Other banks might try to copy Belmont Savings Bank’s latest initiative, but CEO Bob Mahoney says he isn’t too concerned about that.
For starters, it’s really hard to do, he told Banker & Tradesman. Pounding the pavement, going door-to-door to pitch the idea to local businesses, wasn’t easy. That alone would weed out some would-be copycats.
But after all that work, Belmont Savings’ new initiative is now underway. Partnering with 20 area businesses, the bank has announced that customers who use debit cards from the institution now get a host of discounts: A free appetizer at Belmont Italian restaurant il Casale, for example, or 15 percent off most products at the Belmont Pet Shop.
It’s about the hometown bank, working only with area businesses: “It screams ‘local.’ It reinforces the fact that we’re in the community,” Mahoney said.
But the initiative will ideally drive up debit card usage, too – which has an immediate payoff for banks like Belmont Savings.
Keeping up a steady flow of debit card usage fees is vital, said John Carusone, president of the Hartford, Conn.-based Bank Analysis Center, which does business all over New England. As new regulations have diminished profits from certain fees, banks are trying to compensate for that.
And debit is a vital source of non-interest income.
“Promoting higher [debit] activity levels is important to the bottom line,” Carusone told Banker & Tradesman.
‘A Great Idea’
On average, Belmont Savings earns 44 cents for every debit card transaction, Mahoney said. But it’s a longer play as well; rewards for checking account customers is another way to build stronger relationships with current customers, or to entice other people to get checking accounts with the bank. Having that checking account relationship usually leads customers to buy more products and services, he noted, so it’s important to do it right.
Merchants have been vocally opposed to the fee structures on some credit or debit cards, which they have to pay to banks when customers use plastic for purchases. But Erica Kleinkopf, owner of Belmont boutique Thirty Petals, said that didn’t deter her from joining the bank’s list of businesses.
Hardly anybody uses cash or checks, she said. Credit cards are common, but those often come with even more onerous fees. It’s simply fact that debit cards dominate customers’ transactions now, she said, so it makes sense to direct that impulse toward something positive for her business – in this case, partnering with a local institution to draw more customers in.
Thirty Petals is offering a 15 percent discount on merchandise for customers using a Belmont Savings debit card. Neighboring Belmont Pet Shop is also offering 15 percent off purchases, with the exception of pet food and grooming, said owner Loretta Thomas.
“It’s a great idea all-around,” Thomas said. Customers appreciate discounts, she said, and it puts her shop’s name up in more places around town.
David & Goliath
From a marketing standpoint, it’s hard to see the downside, said Lisa Griffin, president of the New England Financial Marketing Association and senior vice president and chief retail banking officer of Norwich, Conn.-based Eastern Federal Savings Bank.
“If you can do anything to cross-promote your local business, that is a fabulous thing,” she said.
Mahoney stressed that the program doesn’t have an expiration date, and added that the bank was still getting the word out to debit card-holders through marketing materials included with their statements. It will take awhile to get the word out – with so many promotions and marketing out there, it takes awhile for anything to really sink in, he said.
A program like this takes a lot of foundation-laying just to get a good group of businesses on board, as well as the logistics of putting it in place and promoting it to customers, Mahoney said. But the CEO sees it as a valuable, visible reminder of the bank’s strong community presence.
And that gets to his other reason for not worrying about other banks emulating the idea – even if others do take a crack at it, it wouldn’t negatively impact Belmont Savings. It isn’t feasible for huge banks to partner with local businesses in this manner, and as a “hyper local” bank, Mahoney said he is concerned with affairs within Belmont Savings’ footprint, not competition from other community banks in other towns.
As always, it’s the omnipresent national banks that comprise the big threat to community institutions like his.
“We’ve got to compete with Goliath,” he said – not other Davids.
