Needham Bank is kicking the habit. The ATM fee habit, that is.
Beginning late last month, the $1.12 billion mutual bank revealed an initiative to reimburse customers with personal checking accounts for any ATM fees incurred out of network.
Of course, that probably had nothing to do with recent findings out of the Government Accountability Office that ATM surcharge fees increased over the past five years, from $1.75 in 2007 to $2.10 in 2012.
For Needham Bank and a handful of other smaller banks, rebating foreign ATM fees is simply a cost of doing business.
“We make plenty of money on the loan side of the house, so our business model is fairly simple. Attract as many customers as you can on the retail side, those deposits will fund the loan demand, and the revenue we get from our lending areas is more than enough for us,” Vice President of Marketing Eric Morse explained.
Far from a closely-guarded secret, Morse says he hopes other community banks follow Needham’s lead – if they haven’t already.
“I think it’s very important that community banks differentiate themselves competitively, and this seems like such a simple way for them to do it,” he said. “I hope other banks will follow our lead.”
Rebating other banks’ ATM fees is not necessarily radical thinking, especially for community banks that don’t have a very wide ATM network. Indeed, the GAO actually found that smaller banks, those under $10 billion in assets, charged accordingly smaller foreign ATM and surcharge fees than bigger banks.
Staying Ahead Of The Game
And as technology has leveled the playing field, some community banks have stepped up their game and begun rebating other banks’ ATM fees as a way of gaining some competitive edge.
“It’s happening sporadically throughout the banking industry,” remarked David Tente, executive director of the United States chapter of ATM Industry Association. “It’s not particularly new and it’s still not particularly widespread. I think there was some movement toward that before Dodd-Frank stirred up the pot and eliminated some of the ways banks had to make revenue.”
With $600 million in assets and only three physical locations – one in Boston and two on Long Island – First Trade Union Bank is by no means a mega bank.
“But honestly, I think we have clients in all 50 states. We’re a community bank, but the Internet allows us to redefine what it means to be a community bank,” Chris Tremont, senior vice president and director of marketing, told Banker & Tradesman.
First Trade has also joined the ranks of community banks refunding their customers for foreign ATM fees. While they’ve had the rebate program in place for three years now, the bank only recently lifted its $20 cap, so customers with a First Trade checking account can get unlimited foreign ATM rebates, Tremont said.
And Belmont Savings Bank refunds ATM fees for customers with an active Platinum Blue checking account, chief operating officer Hal Tovin said.
In order to qualify for that account, the account holder has to have five debit card or point-of-sale transactions in a month, or five checks written in a month, or direct deposit, or a balance of $2,500. Non-Platinum Blue accounts will get charged another bank’s ATM fees, plus a $1 foreign ATM fee from Belmont.
“Most checking accounts we open are Platinum Blue,” he added. “We don’t make the hurdle so high that you won’t want to do it.”
Instead, the key is to reward customers who make Belmont Savings their primary bank.
“Most people have more than one checking account, that’s just the way it is, but you really want to be the primary checking account,” Tovin said. “Successful banks build relationships. They don’t have secondary relationships.”
And the thinking goes that when Jane Doe needs a home equity line of credit, say to build a new deck, she’ll go first to her primary bank for that need.
Needham Bank’s thinking is a little different, the way Morse explains it. For Needham, it’s less about deepening existing relationships than it is about establishing new ones.
“I see this more as an acquisition strategy,” he said. “I think people will be attracted to a bank that’s fee averse. If it’s something that we don’t charge for, that gives us a significant competitive advantage.”
But Tente also pointed out that many banks, even those that rebate other banks’ ATM fees, still do charge their own foreign ATM fee, however negligible. Needham Bank does charge a foreign ATM fee, which it’s obligated to do as a member of its ATM network, Morse said.
Still, Tovin maintained that fees aren’t all inherently evil, so long as they have a purpose.
“Customers don’t mind a fee if there’s a value for the fee,” he said. “What customers mind is when they feel they’re being abused. The uproar has been when people are getting fee’d for something they feel is not a value or is abusive. We are very clear about the fees we have and we always try to give people an alternative to avoid the fees.”
Email: lalix@thewarrengroup.com
