Ohio Savings Marketing CDs through AmTrust Direct

Amtrustdirect_homeOhio Savings Bank <ohiosavings.com> is marketing CDs through a direct-banking subsidiary, AmTrust Direct. The company is currently topping the 1-yr CD chart at BankRate.com with a 5.35% APY. Users can click through to the direct-banking site (see screenshot right) through an enhanced listing at BankRate.com.

The direct banking offer is only 35 basis points higher than the 5.00% offered at the parent, Ohio Savings, or its AmTrust Bank <amtrust.com> division.

JB

Union National Bank’s Gold Cafe

Unionnational_goldcafe_logoTalk about thinking outside the box: Instead of serving coffee in its branches, Union National Community Bank <uncb.com> is serving checking accounts in a cafe. Unionfinancial_goldcafe_pic_1The $400 million bank, headquartered in Mt. Joy, Penn., is using a strategy similar to ING Direct, except UNCB has gone as far as to remove its brand from the name, calling the financial store "Gold Cafe" (see picture right).

The cafe features a full retail coffee operation with coffee, lattes, tea, smoothies and so on priced at $1.45 to $4.45 and pastries and desserts from $1.75 to $2.25. The coffee service is run by Lancaster County Coffee Roasters.

Unionnational_goldcafe_homepageThe branding has also been extended to its website, GoldCafes.com, where the concept is supported with an emphasis on the lengthy hours, 6:30 am to 7:00 pm, Monday through Saturday, and noon to 5:00 pm on Sundays, 82 hours in total. The website also features information on an iPod giveaway during its May 11-13 grand opening. The only banking product mentioned is free checking in the lower-right corner (see screenshot).

The branch, er cafe, located near a major community college in Lancaster, Penn., includes a coffee bar, couches, an outdoor patio, fireplace, free Wi-Fi, and the ubiquitous plasma screen monitors. The bank has also created Sip, a "cultural newszine" available only in the cafe. A second cafe is set to open later this year in Centerville.

Analysis
We can't predict whether this concept ultimately works. Although we like the new-age branch concept popularized by Umpqua and others, this might be over the top. One of the biggest reasons to build branches is for their advertising value, placing the bank's brand in front of thousands of commuters and errand-runners each day. By calling it the Gold Cafe, the UNCB loses the normal branding value, but the highly unusual strategy will generate a large amount of publicity, overcoming the initial customer confusion of using a bank named "Gold Cafe." However, this is a unique situation that wouldn't readily work for other financial institutions.

Unionnational_goldcafe_homeThe initial website is just a single page (see above) and badly needs an upgrade to cash in on all the publicity. At a minimum, prospective customers should be able to get a virtual tour of the cafe and open an account online. The site will be heavily visited by banking analysts and reporters and should do a better job supporting the publicity it's bound to attract, although the parent's home page does include a series of photos of the new concept along with a Gold Cafe link in the main navigation (see screenshot right).

If anyone has a chance to visit the branch, let me know what you think of it.

JB

Citi Focuses on its High-Yield Savings Account

Citi_esavings_msn_1On Tuesday (5/16), Citibank raised its e-Savings rate 25 basis points to 4.75%, making it the highest savings rate at a name-brand financial institution. Only Corus Bank in Chicago has a higher APY on BankRate.com today, 4.84% with a $10,000 minimum.

Bankrate_savingspageMore importantly, Citi continues its massive ad buy touting the rate. It was back on the top of MSN's homepage today, and the bank has bought huge parcels of BankRate.com, with some pages running three Citibank promos, top, bottom and side (see BankRate "Checking & Savings" page right). It's similar to what Emigrant Direct did last year to kick off its direct banking efforts (click here to see past NetBanker articles on deposit marketing).

Analysis
Emigrant Direct, HSBC, ING Direct, and now Citibank are all spending $10+ million per year promoting high rates (see ad spending NetBanker5/17). While high-rate offers are nothing new, the ease of finding rate deals online and transferring the funds means it will be harder to hold onto those high-balance 0.50% checking and savings account balances.

JB

Check-Scanning ATMs to Receive 15 Minutes of Fame

Bofa_atmWondering what to call your remote deposit-capture service? Just wait a few months and Bank of America will solve that problem for you. The bank, and its $175 million advertising budget (see NetBanker May 17), is on the verge of making check-scanning ATMs a household name.

According to last week's Wall Street Journal (May 8), "The Envelope-Free ATM," BofA will use television to trumpet the new feature as it rolls out 1700 next-generation ATMs by the end of the year. Bank of America has an ATM base of 15,000.

As you recall, the last time BofA used its advertising budget to push a new high-tech feature, free bill pay, in 2002, it set off a chain reaction that has resulted in bill payment being free at most U.S. financial institutions.

We expect the BofA advertising to be the beginning of mass adoption of check scanning at ATMs, self-service teller-assisted stations in branches, and for business customers, in-home/office devices.

Analysis
Today there are only about 4000 check-scanning ATMs in the United States compared to 396,000 conventional machines, so it will be years before there is a critical mass of the new machines. TowerGroup predicts that 25% of the 200,000 bank-owned machines will feature check imaging in 2010 (see chart below).

Atm_chart_2

Financial institutions of all sizes should accelerate their plans to harness the technology. As the branch network is downsized, this is one of the ways the impact on consumers will be minimized. The extra $10,000 to $15,000 per ATM expense is relatively insignificant considering the labor savings from the device. TowerGroup estimates a 75% decrease in processing costs to just $0.40 per item compared to $1.70 for checks deposited with a teller or by means of an envelope dropped into an ATM. That means the breakeven is often less than 10,000 deposited items per machine, assuming the bank is able to reduce back-office or branch labor. This does not include the expected lower fraud costs.

However, this particular technology is more about customer satisfaction than cost reductions. Customers will love this system once they understand it. Not only is there instant feedback with an image of the deposited items, users also get the peace of mind of being able to access the image through their online bank system. Yet, another way that online banking adds value to the relationship.

JB

Online Advertising Spending for Financial Services Companies

American Banker released figures for 2005 online advertising expenses for financial services companies. Among banks, Bank of America was first with $20 million spent online in 2005, no surprise there. Five others spent $10 million or more including two direct banking efforts, ING Direct and Emigrant Direct, which spent 96% of its media budget online (click on the table below for a larger version).

2005 Advertising Expenses, in millions
Internet_spending_2005_2004

Sunmark FCU Goes Direct with RateEdge.com

Rateedge_logoWe've seen a number of banks enter the direct banking business, primarily through high-rate savings products. Late last year, Sunmark Federal Credit Union <sunmarkfcu.org> joined the fray with a private-branded direct Web offering at RateEdge.com (click on screenshot below for a closeup).

Rateedge_homeThe Internet-only savings account pays 5.25% interest on all balance levels with no fees and no minimum balance. Rates are five times higher than the credit union's regular share account, which pays 1% on balances of $5000 or more. The credit union's money market pays 2% on a $25,000 balance.

The only possible fee is for transferring money OUT of the account more than twice in a month. The third and subsequent withdrawals are charged a fee ranging from $2 to $5 per transfer depending on the amount. Refer to its fee schedule for more information.

This would be the best savings account in the country, except that it is limited to residents of six counties in upstate New York (Albany, Montgomery, Rensselaer, Saratoga, Schenectady and Schoharie). However, anyone in the country can open an account if they have a relative in any of those counties, or at least claim* they do.

*The application asks for the name of the relative living in the six-county area, but no other identifying information. According to an online posting, the credit union's customer service department requires the address and phone number of the relative prior to opening the account. We did not test it ourselves.

Fidelity Sees its Future in Payments

Margins are thin, markets are tight. New customers are hard to find. Compliance issues are multiplying. New technologies threaten to disrupt established operations.

Some companies wonder if there’s a future for them in payments, but not Fidelity National Financial Corp. (FNF). The Jacksonville, Florida, firm is executing a war plan that could give it the same sort of market domination it already enjoys in title insurance—50 percent of the market. To prove it, Fidelity’s Fidelity Information Services (FIS) said late last month that it was taking up a complex deal that would in effect give FIS freedom to build its business without reference to title insurance, Fidelity National’s original line. Wall Street liked the news; FIS's stock soared 24 percent on the news before closing at a mere 17 percent rise.

In the deal:

  • FNF will transfer insurance and other assets to Fidelity National Title Corp.(FNT) in exchange for FNT stock, in a transaction worth $1 billion to $1.25 billion;
  • FNF will spin off its ownership stake in FNT to FNF shareholders in a tax-free distribution, leaving its ownership in FIS as its only asset;
  • FIS will merge with FNF, and issue FIS stock in a tax-free transaction, making FIS completely independent;
  • FNT will rename itself Fidelity National Financial.

The deal creates two publicly traded companies: a new FNF, trading under the FNF ticker symbol, and FIS, which will keep its FIS symbol. The FNT symbol will disappear.

The move follows on a tortuous road that chairman William Foley II embarked on in 2003, when he stumbled into the payments industry by buying Alltel Information Services, and its ACBS mortgage-servicing products, for $1.06 billion. That acquisition gave Fidelity the databases of eight of the top nine home-mortgage lenders; 50 percent of the outstanding home mortgages; and a clear view of the cash-flow opportunities in the payments business.

Since then, he’s spent more than $2.5 billion to assemble a payments-processing operation that could dominate the industry. This latest move, say informed observers, is designed to simplify the financial structure of the parent company by shifting the debt load associated with the FIS acquisitions away from the title company (FTN owns about 50 percent of that industry). That, in turn, will get FIS what it considers a proper valuation on Wall Street and get a listing on the Standard & Poor’s 500, in the process making it easier for FIS to raise money in the capital markets and thus continue to grow through acquisitions.

“The motivation was to eliminate the holding company structure, move the assets to two individual companies, and make those companies, independently, more able to pursue their strategies,” says Geoffrey Dunn, a senior vice president of Keefe, Bruyette & Woods Inc. (KBW). “FIS gained freedom from a controlling parent, and more flexibility to pursue its strategy and capital management going forward. Foley has historically not sat around if he’s created value in the market.”

FIS's main business idea is that banks will become marketing operations, and increasingly outsource their payments-processing operations, says Executive Vice President Grace Brasington.

“If they’re going to outsource their payments capabilities, we’re going to provide those capabilities to them, so they can focus on the marketing aspects of their business,” she says. “From a marketing perspective, banks won’t have to worry about how to get the additional volume [to turn a profit from payments]; it will be Fidelity’s problem.”

Bulking up Fidelity’s processing volume will in turn boost its earnings by creating scale, and profit. Fidelity has been doing this by, among other things, buying a customer base through acquisitions—last year’s acquisition of Certegy for $235 million in stock, for instance—and then migrating those acquisitions to a simplified clutch of standardized offerings that pretty much cover the waterfront of bank-payments operations. This has allowed them to avoid the expense of supporting obsolete products still used by important customers, a trap that some of its competitors have not eluded.

Meanwhile, the simplified financial structure will allow FIS to continue buying customers by buying companies, a strategy that will be greatly helped by FIS’s roster of institutional investors, all of which are looking for homes for their investor’s money.

Among those investors: Texas Pacific Group and Thomas H. Lee Partners, two private equity investors that together paid $500 million in 2004 for 25 percent of FIS after an uninvited, and failed, attempt to buy the the parent.

These companies had their stakes reduced to 17 percent after the Certegy deal, which among other things gave Chairman Foley the public vehicle he had been seeking for FIS for years. But according to FIS’s SEC filings, both investment groups, which own their FIS shares through a maze of offshore accounts, have remained active owners even though—thanks to a September 2005 shareholder’s agreement—their holdings have largely disappeared into FIS’s 156.6 million outstanding shares.

And both firms have also been working closely with Foley to acquire more companies. In January, according to FNF’s March 10-Q, FNF, Lee, and Texas Pacific together bought 40 percent of Sedgwick CMS Holdings Inc., an insurance claims outsourcer, for about $126 million. That transaction will probably become part of the FNT portfolio.

But this partnership, combined with the splitting of FNT and FIS, will probably be of real help to FIS’s acquisition strategy going forward, says KBW’s Dunn. “If FIS goes and does additional acquisitions eventually, I wouldn’t be surprised if the private equity guys would be involved,” he says. “Once Foley’s found an area that makes sense, he’ll be aggressive to build out a platform, and he’s not afraid to find companies that are underperforming and fix them. He's got a great track record of doing that.”

This sort of resource will lead over time to a larger, increasingly dominant FIS. “Near-term and longer-term, they’ll be very focused on cross-selling opportunities. But they’ll also round out their offering through acquisitions. I would absolutely expect them to be a major player in the M&A front, going forward,” says Dunn.

FIS’s Brasington wouldn’t deny that assertion for a minute, pointing out that risk management and merchant acquiring, both of which came to FIS with the Certegy deal, are natural directions for FIS to take. “We’re always, as a company, going to evaluate the right opportunities from an acquisition perspective as those opportunities come up,” she says in perfect corporate-speak. “We want to exponentially increase our capabilities.” (Contact: Fidelity Information Services Inc., 904-854-5043; Keefe, Bruyette & Woods Inc., 860-722-5902)

Do M-Payments Have a Future in the U.S.?

David_evans An unpublished study being completed by Market Platform Dynamics says there’s little data to support assertions that mobile payments will become the payment vehicle of choice for the people under the age of 40 called Gen X and Gen Y. According to the company’s multi-year research, 62 percent of respondents said they think using cell phones as payment vehicles is unnecessary, and 38 percent said they don’t use their cell phones enough to make it worthwhile. The good news: People born since 1977—Gen Y’ers—like the idea better than their Gen X elders. Last week, founder Market Platform founder David S. Evans spoke with NetBanker about his findings, and their implications.

NB: Tell us about the difference in attitude between the 16-to-19-year olds and older people.

Evans: The very young people indicated they’re more interested in using their mobile phones as a payment device, and the very old people—real geezers in their late-30s to early-40s—are less enthusiastic. Everyone else is about the same [as the geezers]. But still, even 50 percent of the real kids say ‘not really interested.’

NB: Most of the enthusiasm for mobile payments is based on the idea that these children are going to be flocking to use their cell phones like they do in Asia, and that therefore, mobile payments is not only the wave of the future, but also the demise of the credit card and the credit card brand as we know it.

Evans: Let’s be careful about a couple of things there. First of all, and despite the survey results, I’m still bullish on mobile phones eventually becoming payment devices. The thing you need to keep in mind is that people can’t really imagine what it is like to use one of these things until you actually present them with the goods. So, despite these numbers, I’m still bullish on mobile phones.

Number two, you say ‘Displace the credit card industry.’ There are two issues: One, whether the mobile phone is going to become the new form factor—just a physical thing that people use instead of a magnetic stripe card. The other question is whether the possibility of the mobile phone carriers being in the loop has an implication for the card system.

Those are two different questions. For the second question: What is currently happening in the U.S. is that the mobile carriers are not expressing, at the moment, great enthusiasm to be card systems. But having said that, it’s ultimately the mobile operator that has the relationship with the customer, so the mobile operators are being injected into the payment eco-system, and it’s possible that that could have some implications for the card associations. But it’s pretty complex.

NB: It seems to me that the real impetus here is going to be the first question—will the form factor impel the cell phone operators into the loop.

Evans: That’s correct: If consumers are interested in using their mobile phones as payment devices, then you can be sure that ultimately, the mobile phone operators are going to want to figure out some way to get a piece of that action.

NB: Based on your research so far, what are those indications?

Evans: Based on what’s happening in Asia, and looking at the U.S., our sense is that in the long run, and despite the lack of enthusiasm that we get in the survey, the mobile phone has many advantages as a form factor, because of the possibility of its being a contactless device with a graphical user interface—able to do lots of different stuff and being ubiquitous as well. So it’s a natural thing for them to become an important—if not the—form factor for paying for things.

NB: So I take it that your ultimate conclusion here is that this will happen, but it will take longer than some enthusiasts may be suggesting.

Evans: That’s correct, and I think the survey results indicate that people aren’t going to flock to this thing just because it’s new, and whoever is trying to push this form factor on consumers, or on merchants, is going to have to present a solid value proposition to the consumers. Consumers will have to be able to do something with this device that they can’t do with their current, easy-to-use magnetic stripe card. It underscores the fact that the introduction of a new technology in the payment card space is always an uphill battle.

NB: So first of all, the way to accelerate adoption will be to offer something the cards don’t do, aside from being able to use your cell phone as a gizmo; and number two, the people who want to push adoption will have to be willing to buy market share by accepting lower margins today.

Evans: I don’t necessarily agree with that. If you can come up with a clever, valuable thing on the mobile phone that is of interest to consumers, consumers will be interested in it. And that can happen without necessarily taking a hit on margins.

NB: Would that include rewards programs?

Evans: It may turn out that mobile phones make it easier for card issuers and merchant participants to have rewards programs, because you have a graphical interface on the phones. That implies that you can basically beam rewards to people. There are more clever things you can do with a computer than you can do on a mag stripe card, or even a contactless chip card. So that’s one of the value propositions that one can start thinking about with mobile phones: Are there ways to turn the mobile phone into something that’s valuable to both consumers and merchants?

NB: And what do you think?

Evans: Once you start moving towards a smart computing device with a screen, there is an enormous amount of things, including rewards, that people in this business can start thinking about—things we can’t even imagine. The mobile phone is most interesting because it truly is a computer. And in other parts of the information technology world, we’ve seen that once you start talking about software platforms for computers, developers come up with all sorts of ideas about how to use that computing power. That’s the true excitement of the mobile phone.

NB: So the payments mechanism will just be included in the phone, and over time, people will use it more.

Evans: We have to be careful about one thing, though: When you think about people using mobile phones, we’re talking about contactless, and therefore the adoption of mobile phones as a payment device is tied to the adoption of contactless at the point of sale by merchants.

NB: Which is the chicken-and-egg issue.

Evans: It’s a chicken-and-egg issue. There are all these contactless cards out there now, but there aren’t a lot of merchants that accept them. But if consumers wind up really liking the idea of contactless mobile phones as a payment device, and people start getting those sorts of phones, it could propel adoption of contactless. Having said that, if I gave you a mobile phone with a contactless chip today that was an incredibly powerful payment device, you could use it at your local McDonald’s to buy a Big Mac, but not much else.

NB: Everything you’ve said is contingent on a screen. What does your research tell you about what people say will be the generation after cell phones—a chip embedded in a wristwatch or token?

Evans: I don’t think that’s after mobile phones—I think it’s pre-mobile phones. One of the things that came out of our research is that our respondents exhibited utter lack of enthusiasm for fob-like devices.

NB: Yet most people have predicted that that is the next generation after this, and that’s what’s going to atomize the brand value.

Evans: The Gen Y people indicated slightly more interest in fobs than Gen X, but no one expresses a lot of interest in fobs.

NB: I infer from that that some of the anxieties that I’ve heard about the next generation of payment devices atomizing brand value is, at a minimum, overdone.

Evans: Yes. I don’t think there’s any reason to think that mobile phones are going to atomize the brand. I think that the major implication i
s that in the long run—five to ten years—mobile phone carriers are potentially important players in the eco-system, and whether they  become allies of the card systems, or whether they think about becoming alternatives, or allying with someone else, remains to be seen. But it’s certainly not going to atomize the industry—it’s just going to inject another set of interested parties into the business.

NB: What’s happened in Japan [where DoCoMo already operates a thriving mobile payments system] could be done in this country just as easily. Do you think that could be the disruptive element that could marginalize cards?

Evans: It’s possible, but there are very important differences between Japan and the U.S. Japan has a poorly developed card industry and not a lot of interest in the use of credit cards. It has enormous interest in the use of mobile phones. DoCoMo got established in Japan mainly because people don’t have personal computers, and there is an extensive broadband penetration, so Japanese consumers standardize all their Internet activities on mobile phones. And you have companies that are able to push the mobile phone manufacturers around and tell them what to do. When you come to the U.S., you have totally different sorts of operators and a very, very well-developed card industry, with plenty of muscle behind it. So I think the [U.S.] mobile operators are an interesting set of entities that, as the mobile phone becomes a more important payment device and gets injected into the [U.S.] payments eco-system, could alter that eco-system. It could possibly take on a more significant role. But I think that’s a long time coming, and certainly not imminent. It remains to be seen whether that is even a plausible outcome in the U.S.

(Contact: Market Platform Dynamics, David Evans, 617-266-6839)

Latest New Products and Contracts in the Payments Industry

The latest new products and contracts.

The Canadian Payments Association issued new payment standards for electronic check clearing, part of an industry-wide plan to move the Canadian check-clearing system to an image-based process by December 31, 2006. (Contact: Canadian Payments Association, 678-781-7205)

CheckFree Corp. says it has a new product, the CheckFree Positive Pay Accelerator, a  real-time software module of the CheckFree ARP/SMS product. (Contact: 678-375-1595)

Deluxe Financial Services says it’s now the exclusive provider of checks and related services for BancorpSouth. (Contact: Deluxe Financial Services651-483-7503)

DCI says that Syracuse, Kan.-based Valley State Bank is using a DCI interface that allows the bank to connect to AudioTel’s remote image capture and exchange product. (Contact: DCI, 678-781-7224)

First Data Corp. says Brookfield, Wisc.-based North Shore Bank will be using its STAR ATM network. (Contact: First Data Corp., 303-967-8646)

Fiserv Inc.’s BANKLINK unit says Union Bank of California will be using BANKLINK’s iLINK remote deposit product. Separately, Fiserv’s Credit Processing Services and BillMatrix units are issuing a new product that the company says lets its PLUS System customers use on-demand payment services to manage their credit portfolios. (Contact: BANKLINK, 212-419-3026)

Fundtech Ltd. says that FNB Corp.’s First National unit is live with CASHplus, Fundtech's cash-management system. Separately, Fundtech says four of their payments customers—EverBank Financial, Astoria Federal, Mid State Bank and Trust and Sterling Savings Bank—are adding the PAYplus USA interface to The Bank of New York's international payments service, Global F.A.S.T. Also, Fundtech says it has a new ACH product, OmniPAY, for International ACH, for international ACH operations. (Contact: Fundtech Ltd., 201-946-1100)

Global Cash Access says the San Manuel Indian Bingo and Casino in Highland, Calif., agreed to continue using Global’s products and services. (Contact: Global Cash Access Inc. 702-262-5003)

Global Payments Inc. will be providing merchant-acquiring services to retail and restaurant merchants of Diversified Acquiring Solutions Sales Corp. (Contact: Global Payments Inc., 770-829-8245)

JP Morgan Chase & Co. says that it’s issuing a Visa card for BP North America that features a five percent rebate on BP purchases, two percent rebates on most travel and dining purchases, and one percent on most other card purchases. (Contact: JP Morgan Chase & Co., 302-282-6150)

P&H Solutions says it’s expanding its Enterprise Enrollments product adding a small business front end that allows them to enroll in the Web Cash Manager Suite. (Contact: P&H Solutions, 781-235-3424)

SVPCO – Electronic Clearing Services,says that BB&T is now exchanging and settling check images through the SVPCO Image Payments Network. (Contact: SVPCO, 917-576-0957)

Tier Technologies Inc.’s Official Payments Corp. unit says the Minnesota Association of County Auditors, Treasurers and Finance Officers (MACATFO) recently launched a Tier-built, online portal Minnesotans can use to make electronic property tax payments. (Contact: Official Payments Corp. 571-382-1048)

Washington Mutual Inc. launched WaMu Free Checking, which features 100% online approval and opening. The offering includes: free ATM cash withdrawals; free checks for life; one free OD/NSF fee per year; a free gold debit MasterCard with rewards; free outgoing wire transfers; free ID theft services; and free e-alerts on account events. (Contact: WaMu, 212-326-6075)

Wausau Financial Systems says First Data Corp.’s REMITCO unit is using Wausau’s ImageRPS product for remittance processing at REMITCO’s lockbox operations. (Contact: Wausau Financial Systems, 715-241-4616)

Surcharge-Free ATM Finder

Westsuburbanbank_atmfinder_small_2Illinois-based West Suburban Bank <westsuburbanbank.com>, which offers an array of prepaid card services through its subsidiary, Prepaid Solutions USA <prepaidsolutions.com> is promoting payroll cards to employers.

Westsuburbanbank_atmfinderThe powercash card website, powered by FundXpress <portal.fxfn.com/c2wsbli>, includes a surcharge-free ATM finder that points to nearby machines within Allpoint's 32,000 ATM network <allpointnetwork.com> (click on inset for closeup).

Analysis
The surcharge-free ATM is an important benefit for payroll card clients, because it allows them to point their employees to ATMs where they can withdraw their paychecks without an additional charge.

JB

More Free Credit Monitoring

Paypal_freeequifaxalerts_logo_2One day after SunTrust announced free credit monitoring for checking customers (see NetBanker May 8), PayPal launched a similar service for its 50+ million U.S. account holders (see landing page below for details). Both services use Equifax to power alerts based on credit bureau info. Paypal_freeequifaxalerts_landing

However, SunTrust includes one free look at the customer's credit report. PayPal users would have to pay for that, or sign up separately at <annualcreditreport.com> to see their report free of charge.

While SunTrust bends over backwards trying to upsell users into a more comprehensive fee-based option, PayPal takes the high road, at least initially, simply redirecting users to an Equifax sign-up form devoid of sales pitches (click on screenshot below for closeup).

Paypal_freeequifaxalerts_signupHowever, we expect the upsell offers will be along shortly. We'll keep you posted. As a previous Equifax credit-monitoring customer, we've witnessed the company's aggressive email marketing schedule.

JB

Hiding Your Offer from Existing Customers

Usually, when designing targeted offers, you focus on what you know about the prospect. Where do they live? What products do they use? What's their balance? What if you wanted to offer a product only to folks you know nothing about, such as new visitors to your website?

Suppose you had a hot APY offer you wanted to make only to new customers to avoid cannibalizing that cash cow, the passbook savings account. Using cookies, you could avoid showing the offer to online banking users, minimizing their awareness of the product.

Citi_esavings_homepageApparently, Citibank is using this approach. In a routine visit to Citibank's website in mid-April using our laptop, we were surprised to see advertisements for its 4.50% e-Savings account dominating the website (click on inset for a closeup). When the high-yield product was announced (NetBanker March 29), many observers believed it was a stealth offer made through a new "Citibank Direct" entity.

But when we returned to the office, the offer had disappeared from the homepage. We had to click on the small "special offers" link to find it listed along with several other offers. Apparently, the cookies on our office PC, which identify us as a Citibank online banking user, triggered the website to load a different homepage. We confirmed this through testing on other PCs.

But before you use this tactic, realize it has significant drawbacks. First, it doesn't work with users who delete or disable cookies, estimated to be as high as 40%. Also, an online banking user visiting from a different location, or with a different browser, will also see your offer.

There is also the risk of your clever marketing being outed to the press and public, which may find the practice deceptive (see SmartMoney, April 2006). Finally, you may be teaching users to game your system, deleting cookies more often, entering different zip codes, and so on. This could hinder your ability to deliver targeted promotions to the customers you DO know something about.

JB

Citi_google_citibankNote: Citibank isn't shy about putting the offer on Google, where it shows as the top paid result on searches for  "Citibank" (see screenshot right).