote to Mahan's career. He sold the operation in 1998 to Royal Bank of Canada but held on to its enabling technology. That's the heart of SI Corp., which provides online systems and support to 800 financial institutions, including 57 of the world's 100 largest banks. "Our biggest challenge is handling all the dadgum business out there putting our shoulders to the wheel and getting it all done," says the folksy Kentuckian, who serves as CEO of the 1,800-employee, Atlanta-based enterprise. Mahan owns 7 percent of the company's shares, worth some $350 million recently. (Others enriched by Si's 1996 IPO include Huntington Bancshares and Wachovia Corp., a former Mahan employer; each put $2 million into the start-up.)

Declaring that a $100 billion market cap (it's at $5 billion now) is within reason, Mahan, 48, is on an aggressive expansion campaign. Last year he closed three acquisitions for a total of $1 billion in SI stock. Among them: Vertical One Corp., whose software aggregates personal financial data from multiple sources. Some bankers are wary of that ability to "screen scrape" consumers' data at will, but Mahan says his banker customers supported the deal because "we are a friend of the banking business" and would not abuse the trust.

"We used our stock price to consolidate the industry, and we will continue to use that currency," Mahan vows. "No one can compete with me as long as we can keep this going." Next big thing: "Portals and media-destination sites. We're there now but still have to figure out the payment-systems piece. "



Senior corporate officer


No bank has been more associated with technology over the past quarter century than Citigroup. And no one made a bolder move to jump-start online operations than John Reed, chairman of what was then Citicorp, when he brought Ed Horowitz over from media giant Viacom in 1997 as his designated "e-czar."

It fell to Horowitz, a man more at home with televisions than tellers, to push Citi into the Internet era - and suffer the consequences. "I didn't get invited to too many dinners," recalls Horowitz, 52, who played a key role in taking Viacom's MTV Networks global. He made an immediate and impolitic impression by likening Citi and other banks to the three original TV networks, which were overly complacent in the face of serious market-share threats from cable competitors.

From Citi's technology-focused advanced development group Horowitz fashioned the 1,500-person e-Citi unit, whose achievements have been overshadowed by the swirl of politics and restructuring that followed the CiticorpTravelers Group merger in 1998. Today 1 million Citibank retail customers worldwide, 1.8 million credit card holders and 500,000 Salomon Smith Barney brokerage clients are all connecting online. A priority now is business-to-business exchanges and payments services, notably through an alliance Citigroup forged in February with Commerce One, a leading software provider.

"B2B is where the money is," Horowitz says. "Once that stabilizes, business-to-consumer will grow, and ultimately we'll have a consumer-to-consumer e-world." One measure of his success to date: He's eating better. "Now I'm invited to dinner a lot."

How long that will last remains to be seen. Horowitz's champion, Reed, retires this month as Citigroup co-chief executive, leaving as sole CEO Sanford Weill, a notorious stickler about the bottom line. However, Horowitz remains confident of the bank's commitment. "The CEO must be actively involved, and I've had that from the get-go," he says. "I had it from John. After the Travelers Group merger, I had it from the office of the CEO, and now I have it from Sandy Weill."

Next big thing: 'More Time Warner-America Online deah that will force an e-culture on traditional companies. "




Financial Engines

Nobel laureate Bill Sharpe taught a generation of financiers the power of numbers, formulating such investment management standards as the capital asset pricing model and the Sharpe ratio for measuring investment performance. Now he's trying to bring the power of finance to the people.

After retiring last year from Stanford University, where he taught finance for 30 years, Sharpe now works full time at Financial Engines, the online financial advice service he launched in 1996 with Stanford University law professor and former Securities and Exchange Commission commissioner Joseph Grundfest and Silicon Valley attorney Craig Johnson. "I spend about 70 hours a week on it," says Sharpe. "That's basically what I do."

What Financial Engines does is provide retirement income projections for different investment scenarios by running customer data through state-of the-art portfolio optimization analytics. The company has signed up investment firms, such as Merrill Lynch & Co. and State Street Global Advisors, as well as plan sponsors like Hallmark Cards and 3Com Corp. They in turn provide the power of Financial Engines' analyses to their hundreds of thousands of retail accounts and employees.

Sharpe, 65, hopes to prove that the Internet can provide sound asset allocation and investment advice in addition to the ubiquitous, cheap brokerage transactions that have turned so many people into day traders. "We are not for the twitchy investor," he says. "Forget the pie-in-the-sky. You're not going to make 30 percent on stocks."

Sharpe's backers, including venture capital firm New Enterprise Associates, leveraged-buyout king Henry Kravis and Financial Technology Ventures (see No. 23), are hoping to make more than 30 percent on Financial Engines. But Sharpe says only that the company will go public when the "time is right." Until then Financial Engines is planning to expand into advice-giving for many more financial products. Says Sharpe, "We ultimately want to get to the point where we can help individuals manage their entire balance sheets." Next big thing: "The ultimate in personalization for consumers. Crafting financial products as personalized as need be."



Co-founder, chairman and CEO

Knight/Trimark Group

Before he traded stocks and options, Ken Pasternak arbitraged Chevys and Oldsmobiles. The son of an upstate New York used car dealer, Pasternak learned that markets breed price inefficiencies, and price inefficiencies breed jackpots.

"I learned about supply and demand, price discovery, arbitrage, all that stuff, by going to used car auctions when I was a kid," says the 46-year-old Pasternak. He took his knowledge to Troster Singer, the market maker in over-the-counter stocks, owned by trading giant Spear, Leeds & Kellogg. As head of trading, Pasternak spotted an even better opportunity: Discount brokerages were discovering the Internet. Foreseeing that they would need to execute their trades cheaply, he quit and, with Walter Raquet, Troster's head of technology and marketing, formed Knight/Trimark Group, which acts as a "wholesale" market maker executing trades for online brokerage firms. "People thought I was crazy to leave and do a startup," says Pasternak.

His bet paid off big. Pasternak and Raquet recruited the biggest online brokerages, including Ameritrade, E*Trade Group and Waterhouse Investor Services (now TD Waterhouse Group), as equity partners, guaranteeing the new firm a steady supply of orders. Online brokerage exploded, fueled by the bull market in Knight's specialty, Nasdaq stocks. Today the firm executes 21 percent of Nasdaq's volume and is moving aggressively into other markets and overseas. Knight acquired options market maker Arbitrade Holdings last year and will serve as a dealer for the all-electronic International Securities Exchange, which recently gained Securities and Exchange Commission approval as an options market.

"We made money by the third day of our operations, but by about 1996 we realized that the Internet had become free and fluid and that we had rocket fuel in our car," says Pasternak, whose stake in Knight is now worth a cool $325 million. Next big thing: "The growth ofthe Internet and individual investors globally is going to be very powerful."



Assistant treasurer

Ford Motor Credit Co.

At Ford the Internet is Job One.

And the fellow with his sleeves rolled up, getting the job done in the finance department, is Jim Bosscher, who has turned Ford into the pace car for major corporations exploiting the Internet to raise funds - and potentially disintermediate financial companies.

"If you're not using the Internet here, you're not doing your job," says Bosscher, 51. Ford has vowed to remake itself using the Web for everything from incoming orders from dealer showrooms to inventory adjustments from suppliers.

In 1998 Ford began posting detailed information online for investors interested in its securitization pools. Last year the company became the first to sell commercial paper online. In January, through Lehman Brothers, it became the first company to take orders over the Web for a bond offering.

Soon this may all seem like Model-T stuff. "What has been done today will probably ultimately seem like nothing," says Bosscher, who expects all parts of the bond market to soon have common dealing platforms run by banks and issuers. Ford and other major commercial paper issuers are expected to launch a joint Web site this quarter.

In addition to allowing issuers to reach a broader range of potential investors, especially smaller institutions and retail buyers, the Web provides more control over the underwriting process. For example, companies can now carefully watch the book of orders build on a deal. "It used to be that one of my team would have to go to New York and sit on the desk," says Bosscher, a 25-year Ford treasury department veteran.

Nowadays investment banks are descending on Ford, pitching their new online dealing systems. Not even an Internet guru can test them all. Says Bosscher, "I wouldn't have time to understand everybody's system."

Next big thing: 'A tremendous improvement in common platforms for the commercial paper market and others. "



Director of enforcement

Securities and Exchange Commission

Financiers are trying to make fortunes on the Internet.

Richard Walker is making cases.

Walker, 49, who runs the Securities and Exchange Commissions enforcement division, has made cracking down on online fraud and chicanery a top priority. He has filed more than 100 Internet-related cases during the past two years, hired 50 new attorneys and assistants and is deputizing nonlawyers to patrol for fraud. Dubbed the Cyberforce, 240 volunteers drawn from the enforcement division surf chat rooms and message boards looking for financial misdeeds.

Among the SEC's high-profile cases: a civil suit filed in January against Yun Soo Oh Park, the widely followed online stock alert service entrepreneur. Also known as Tokyo Joe, Park has denied charges that he defrauded investors by overstating his performance record, illegally touting stocks and personally dumping shares he was recommending.

Two more big cases came last month. In one, Walker's unit charged a former temporary employee of Goldman, Sacks & Co. and Credit Suisse First Boston with allegedly collecting inside information about 23 pending mergers and passing it to friends and acquaintances, some of whom he met in Web chat rooms. In the other, the enforcement unit settled charges against four Georgetown University law students who made $345,000 by hyping stocks on an investment-tip Web site and then dumping them before they collapsed. "A 100 percent capture rate has never been our goal," says Walker, who knows the Internet's vastness means his unit can't catch all of its financial flimflam artists. "It's more to send broad messages to Internet users that certain kinds of conduct are not tolerated."

Walker is also teaming with other online prosecutors. His Cyberforce has helped to train law enforcement agencies, including the Washington, D.C., police department, in collaring Web wrongdoers. "When we first got started, it was mostly people selling interests in eel farms and coconut plantations - that kind of nutty stuff," says Walker. "Now it's not just laughers. The technology flows so rapidly. Being able to remain fluent and continue to spot conduct that violates the law is a huge challenge."

Next big thing: 7 worry that technology will develop to let peopLe conceal themselves better. Its a terrible fear."


Chairman and CEO


Many CEOs love their business models. Few patent the underlying process. But that's exactly what Jeremy Lent, who is using the Web to rewrite the rules of the credit card business, is doing. "Direct-mail marketing allowed niche players to take over the credit card business," says the founder and CEO of San Francisco-based NextCard. "The Internet's power as a marketing channel could blow direct mail away"

Lent's secret weapons come in the form of those patents. He received his first approval from the U.S. Patent and Trademark Office in February; it covers a process for handling customer applications and transferring balances from other institutions. Lent is serious about the intellectual property part of his game and says rivals should be on guard. The patent "will tend to slow down our competitors. They will have to be careful with their plans and run them by attorneys to be sure that they do not infringe."

Since Lent, 39, started NextCard with his wife, Molly, in 1996, it has grown to 350 employees. It went public a year ago and now has a market cap of about $1 billion. Trumpeting marketing alliances with the likes of and, NextCard ranks as one of the heaviest spenders in terms of advertising on the Web. When Amazon plunked down $22.5 million last year for a warrant for up to 9.9 percent of NextCard's shares, CEO Jeffrey Bezos said, "We invest only in companies that share our passion for customers."

At $500 million in assets, NextCard is just a blip next to the $70 billion of card loans managed by industry leader Citigroup. But NextCard is on a pace to double in size this year, a growth rate unheard of in the very mature banking sector. And U.K. native Lent, a onetime consultant to Capital One Financial Corp. who later became CFO at Providian Financial Corp., views cards as just the springboard to other parts of what he terms the "e-commerce experience" for the consumer, including online checking accounts and bill payments.

Next big thing: 'A global socioeconomic change as online transactions become widespread."




Instinet Corp.

Instinet Corp. all but invented the electronic trading of stocks some 30 years ago. Now, in the midst of an Internet-- inspired trading revolution, CEO Doug Atkin is scrambling to beat back upstart competitors and leverage the company's brand name and order flow into a diversified online capital markets empire.

Last May he bought a stake in WR Hambrecht & Co., the online investment bank that is trying to crack the traditional underwriting business. Then he invested in a trading rival, an electronic communications network called Archipelago, and led a consortium of investors in the London-based Tradepoint Stock Exchange, an all-electronic market seeking to establish the first true pan-European stock market. This month Atkin will make his riskiest move yet when he launches, an online brokerage for retail customers.

Whether Atkin can pull off this transformation remains to be seen. He faces tough competition from rival ECNs, which are aggressively pursuing Instinet's business of executing stock trades away from traditional exchanges. And Instinet lacks experience in the arenas it's entering - like online brokerage. The company reportedly held talks with Island ECN about a merger, discussed alliances with the New York Stock Exchange and Nasdaq and is said to be contemplating a spin-off from parent company Reuters Holdings.

Atkin thinks the company's brand identity and the institutional liquidity already in its system will distinguish it from other online brokers, which rely on wholesale market makers to execute customer trades. "Retail investors right now don't really understand that what they think is online trading is just an e-mail message to your online broker, who then sends your order to a market maker," he says. "We're going to be giving retail investors the exact same service institutions get, plus allow them to direct orders to any execution source around the world."

Next big thing: "The most massive change that the securities industry has seen since 1975. Ifyou look at who the winners were pre-1975 and post-1975, its a different list. That will happen again."



President and COO

TD Waterhouse Group

Frank Petrilli had a good laugh when The New York Times reported in February that Merrill Lynch & Co. was considering a tie-in with a bank so that its brokerage customers could park idle funds in federally insured accounts. Waterhouse Securities opened a bank in 1995 to do just that. "What's all the hoopla?" says Petrilli, president and chief operating officer of TD Waterhouse Group, "They're three or four years late to the party "

Petrilli signed on with Waterhouse, long an aggressive discount brokerage shop, in 1995 after seven years with American Express Co., where he was president of American Express Centurion Bank. Waterhouse introduced Internet trading in January 1997 and last year claimed to be the first to combine banking and brokerage in a single online offering.

New York-based TD Waterhouse, 88.5 percent controlled by Toronto-Dominion Bank (the rest was sold in an initial public offering last June), ranks second to Charles Schwab & Co. in discount brokerage, with more than 3 million accounts globally. Its 1.3 million online accounts generated 13.3 percent of all daily trades in the fourth quarter, trailing only Schwab's 22 percent and E*Trade Group's 15.3 percent, according to U.S. Bancorp Piper Jaffray

Though Schwab president David Pottruck first uttered the phrase "clicks and mortar," no one lives it like Petrilli. In March, when he opened an office in Overland Park, Kansas, he reached his goal of becoming the first Internet brokerage with an office in every state.

"We were in business as a discount broker for 20 years. The fact that we were able to migrate this business so effectively and efficiently to the Internet is a phenomenal success," says Petrilli, 49, who in a bizarre turn last summer publicly accepted the COO job at E*Trade, only to reconsider for personal reasons that he declines to further explain. Next big thing: '7n three to five years, 50 to 60 percent of our business will be done on wireless and handheld devices. "



Head of electronic equity trading

Goldman, Sachs & Co.

No Wall Street firm has been more aggressive about electronic trading than Goldman Sachs Group. And nowhere is Goldman moving more aggressively than in equities. CEO Henry Paulson Jr. and co-president John Thain beat the drum for rapid technological change, but the point man behind Goldman's drive toward trading dominance is 15-year veteran Duncan Niederauer, a former derivatives trader.

In less than a year, the newly public Goldman has taken stakes in no fewer than six electronic alternative trading systems, including Archipelago and Primex Trading (which aims to electronically replicate the floor-based auction market at the New York Stock Exchange). All challenge the primary of the traditional exchanges. Goldman also bought a stake - currently 15 percent - in online investment bank Wit Capital Group and last July plunked down $550 million to purchase Hull Group, a souped-up market maker in options and stocks on dozens of bourses worldwide.

Goldman is developing numerous online fixed-income projects. And it continues to work on its long-awaited venture, a Web-based service for wealthy customers.

A Goldman representative on the controversial working group of major Wall Street firms (Merrill Lynch and Morgan Stanley Dean Witter are the other big-name members) that is advocating the creation of a centralized trading network for the U.S., Niederauer is a true believer in the transforming power of the Web. As technology and increased competition continue to commoditize the business of executing stock trades, Goldman will have to contemplate even more unlikely alliances.

"Technology and the accelerated pace of change make it important to predict the future. Volumes will likely grow, but market share will be more transient as trading platforms evolve," says Niederauer. "It's incumbent on us to be familiar with the latest technologies. That's why you've seen us make the investments we've made."

Next big thing: "Order flow is the new currency of the equity markets. It will be critical for us to augment our traditional execution services with technologically leveraged capabilities."


WILLIAM FORD (General Atlantic Partners)

STEVEN GLUCKSTERN (Capital Z Partners)


Last year venture capitalist Bill Ford and insurance-guruturned-deal-maker Steve Gluckstern were hunting for some good investments. They found each other.

Gluckstern, 48, made his name in the late 1980s by inventing the multibillion-dollar finite insurance industry, before becoming CEO of Zurich Re. In 1998 he left, co-founding Capital Z, a private equity shop. Its $1.85 billion Capital Z Financial Services Fund has focused increasingly on financial technology since its launch. Among its investments: online investment bank Wit Capital Group; Channelpoint, an Internetbased insurance exchange; and Enba, an Irish e-bank and financial services company.

A technology investor, Ford, 38, concluded in the mid1990s that "IT enabled businesses would transform finance." His General Atlantic Partners plunked down $14 million in 1995 to back the fledgling E*Trade Securities. The firm, which still owns $250 million in E*Trade stock, has realized profits of $500 million on the investment.

In February Ford and Gluckstern, who were introduced by Wit Capital chairman Robert Lessin (see No. 26), created efinanceworks, a $300 million joint venture designed as an "accelerator" to focus on very-early-stage investments (efinanceworks will provide money and office space). "In information technology, General Atlantic is at least as good as Capital Z is in financial services. We have similar cultures and a similar concentration in a vertical area. Theirs is IT Ours is financial services," says Gluckstern.

"A lot of investment has been in B2C [business-to-consumer), where the focus is disintermediating traditional players. We think the richer opportunity now is in B2B," says Ford, citing the loan syndication market as one area ripe for automation. The capital markets, however, are likely to be much more demanding as finance-related Internet companies go public. "Fairly soon the market is going to say, `I want to see how you're going to be profitable,"' he says. "Some of these models will never get there. Some of these stocks will never recover."

Next big thing: Ford: "Wireless is going to have a big impact on financial services. " Gluckstern: Superportals in consumer finance.


JAMES DIXON executive

Bank of America Corp.

The 1998 merger of NationsBank Corp. and BankAmerica Corp. created the first coast-to-coast bank, with branches in almost half the states, serving 30 million households and 2 million businesses. The virtual empire is also pretty impressive: 2 million customers, wired up through personal computers or WebTV BofA was the first bank to hit 2 million and is currently alone with that distinction.

In February Bank of America emphasized its commitment to cyberspace by naming Jim Dixon, a 32-year banking veteran, to run the online operation. His title: executive. "This is a fundamental piece of what we do every day now," says Kenneth Lewis, president and chief operating officer, to whom Dixon reports.

Still, the politics surrounding a technology that could put a lot of employees out of work are not trivial. "Whatever the size of the institution, when it is successful historically, there is resistance to change," says Dixon, 56, who was CFO at C&S/Sovran Corp., which NationsBank acquired in 1992, and most recently was technology and operations group executive at Bank of America. "I don't think I have to push anything on anybody. A huge pull is coming. If there are people in the organization who are not there yet, they are anxious to get moving."

Bank of America spent $1 billion in the 1990s on a common technological infrastructure that can accommodate online growth that now exceeds 100,000 accounts a month. "That's without advertising, and it is still a relatively simple offering," says Dixon. "The ability to integrate capabilities and give people a more complete picture of their financial lives will be the test for the future."

From a corporate perspective, Lewis adds, "many Internet companies, such as e-tailers, are wonderful on the front end, but the back end is the same as it has been for decades. We have an ability to fulfill, and it doesn't require hundreds of millions of dollars to do what we need to do - $25 million to $50 million for a project is not overwhelming."

At least not when you've already got $600 billion of assets. Next big thing: "Broadband communications will be coupled with cheaper and multiple consumer devices to extend and enwith cheaper online experience. perience."




Fidelity eBusiness

Aggregation is all the rage for consumers. Companies trying to turn those consumers into customers have to pull their resources together, too.

That, anyway, was the conclusion of mutual fund giant Fidelity Investments last September when it named Steven Elterich president of newly formed Fidelity eBusiness. Until then Fidelity had decentralized its Internet activities among its institutional, retail and financial-intermediary business units. To harness the groups' energies, Fidelity turned to Elterich, 49, who five years before had spearheaded development of Fidelity NetBenefits, the pension industry's most ambitious Web-based 401(k) information delivery system.

The approach obscured many accomplishments for Fidelity, one of the first major financial institutions to embrace the Web. Its brokerage arm claims more online retail customers than Charles Schwab & Co., while its Instant Broker service was the first in the world to offer stock quotes and trading on wireless communication devices. (Schwab ranks first in trades per day, with Fidelity fourth, trailing E*Trade Group and TD Waterhouse Group.)

"The Internet, as it relates to this business, is all about seamless delivery of information across multiple relationships," says Elterich. The idea is that Fidelity can leverage the Web to capture - and keep - business from customers it already has: individuals, say, who have an employersponsored 401 (k) and may also have other mutual fund accounts and trade online. Other initiatives include providing advanced analytical tools to online stock investors, although Elterich says Fidelity won't be courting day traders.

Elterich says Fidelity can gain an advantage by providing a single access point for all information, be it on a personal computer or handheld Palm organizer. Fidelity recently teamed up with AT&T Corp., IBM Corp. and Lycos to develop an Internet appliance for high-speed access to and the company's Powerstreet trading site.

"With all of this information under one roof- asset allocation tools, benefit statements, mutual fund valuations - and making it easy for customers to get to it, we think we can add value," says Elterich.

Next big thing: Wireless delivery offinancial services will "explode in the next two to three years."



Executive vice president

Chase Manhattan Corp.

After taking over as chief executive officer of Chase Manhattan last year, William Harrison proclaimed that he'd had a personal epiphany about the Internet. While delving into consumer and technology businesses in preparation for the job, he said, "I got converted, became a believer."

Turning that conviction into business reality is the job of executive vice president Denis O'Leary, 43, who in January took charge of Harrison, says O'Leary, put "a stake in the ground that accelerated our migration to being a New Economy company."

O'Leary brings to this migration 21 years of experience at the $400 billion-in-assets bank. Until he took charge of the 125-person unit, the hub of the company's Internet efforts, O'Leary was the No. 2 executive at Chase's consumer bank. Before that he spent four years as chief information officer. "Those were our merger years," says O'Leary, referring to Chemical Banking Corp.'s acqusitions of Chase (1996 - it took the Chase name) and Manufacturers Hanover Corp. (1991). "We did the cleanup in the back office that a lot of other banks are still struggling with."

Having unified and upgraded its back-office technologies, Chase can do far more than just present pretty homepage pictures to the 600,000 of its retail customers who bank online. For fulfillment, customer service and other purposes, and to create new businesses that are not just Web-ified versions of old routines, says O'Leary, "the back end has to be in synch, and that requires very heavy lifting. We are as progressive as anybody in this area."

Few commercial banks have corporate affiliates like Chase Capital Partners and the many high-tech connections in its $16 billion portfolio, or the amply wired investment bank Chase Hambrecht & Quist. Still, O'Leary harbors no illusions about how easy it will be to achieve Harrison's vision of a fully wired New Economy bank. "You don't change a culture overnight," he says.

Next big thing: Working with PCs will give way to "technology without an instruction manuaL "




General partners

Financial Technology Ventures

A long time ago (1996) and in another economy (the old one), Jim Hale and Bob Huret got this idea: that the Internet would transform no industry as radically as it would financial services. Investment bankers at Montgomery Securities, they set out two years later to raise the first venture fund focused on financial technologies.

Nice timing. Today firms are racing to assemble the technological building blocks of banking and brokerage in cyberspace. "Even if you don't think the Internet is the most significant development since the printing press," says Huret, "it's still one of a dozen of the most transformative technologies in the past 100 years. It's as profound a change as the advent of computers in banking. The difference is that when computers came in, you bought from a handful of companies. Now there are thousands of vendors."

Huret, 55, a onetime senior vice president in financial development and planning at BanCal TriState Corp. in California, and Hale, 48, a former executive at BankAmerica Corp., closed their first round of financing in July 1998. Five months later they made their initial investment, in Financial Engines (see No. 11). Today their $200 million fund boasts 21 limited partners, including American International Group, Deutsche Bank, Sallie Mae and Charles Schwab & Co. They have placed $45 million in a dozen companies, among them 724 Solutions of Toronto, a specialist in software for wireless transactions. Financial Technology Ventures took a stake in October; the company went public in January at $26 and was recently trading at about $170.

Three software company holdings - Corillian Corp. (Front-end Internet banking), Servicesoft Technologies (callcenter automation), and ClearCommerce Corp. (credit card processing) - are in registration. Another, BlueGill Technologies (Internet bill presentment) was acquired by Checkfree Holdings Corp. Says Huret of the current market frenzy, "We spend the first hour of every day making sure we don't confuse a bull market with being smart."

Next big thing: Huret: "Consumers will get all of their data from all of their financial institutions assembled in one place. They will he able to have a daily marked-to-market balance sheet and do whatever they want with it. "




Archipelago Holdings

Gerald Putnam knows how to put partnerships together, a skill that goes a long way on the Internet. In the past two years, Putnam, 41, has moved to the front of a crowded electronic-trading-system pack by bringing in a string of blue-chip investors - including Goldman, Sachs & Co., J.P Morgan, E*Trade Group, Merrill Lynch & Co. and the CNBC network. Each reportedly paid about $25 million for a 12.5 percent stake in Archipelago, the electronic communications network Putnam co-founded in 1996.

Teaming up with Maria Bartiromo's employer may look daring, but Putnam's latest move - buying the Pacific Exchange's equity business - is likely to pack far more punch. Archipelago currently executes trades of about 50 million shares per day, well behind competitors Island ECN and Instinet, which each handle nearly 200 million shares per day. The merger should make Chicago-based Archipelago the first ECN to compete on an equal footing with the New York Stock Exchange in executing orders for blue chips like General Electric Co., IBM Corp. and America Online.

ECNs gained entry to the Nasdaq system in 1997 and account for about one third of that market's volume, but they still face regulatory barriers to competing for NYSElisted shares. Archipelago, Island and another ECN,, filed last year to become exchanges and compete with the Big Board, but the Securities and Exchange Commission has moved at less than Internet speed. "That process is taking a very long time," says Putnam, a veteran of institutional securities sales with firms such as Prudential Securities and PaineWebber. He started working on Archipelago shortly after founding Chicago brokerage Terra Nova Trading. "Doing a deal with the Pacific or any of the regional exchanges was always an alternative for us," he says. "Now we're at the next level. We've graduated." Next big thing: "Trading will occur across borders, 24 hours a day, seven days a week. All market centers will be linked so that everyone will have access to the best prices. "





MyCFO began the year with a secret business model and maybe 100 people you could call customers. That was more than enough for some of mainstream finance's most senior statesmen - including Goldman Sachs Group CEO Henry Paulson Jr. and Chase Manhattan Corp. CEO William Harrison - to make pilgrimages to its Mountain View, California, headquarters.

Why? It's the latest brainchild of Netscape Communications Corp. founder and can't-miss Web entrepreneur James Clark. With an integrated financial Web site for the superrich and a staff of private bankers and accountants, myCFO is targeting the lucrative high-net-worth sector. Every firm from white-shoe Morgan Stanley Dean Witter to discounter Charles Schwab & Co., which spent $2.7 billion in January to buy U.S. Trust Corp., covets that market. And myCFO has the right pedigree to attract the enormous piles of wealth being created by the Internet and other technologies. Joining Clark on myCFO's board are Cisco Systems CEO John Chambers and venture capitalist par excellence John Doerr of Kleiner Perkins Caulfield & Byers. The firm's first four offices will be in Los Angeles, Orange County, San Francisco and Silicon Valley.

Last fall Clark brought in Art Shaw as CEO. A former McKinsey & Co. consultant, Shaw is credited with having built Charles Schwab's mass-market online business after joining the discounter in 1992. Shaw is expected soon to unveil services that will include online tools to enable wealthy customers to monitor all their assets and investments and track them on comprehensive statements. He is also said to be forging alliances with traditional financial firms to give myCFO customers special access to Wall Street products and services.

"We don't have products, so we can be unbiased," says Shaw, 40. "The Internet allows us to focus on adding value rather than accumulating paper. The Internet fundamentally restructures what you can offer clients - and the cost." Next big thing: "We're combining the best of professionals, with the best of technology and an unbiased platform. We think that' the future offinancial services. "



Chairman and co-CEO

Wit Capital Group

The Internet was made for reinvention. And few firms have reinvented themselves more than Wit Capital Group, which began life in 1992 as Spring Street Brewing Co. It metamorphosed into a financial services concern in 1996, a year after becoming the first company to complete a securities offering on the Internet.

Chairman Bob Lessin, 45, has done a metamorphosis of his own. A star banker at Morgan Stanley & Co., he became vice chairman of investment banking at Smith Barney, leaving in 1998 to become a venture investor. Inexhaustible and irrepressible - he conquered Hodgkin's disease in the early 1980s and survived a stroke in 1994 - Lessin set up his own Internet fund before joining Wit in 1998 and transforming himself into the ubersalesman of New York's Silicon Alley. A consummate networker, he hooked up efinanceworks founders Bill Ford of General Atlantic Partners and Steven Gluckstern of Capital Z (see No. 19) and sits on the board of CBS Marketwatch. Lessin steered Wit into 176 IPOs last year, according to Thomson Financial Securities Data.

Lessin, who foresees a rash of America Online-Time Warner-type marriages of online and traditional companies, has set his sights higher for Wit, which went public last year and merged with boutique Soundview Technology Group. "I want to be in every part of the capital structure," says Lessin, who is in the last stages of raising a $300 million Internet venture fund. Last month Wit hired veteran banker Mack Rossoff to head mergers and acquisitions as part of Lessin's effort to make Wit the "bridge between the dot-com world and the real world."

Aggressively expanding overseas, Wit owns a piece of Enba, the European financial holding company that started the online bank First-e, and last month it hired Merrill Lynch & Co. banker Edward Annunziato to head its Wit Capital Europe offshoot.

Next big thing: "The physical world and the virtual world will combine."




International Securities Exchange

The original online financier is going strong. In 1982 Bill Porter, inventor and entrepreneur, founded Trade Plus, an electronic brokerage service; it processed the first electronic trade in 1983. When the Web started to look like a low-cost networking alternative, Porter decided to compete against his traditional customers, such as Charles Schwab & Co. He rechristened his firm E*Trade Securities and undercut the industry with a shocking $14.95 per-trade commission. He still sits on E*Trade's board, but he left active management in January 1999.

Porter is now devoting his time to building a new business that could unsettle the options industry. "At E*Trade I couldn't figure out why it was so expensive to take customer orders for options," says Porter, 71. His answer: the cost structure of the five traditional options exchanges.

In November 1998 he started groundwork on the International Securities Exchange, an electronic options exchange funded by E*Trade Group, Ameritrade Holdings Corp., Knight/Trimark Group and others. ISE received Securities and Exchange Commission approval in February and plans to launch this year. Already all major options exchanges have cut fees and promised to develop their own electronic services.

Porter, who earlier in his career acquired 14 patents on technologies ranging from the first color low-light-level broadcast television camera to automotive pollution control exhaust sensors, last year donated $25 million to the Sloan School of Management at the Massachusetts Institute of Technology. He may soon have more fortunes to donate. "We're already working on a couple of spin-offs from the ISE," he says.

Next big thing: "Total globalization of markets, from retail order entry to institutional order entry. It will take about a decade to achieve."



Co-founder, chairman and CEO

CBS MarketWatch

If you watch TV for financial news, it's CNBC; if you still read, chances are good it's CBS MarketWatch.

That's where many of today's real decision makers, the customers of online brokerage, Internet banks or Web aggregators are getting their nanosecond-to-nanosecond market information. James Cramer, the ubiquitous founder of, may generate more publicity, but it's Larry Kramer, the bearded founder-impresario of this financial news juggernaut, who is winning this Kramer-versus-Cramer showdown. According to Media Metrix, CBS MarketWatch attracted 4.9 million different users in January, making it the most popular Web destination for business and financial news.

Kramer, 48, is an unlikely online financial media mogul. A former metro news editor at The Washington Post and executive editor at the San Francisco Examiner, he waded into the electronic information business in 1991, when he founded Sportrax, which continuously updated sports scores and betting odds on handheld devices.

In 1993 Kramer sold Sportrax to San Francisco-based financial-data vendor Data Broadcasting Corp., which put him in charge of its combined news and sports operations. Two years later DBC launched a financial-news site on the Web to complement its real-time quote service. MarketWatch, then called DBC Online, was born. "Our roots are in serving what became the day-trader community," says Kramer. "They'd pay for the information, but I knew if we wanted to build a broader media brand, it would have to be free, and wed have to have a partnership with a big player." Enter CBS. In January 1999 the company took off with an eye-popping IPO. (Its market capitalization currently stands at about $600 million.) Though it lost $22 million in the fourth quarter on only $10 million of revenues, MarketWatch is branching into national radio and television. It has signed up Fidelity Investments as a major sponsor and has key distribution agreements with America Online and Yahoo!.

With annual cash compensation of about $225,000 and exercisable stock options worth some $2.8 million, Kramer is not the richest of the online financial elite, but he is among the most grateful: "It is awesome to not have to worry about money."

Next big thing- Broadband communications that will allow more advanced video communication on the Web.



Chairman and CEO

It takes guts to start an online financial services company in a country where not many people have bank accounts, fewer still own stocks or bonds, and there are less than 100,000 Internet users. That is exactly what Wences Casares did in Argentina in 1997, when he started

Casares visited (and interrogated) officials at E*Trade Group, Motley Fool and various banks before launching his financial services and information Web site. Just 24, Casares had a hard time raising money, but he plowed ahead. "The combination of my age and the Internet made people think I was doing witchcraft," he says.

So much for sorcery. Last month, with interest in the Internet raging in Latin America, Casares agreed to sell 75 percent of his company - a financial supermarket that also provides online trading and proprietary financial news and has operations in six countries - for $529 million to Banco Santander Central Hispano, the Spanish banking giant with a powerful Latin American retail operation. Not bad for a company that no one wanted anything to do with in 1997.

"We understood the media and Internet part, but we needed a lot of financial know-how," says Casares, explaining why he sold. He attributes the success of as a financial destination to the fact that it follows its own path.

"We are not just the E*Trade of Latin America," he says. "I would be doomed if I was E*Trade, because no one sells stock in Latin America." But Latin Americans have other needs, such as paying bills, securing mortgages and buying insurance. Casares, who remains CEO, is betting that younger consumers, who are comfortable with the Internet, will expand their financial activities beyond savings accounts.

"Latin America leapfrogs with technology," he says. More than one third of the region's 500 million people are under 15 years old, and cable television and cellular phone penetration is high, even if personal computer ownership is not. "We still have a long way to go," he says. "Until we've changed the lives of millions, this is not a sure thing." Next big thing- WireLess access on a variety of devices. "It's coming sooner than we expected."



Senior vice president and general manager of the consumer division


Through the mid-1990s Intuit sat on top - make that the desktop - of the world, dominating the personal financial services software market with Quicken. The emergence of the Internet challenged that position in a hurry, since Intuit could no longer depend for growth on the old model of selling software through retail stores.

But the Silicon Valley company did not deviate from its mission of making consumers' financial lives easier - and it never lost the loyalty of its PC-software users: a staggering 12 million for Quicken and 3 million for the small-business package QuickBooks. Millions more use TurboTax and visit and related sites on the Web.

That large and loyal customer base puts Intuit in the Internet-- audience big leagues, making it a content provider and partner of choice to leading online financial companies. Hundreds of banks, brokerages and other companies with a stake in personal financial management, such as America Online and Checkfree Holdings, have working alliances with Intuit. More than 40, including Citigroup, TD Waterhouse Group and Wells Fargo & Co., have signed on to the fivemonth-old My Accounts program, which lets customers view and manage all their accounts at participating institutions.

Says Mark Goines, who as senior vice president and general manager of the consumer division is responsible for integrating traditional sales with dot-com initiatives: "Not being exclusively in either camp is what makes us so powerful. We've got lots of customers, and we can provide scale very quickly."

Goines, 46, adds: "It's not just that we have customers. We have the advantage of data in the form of data. Others still need documents, credit reports, application forms. We can use the Internet to simplify a complicated, not-fun process like loan origination, just as we did in the tax area with TurboTax."

Founded in 1983 by Stanford Business School student Tom Proulx and former Procter & Gamble Co. product manager Scott Cook, Intuit expects to reach $1 billion in revenues this year. After nearly being acquired by Microsoft Corp. in 1994, Intuit has seen its stock valuation lag that of dot-corns. The shares now trade at a price-earnings multiple of about 30. "We are competing against some companies with a no-holds-barred ability to spend," says Goines, "but they don't have our staying power."

Next big thing: "The Internet revolutionizes any industry with processes based on rows of metal desks. "



President of interactive delivery services

Bank One Corp.

Last June Bank One launched with great fanfare. Conceived by CEO John B. McCoy as a stand-alone, all-Internet operation, it earned headlines as well as searing criticism from competitors and analysts, who disparaged its departure from the "clicks and mortar" approach favored by most financial outfits.

Bank One has since become all but an industry pariah. Unexpected losses at its First USA credit card subsidiary and successive lowerings of earnings estimates hammered the bank's stock price and forced McCoy's resignation in December. Three months later Wingspan went on the selling block.

Under the guidance of Michael Johnson, 36, president of interactive delivery services, the Chicago-based bank still deserves credit for one of the industry's boldest Internet strategies. Johnson took charge in September as part of a broad senior management reshuffling.

For all the press, Wingspan accounts for just over 10 percent of Bank One's 700,000 online customers. The rest go to, which ranks among the top five commercial-bank Web sites. Wingspan, with offbeat ads tweaking the old way of banking, was designed to appeal to a highly wired, early-adopter population. Most customers - particularly in such states as Illinois, Michigan and Texas, where Bank One has good branch coverage - want to mix branch and online access.

"Procter & Gamble will compete with itself in different product categories, and we wanted to do the same," says Johnson, who has worked closely with Michael Cleary, the president of Wingspan, which is based at First USA headquarters in Delaware.

Johnson says he is still following the online banking blueprint laid out by McCoy: "He saw the whole dot-com vision. He was instrumental in getting us to attack on all fronts in ways that some other banks have not been able to duplicate."

Going beyond its tailoring of Web brands to customers' Internet comfort levels, Bank One also geared online marketing strategies toward women, small-business owners and home equity borrowers and entered into cross-marketing deals with Web portals Excite and Lycos, among other high-profile Internet names.

Next big thing: "The customer is going to want account information in oneplace, regardless ofhow many providers there are."



Head of institutional e-commerce

Merrill Lynch & Co.

Michael Packer is giving Merrill Lynch something to crow about on the Internet. Finally.

Merrill earned the online world's derision in 1998 when retail supremo John (Launny) StefFens publicly resisted introducing electronic trading. Web brokerage exploded, Merrill's share price dived - and, horrors! - online champion Charles Schwab & Co. passed Merrill in market capitalization. Last December the firm belatedly inaugurated full online trading.

Packer's mission is to bring the Internet to Merrill's dominant institutional business. A former technology guru for Simon & Schuster, Packer moved from book publishing to book running when he joined Merrill last year. His last job, as Simon & Schuster's head of corporate strategy, technology and operations, was to help sell most of the company to Pearson, the British publishing house. He then signed on as a consultant with Merrill debt chief Kelly Martin, who, he says, "reeled me in over time."

Packer, 44, has launched online trading systems for such commoditized faced-income products as commercial paper and short-term government bonds, and he has overseen the development of the iDeal online underwriting system for stocks and bonds. In 1999 the firm completed more than $2 trillion of short-term fixed-income deals electronically. Merrill has set up joint ventures with research distributor, as well as IntraNet Solutions, a software company that helps clients route information through their intranets quickly and securely. He helped engineer Merrill's partnership with five other Wall Street firms in the bond research portal Securities Hub.

Packer's goal is not just defensive; he aims to expand Merrill's customer base. "Right now, like all the other major firms, we concentrate our selling efforts, because of our economic model, on the biggest clients," says Packer. "But in much of the world, such as Europe, we don't have the sales force or the economics to reach as many clients as we'd like to serve. We are very serious about changing the business." Next big thing: "Collaborations with firmS outside the traditional securities industry to build electronic capabilities that fuel the next generation offinancial innovation."





The ubiquity and easy access of the Internet play right into the hands of Steven Wallman, a former securities industry regulator whose latest venture, Folio[fn], could give the mutual fund industry a run for its money. Says he, "I want to encourage things that help democratize financial services."

Scheduled to open this month, Folio[fn] puts powerful online analytics like stock and investment-style screens at the disposal of individual investors, allowing them to become their own fund managers. Investors can choose from preselected "folios," or portfolios of stocks that represent different industry groups or risk parameters. Or they can input financial goals and constraints, which are run through stock selection screens to produce customized portfolios. In either case, there's not a fund manager in sight.

"We're taking the whole concept of low-cost mass distribution on the Internet and marrying it to portfolio theory," says Wallman. Investors access the service directly through the Folio[fn] Web site, but the company is expecting alliances with financial advisers and other intermediaries.

Wallman, 46, a well-regarded corporate lawyer, who served on Securities and Exchange Commission from 1994 to 1997, made his name pushing through regulatory exemptions for early online finance pioneers, He also fought for the decimalization of U.S. stock markets, against the wishes of the SEC's powerful chairman, Arthur Levitt Jr.

In addition to Folio[fn], Wallman is one of the founders of an online private placement service called OffRoad Capital Corp., which has inked prestigious partnerships with such firms as Charles Schwab & Co. but so far has only raised five financings of less than $6 million each. Says Wallman, "Our goal is nothing short of a total revolution in individual investing."

Next big thing: "The Web will be used to create products and services that couldnt exist in the off-line world. This new phase will render the old rules of business and accounting obsolete, along with the traditional role of regulators."



Senior vice president of business development and strategic investments

Visa international

Credit card payments lie at the heart of electronic commerce. So it's not too surprising to find the Visa organization helping to fund some start-ups. More surprising is its success: With 11 early-stage Internet investments, including stakes in such highfliers as Yahoo!, security vendor VeriSign and e-commerce software provider Open Market, Visa turned some $30 million into more than $400 million in five years.

Sarah Perry, the senior vice president who oversees these venture investments, insists that they are more about relationships than money. "Many corporate venture capital companies emphasize their investment returns, but we're different," says Perry, who has been in the strategic investments division for three years and in March succeeded its founder, Todd Chaffee.

Before Chaffee left for Institutional Venture Partners, Visa considered but rejected the idea of starting a stand-alone technology venture fund. "We place our emphasis on the strategic value for Visa and its members and on growth opportunities for the portfolio companies," Perry says. Thanks to its early $300,000 stake in Yahoo!, for example, Visa enjoys prominent advertising placement on Yahoo! screens.

Though Visa is a for-profit corporation, it operates as an association of 21,000 banks worldwide. They share in the yield of Perry's five-person team, in the form of share appreciation, payments volume and other e-commerce opportunities. Perry, 47, who worked in retail banking at Bank of America and First Nationwide Bank before joining Visa in 1988, discourages direct comparisons with corporate counterparts, noting that Visa liquidates all stockholdings after post-IPO lockup periods. But it locks in marketing or operational cooperation. She says these "spiritual ties" are more valuable to Visa members than the money.

Not that the money's bad. A recent winner, business-tobusiness exchange vendor Ariba, went public last year at $23 a share and is trading above $200. It designates Visa as its preferred card for corporate purchasing. That's the spirit. Next big thing: "Person-to-person commerce. There is a need for a ubiquitous and trusted payment solution, and we think we can create a preferred position for Visa."



Director of special projects

Banco Bradesco

Since 1996 Banco Bradesco's Candido Leonelli has enticed 1 million Brazilians into shopping and banking online. How? Sheer aggression. "This is not just a race," he declares. "This is trench warfare."

Bradesco's director of special projects, Leonelli, 52, has made Brazil's largest bank one of Latin America's most successful Internet plays.'s 1 million customers (out of the bank's total of 8.5 million in Brazil) put it in a league with an elite handful of U.S. banks and brokerages, with 2,300 more joining each day.

Online customers can do their banking, pay bills, trade stock, set up a business-to-business electronic commerce platform and shop in a mall called Shop Facil (Shop Easy, in English). They conduct more than $5.8 million in transactions per day. "We want 30 percent of our clients online by 2002," says Leonelli. One lure: offering free online time for shopping and banking on the Bradesco Web site. "This is a loyalty game, where the users win free Internet time based on the number of products they buy" he says.

Rival Uniao de Bancos Brasileiros, or Unibanco, had the distinction of being first to offer a virtual credit card account for Internet purchases, but Bradesco shook up the Internet service provider, or ISP, market in December by offering its clients free Web access. That forced down the fees charged by other ISPs, further stimulating growth of the consumer online market. Bradesco is also offering cutrate financing for computers purchased by employees and expects to start doing the same for customers by midyear.

"The Internet raises the number of clients using home banking and reduces the number in our branches," Leonelli says. "But our research shows that Internet clients buy more products." Bradesco has 98 products online and more in the pipeline.

Next big thing: Web TV wireless browser access and broadband. "Only with broadband can we have pure Internet banking."






Municipal bonds can seem a tad boring, but Pittsburghbased Internet entrepreneurs Myles Harrington and Dan Veres have managed to push them to the leading edge of online finance. In 1996, when most people saw only modest online potential in the fixed-income market, the former investment bankers launched MuniAuction. Their proprietary system was designed to facilitate electronic primary and secondary market auctions, cutting borrowing costs and increasing liquidity in this fragmented and inefficient corner of the capital markets.

A growing number of issuers seem to think they're right. MuniAuction made waves last November when it sold $57 million worth of general obligation bonds for the City of Pittsburgh - the first-ever bond offering without an underwriter. By the middle of February, the company had auctioned $206 billion of bonds in the primary and secondary markets for 201 issuers, signed deals to help run discount-note auctions for Freddie Mac and the Federal Home Loan Banks and announced plans to launch at least a dozen private-label sites for underwriters, advisers and issuers.

Though Harrington, 41, and Veres, 38, once ran an independent financial advisory firm, they happily market themselves as a team that will put many bankers out of work. Traditional financial institutions can't be as aggressive as they can, says Harrington: "Morgan Stanley does not see a world where institutional investors talk directly to institutional investors. They see a world where they talk to each other through Morgan Stanley." As for Harrington, he may soon have more to talk about. You'll see us in a market by June that will cause heads to turn."

Next big thing- Harrington: "Even the disintermediators will end up getting disintermediated. " Veres: "Consolidation and attrition among fixed-income Internet trading start-ups."





Whenever a credit card transaction is processed, online or off, the chances are that one of Bill Melton's companies helped move the transaction through. A pioneer in electronic commerce, Melton has made a fortune assembling the plumbing of payments systems and reigns as a kingmaker in the complicated world of e-money

In 1981 Melton founded Verifone, the first and biggest mass producer of the now-ubiquitous credit card authorization terminals. He was still a sizable shareholder when Hewlett-Packard Co. bought Verifone in 1997 for $1.3 billion. He also financed the startup of Transaction Network Services, a provider of telecommunications services to major banks and credit card companies. PSINet, an Internet service provider, acquired TNS last year for $800 million.

In 1994 Melton and several associates, including Internet technology pioneers Daniel Lynch and Stephen Crocker, started CyberCash, a quick-moving but financially struggling processor of online payments. Chairman Melton owns 18 percent of the Reston, Virginia-based company, which lost $43 million last year. At a March share price of $12, down from a high of $60 in 1996, Melton's stake is worth about $50 million. An optimist, he notes that the stock has recovered from a $G low and that CyberCash's merchant base more than doubled last year, to more than 20,000. "We were ahead of the pack as a dot-com company and ahead of the pack in the Street's disappointments with us," he says. "As the market retreats to value, we think we will be in the right place."

Melton, 57, who has a master's degree in Chinese philosophy from the University of Hawaii, is slowing down some to focus more on his personal investments - many in emerging technology frontiers in Asia - and "smell the roses." Last fall he turned the CEO job over to president James Condon. "The problem with us visionaries is we tend to be a little loose on the details," says Melton. "I have always seen payments technology as a measure of how efficient economies are. When economies get more efficient, payments do too."

Next big thing. "Geography evaporates. It may take ten to 15 yearsfor the Internet to reach full globalization. When it does, business profits as well as labor rewards should be tremendous. '




Some bankers think is playing with fire. But to the engineers who started the company 14 months ago-- and its venture backers - Yodlee is all Internet cool.

The Sunnyvale, California-based company sells what it calls a Web personalization platform that enables consumers to gather, manipulate and analyze all of their online personal information in a single place. Detractors, fearing they might lose their hold over customers, deride this as "screen scraping." In one extreme response that drew battle lines over data ownership, First Union Corp. of North Carolina sued a Yodlee rival, Secure Commerce Services, for allegedly scraping bank data without legal authority.

Yodlee's approach is to offer to help banks, brokerage firms and other loyalty-seeking service providers to use screen scraping to their advantage. The software's power is already evident in the AltaVista portal's My Accounts service, and Yodlee CEO Anil Arora says several financial institutions are close to forming alliances with his company.

"At first banks were like, `Wait a minute! What's this all about?' Now these institutions realize this is something they need to do because it positions them as the place where users hang around on the Internet," says Arora, 39. "People will base where they live on the Internet around what's important to them, and for most people it's their finances." Yodlee can surround banking; investing and credit with e-mail, shopping, travel, auctions and other services consumers choose.

"This is a battle for stickiness," says Sree Rajan, cofounder and head of research and development. He cites surveys indicating that half of Internet users want to view all their accounts and pay their bills at a single Web site using one name and password.

Arora joined in February from the computer retailer Gateway, where he ran a highly personalized marketing program via a Web portal. Arora replaced one of the co-founders, engineer Venkat Rangan, who became chief technology officer. Says Rangan: "Anil has the perfect background to propel Yodlee to the next level."

Next big thing: "It's not just the financial institutions and the portals like Yahoo! that hope customers will live at their site. Expect to see major companies like Amazon. com and eBay trying to tap into the stickiness."




Harvard University

Think of Jeremiah prophesying doom - but being listened to. That describes the phenomenon that is Clayton Christensen. Though the Harvard Business School business administration professor is no Internet specialist, his Innovator Dilemma sits on more bedside tables than the Gideons' Bible. A must-read for any self respecting tech mogul or wannabe, Christensen's 1997 tome is to the New Economy what Tom Peters' In Search of Excellence was to the precrash 1980s.

The word has been carried far and wide. "Senator, I don't know if you've read Clayton Christensen's Innovator Dilemma," Goldman Sachs Group CEO Henry Paulson Jr. said to Republican Senator Phil Gramm at recent hearings on securities market reforms. Other high-profile devotees of Christensen's work: multimedia mogul Michael Bloomberg, Merrill Lynch & Co. CEO David Komansky and Microsoft Corp. supremo Bill Gates. Christensen graced the cover of Forbes magazine in September with longtime client Andrew Grove of Intel Core.

What makes the fuss all the more remarkable is that the word "Internet" does not appear in the original 1997 edition. Says Christensen: "I think the word `Internet' passed through my brain once when I was writing it." Focused on falls from grace by the likes of Digital Equipment Corp. and Sears, Roebuck and Co., Christensen's message is simple: No company is safe. Even the best managements, doing everything right, can miss the boat when it comes to innovation. That lesson rings true with executives everywhere especially those on Wall Street. "The Internet enables far more people to do what specialists had to do for you," Christensen says. "If you wait until the barbarians are at the gate and eroding your core business, then your fears of cannibalism will become a self fulfilling prophecy."

In high demand, the 6-foot-8 Cristensen consults for clients like Intel, Corning and Eastman Kodak Co. He has lectured executives at Goldman Sachs and Merrill Lynch and shared his thoughts with Defense Secretary William Cohen and the Joint Chiefs of Staff. Christensen offers hope for fretful financial executives: "If Merrill Lynch thinks they have organizational challenges, they should take a trip to the Pentagon."

Next big thing: The disintegration ofthe financial services industry and the end of integrated bundled investment banks.



President and CEO

Broker Tec Global

Few areas are more ripe for technological overhaul than the bond market. If William (Hal) Hinkle has his way, the coterie of specialized bond brokers that flourishes by enabling big dealers to trade anonymously with one another will be among the first casualties. Hinkle is CEO of Broker Tec Global, an electronic order-matching system, jointly owned by 12 of the world's largest bond dealers, including Goldman, Sachs & Co., Credit Suisse First Boston and Merrill Lynch & Co.

Scheduled to be launched this quarter, Broker Tec will first focus on the huge U.S. Treasury and European sovereign interdealer markets. Later, the joint venture will begin trading in corporate securities, repurchase agreements and futures.

Hinkle, 47, joined Broker Tec in 1998 as acting general manager and was named CEO last year. A 21-year Goldman Sachs veteran - his last job there was director of e-commerce for fixed income, currencies and commodities - he doesn't underestimate either the energy or the finesse that will be required to make Broker Tec a success. In the 1990s an effort to build an electronic bond trading system by a Wall Street consortium called EJV Partners was killed by internal politics. Hinkle had a bird's-eye view as Goldman's representative on the EJV board.

Another potential stumbling block: It's far easier to get firms to invest in a system than it is to persuade them to direct their order flow to it. And if too many competing systems develop - as has begun to happen in the equities market - liquidity can fragment. "The equity market has that challenge in spades, with nine, ten, 11 [electronic communications networks] competing for market share," says Hinkle. "But there's more commonality of interests in the bond market, so it's more likely that it will preserve centralized liquidity without first going through a fragmentation stage."

Next big thing: "E-commerce transforms the bond market with the emergence of a few dominant players, the development of standardized trading and research systems, and the creation of exchanges. "

The following profiles were written by Global Banking and Technol ogy Editor jeffrey Kutler, Hong Kong Bureau Chief Kevin Hamlin, Senior Editor Hal Lux, Senior Writer Robert Clow and Staff Writers jenny Anderson, Rich Blake and Justin Schack. They were compiled under the direction of Kutler and Lux.