From...

by Megan Barnett

(IDG) -- To create our list of the key financial-services companies on the Net, we looked for the category leaders in specific areas such as online banking, brokerage and financial software; for the innovators whose ideas were pushing others to act; and for the big institutions that are defining the environment for everyone. The result is a list that includes some unlikely contenders, like Nasdaq, the electronic stock exchange and Merrill Lynch, whose executives once denounced Net opportunities but now have announced plans for a Charles Schwab-like service that charges $29.95 per trade.

The online debut of these offline companies has engendered a new debate: Is it necessary to provide a combined online and offline infrastructure (a "clicks-and-mortar" business model), or will consumers be content with lower fees and virtually no human contact? E-Trade continues to defend its all-electronic model, while competitor Charles Schwab stands firm in its belief that an online trading business must include access to people. Similarly, E-Trade expanded into banking with its acquisition of Net-only commercial bank Telebank, while Wells Fargo, the bank with the most online customers, defends the combined approach.

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1. Charles Schwab: Few companies can claim anything close to the successful transition Charles Schwab has made onto the Web. The 25-year-old discount brokerage jumped into the Internet trading boom when it introduced one low commission rate for both online and offline customers early last year. The idea was risky, but the results have been spectacular. Schwab leads the brokerage market, with more than twice the share of its nearest competitor.

2. Datek Online Holdings: Datek captured the active investor market early. It offered a unique guarantee: Any marketable order will be executed in 60 seconds or the commission will be waived. That offer, and commissions as low as $9.99, put Datek on the map.

3. E-Trade: The competition has become fierce, but thanks to successful marketing ("Someday, we'll all invest this way") and lots of content ("Destination E-Trade"), the site solidly claimed the No. 2 spot, second to Charles Schwab, in the online brokerage space last year.

4. Intuit: Intuit is the leading provider of personal and small-business finance software. With more than 11 million Quicken users, Intuit has the juice to become a Web powerhouse. It just hasn't done it yet. Revenue from Internet businesses is estimated at around 10 percent.

5. Merrill Lynch: When Merrill Lynch earlier this summer announced plans to offer online trading at $29.95 a pop by December, the online brokerage industry responded with a resounding "I told you so." The company had earlier declared online trading to be a danger to the financial health of investors.

6. Nasdaq: Nonprofit organizations don't typically make the cut in lists like this. And the Nasdaq Exchange isn't even its own company, it's the stock- trading arm of the National Association of Securities Dealers. Nonetheless, the Nasdaq is playing a big role in the Internet Economy.

7. NextCard: Jeremy Lent, founder and CEO of NextCard, saw the obvious long before the credit-card titans did: The easier you make it for consumers to apply for a credit card, the more likely they are to try -- and transfer their balances.

8. Reuters: Before auctions, e-commerce and online stock trading, the Net was little more than a platform for content delivery. It seemed to threaten information providers like Bloomberg and Reuters. Instead of trying to beat 'em, Reuters joined 'em, selling its financial news and information to a wide range of Web sites and capitalizing on the stock-trading boom via its ownership of Instinet.

9. Wells Fargo: Wells Fargo CEO Dick Kovacevich believes people want it all. They want online banking services in addition to physical branches and ATMs, not instead of them. At least for now, he appears to be right. Wells Fargo has more customers online than any other bank. It signed up its one- millionth customer last month, and it claims to be adding 100,000 new ones every month.

10. Wit Capital: A new school of investment-banking firms is evolving, and New York-based Wit Capital is at the forefront.