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Every year at this time, I poke around the financial Web looking for holiday themes. While Mercantile Bank of Michigan hasn’t posted a virtual Santa snow globe, it’s done something more useful: posted holiday hours on the top of its homepage. The bank should also note its telephone and online support hours, if different.
Mercantile Bank of Michigan homepage (22 Dec. 2009, 2 PM Pacific)
Mercantile Bank of Michigan is riding the wave of free publicity from being first to market (probably) with iPhone-based P2P payments powered by PayPal. That’s a triple play in both 
alliteration and PR value. See the teaser ad on the bank’s website below (first screenshot).
The new service, a joint effort from PayPal and S1, is expected to go live in early 2010. It will allow customers to send money directly from their iPhone to any other individual on the worldwide PayPal network. All the sender must know is the recipient’s mobile phone number or email address. According to the five-question FAQ on the landing page (see second screenshot), the service will be available to all MercMobile customers and will be free of charge.
Mercantile Bank has become one of the most innovative banks we follow. Congratulations to CIO John Schulte and his team for leading the industry on several fronts and providing great material for Netbanker (previous posts here; note 1).
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For more on the P2P payments market, see our latest Online Banking Report, published earlier this week, Making the Case for Person-to-Person Payments.
Mercantile Bank’s powered-by-PayPal mobile P2P app (7 Dec. 2009):
Mercantile Bank of Michigan homepage (8 Dec. 2009):
Note: MercMobile P2P Payment teaser in lower left and home-based remote-deposit capture on the top banner.
P2P payments landing page (link)
Note:
1. Mercantile even earns its very own category at Netbanker: <netbanker.com/mercantile_bank_of_mi>.
The biggest surprise of the year in the world of alt-payments is PayPal’s newfound reach into banking circles as evidenced by their agreements with S1, FIS, and FirstData announced at last week’s Retail Delivery conference.
But a huge question remains: Will banks play ball with PayPal or will they provide the same functions via home-grown solutions or non-PayPal alternatives such as CashEdge, Fiserv, or Visa/MasterCard?
I don’t think anyone has that answer yet. There are simply too many variables. But if you believe there’s no way a bank would use a “powered by PayPal” solution, read this quote by Mercantile Bank of Michigan’s CIO, who plans on launching the S1/PayPal person-to-person mobile service next year (note 1):
“(PayPal) is a network, it doesn’t scare me at all. They’re never going to steal significant deposits out of our bank and keep [them] in PayPal accounts. Visa and MasterCard probably look at PayPal as the enemy, and they probably should, but that’s their problem, not mine.”
— John Schulte, CIO Mercantile Bank of Michigan in a
Nov. 10 article from Digital Transactions
Note:
1. You might remember Mercantile Bank from our May post lauding its fee-based consumer positive-pay service.
As we’ve mentioned before, there are surprisingly few fee-based online financial services in the United States (see note 1). But things may be changing. In the past month we’ve looked at three innovative services charging fees:
Today, we highlight a fourth new fee-based service, also charging $4.95/month (or more), vSafe from Wells Fargo. vSafe is a secure online storage solution that sells for $15 to $15 per months as follows:
The service was introduced several months ago, and I’ve been using it for a couple months. The service automatically stores Wells Fargo statements, and allows users to upload any other file up to the storage limit. It would be even more useful if it offered automated retrieval and storage of other bank and biller statements.
Wells Fargo homepage (1 June 2009, 1:15 PM PDT)
Landing page (link, 1 June 2009)
Take a test drive in the Wells Fargo lab (link, 1 June 2009)
Interactive video highlighting benefits
Signup explanation
Notes:
1. The golden rule of consumerism: “You get what you pay for.” Because online banking services are typically offered free of charge, U.S. consumers have had to contend with clunkier, slower, less secure and less feature-rich online services than consumers in other countries that pay for online access. Fees for online services can be a win-win, allowing financial institutions to offer premium online services for those willing and able to pay for them, while at the same time offering basic services free of charge so that everyone can benefit from online banking.
2. Article updated 9 July 2009 to remove incorrect reference to Expensify’s $4.95/mo fee (see comments).
We are always on the lookout for examples of U.S. financial institutions charging fees for value-added services online (see note 1). In the past seven or eight years, the sightings have been rare.
But today, we have a great one. And like most brilliant ideas, it seems pretty obvious in retrospect. The new service from Mercantile Bank of Michigan is called Funds Manager (PDF FAQs here) and it’s not only a great service innovation, but also promises to bring fees back to online banking.
How it works
Funds Manager is basically a consumer version of positive pay, a standard offering in commercial banking. In the commercial version, clients look at checks and electronic items being presented for payment, and can nix any that are fraudulent.
Mercantile launched similar capabilities for its retail customers, allowing them to peek at their pending checks and ACH items a half-day before they are withdrawn from their account (see note 1).
Between 11 AM and noon, the bank posts the checks that will be processed that evening, giving customers a few hours lead time to make a transfer to avoid an upcoming overdraft. Customers have until 5 PM to make a branch deposit or 7 PM to make an online transfer to cover a shortfall.
Mercantile’s online and mobile banking are powered by S1.
Business case
Sure, the service would impact OD/NSF income. But the bank makes up for that by charging a small fee, $4/mo, for the service. Given the type of customer who’d be drawn to this service, $48/yr should more than cover any lost OD income. And it provides a service that improves customer satisfaction and differentiates the bank from others. Business customers pay $30/mo, a potentially lucrative small-business service.
According to an article in Friday’s American Banker, the bank has signed up a quarter of its retail online banking customers for the service (558 of 2,361). While the $27,000 in annual revenues to Mercantile barely covers costs, if Bank of America experienced similar penetration, it would be worth more than $250 million per year, a nice boost to the online banking P&L.
Opportunities
Not only is consumer positive pay a nice standalone service, it could be the cornerstone of a premium online banking option that could be priced at $5/mo or more.
It would be even better if users received email or text-message alerts whenever they had items to review. And it would be a great addition to an iPhone/mobile app where the items could be reviewed, and transfers initiated, right on the phone.
Notes:
1. Please email other examples to me or add them to the comments.
2. The advanced look does not include branch deposits, ATM transactions, wire transfers, or telephone transfers.
