Regions bank pursues non-customers for business
Services aim to make up profit lost to rules, soft loan demand
By Bobby Allyn | The Tennessean
Regions Financial Corp., the biggest bank in the Nashville market, has started TV and print advertising in Middle Tennessee aimed at capturing a share of business from customers who don’t keep checking or savings accounts.
“Banks are having trouble meeting their growth targets, so under-banked households are becoming the new focus,” said Greg McBride, a financial analyst at Bankrate.com. “There’s a recognition that not everyone will transition into a bank customer. But this is the year banks will try to make non-customers profitable.”
Buffeted by new regulations and weak loan demand, Regions is among banks that have begun to offer a platter of new services focused on people without longstanding banking relationships.
These “under-banked” or “unbanked” customers — as the financial industry calls them — can now cash third-party checks, buy reloadable credit cards and make fast bill payments through Western Union.
At Regions, such products come with fees that the banks touts as modest or well below rates charged by payday lenders and other stores that cater to clients without bank accounts.
Customers can cash checks with a fee of 1 percent to 3 percent, and cash money orders with a 5 percent fee, Regions’ ads say. Bill-paying starts at $5 a transfer. Prepaid cards have a $5 monthly fee.
It amounts to the latest in what analysts are calling the industry’s quest for new revenue streams as loan demand remains sluggish and quarterly profits are less than stellar.
The Birmingham, Ala.-based bank started the new services — under the name Now Banking — about six months ago in select markets. It began running print and television advertisements for the program this month in Middle Tennessee, where all 65 local branches are participating.
“If you’re in this industry and not looking for ways to expand your customer base right now, you’re missing the boat,” said Jim Schmitz, the bank’s regional president, adding that the programs are a response to improved anti-fraud processing technology and consumer demand.
$602 million loss
Regions on Tuesday reported a fourth-quarter loss of $602 million, compared a net profit of $36 million a year earlier.
The bank has been surveying customers to maintain ties with them, while seeking unique ways to make money.
Regions last spring began offering direct-deposit loans in which customers borrow against their next directly deposited paycheck. Credit analysts called the program “payday loans disguised with a different name,” while the bank contends it is a response to customer needs.
Shortly after introducing a $4-a-month fee for debit card purchases, Regions and a slate of other banks, abandoned plans to institute monthly fees, reacting to customers who mobilized to close their accounts and take their business elsewhere.
According to a Regions internal report, nearly 30 percent of customers polled said they already use at least one type of “under-served banking services,” such as bill pay, money orders and payday loans.
Regions says its fees are around one-third of those charged by liquor stores, payday lenders and pawnshops.
If Regions’ new products yield significant profits in the coming quarters, McBride thinks other banks will take notice. Much it boils down to whether the so-called under-banked population, mostly low-income and minority customers, will switch its banking habits.
“The banks, particularly the large banks, have a ton of scale, so they can compete with prices,” McBride said, “and as more large and regional banks get into these services, they will be watching to see how customers respond.”
