Banks see competition from outside industry grow

In the 2014 marketing plan for BayCoast Bank, Senior Vice President and Chief Marketing Officer Jim Rice included a section called, “The Invasion of the Non-Banks.”
Rice’s message with that jarring title and related information is to remind bank executives and board members that banks need to be alert to what Rice described as “a shifting competitive set in the industry.
“The invasion of the nonbanks includes Walmart, Popmoney and T-Mobile’s Mobile Money,” said Rice. “Then there are peer-to-peer services that let you, for instance, take a loan from your brother.”
While bank executives are likely aware of the bigger nonbanks, it’s also important to keep up with the increasing number and variety of peer-to-peer and other emerging financial services offered by nonbanks, he said.
“The young folks are paying attention to it and using their smartphones for all types of payments,” said Rice. “Those in the boomer generation really need to focus on our strengths in the mass market, and especially to create an awareness of our services with the unbanked and under-banked.
“We have to make them aware that small and local is better than large and national,” said Rice. “We’re taking local deposits and putting that money back into the community in car loans and small- business loans,” he said.
Nonbanks often promote their low-fee or no-fee services, but local banks can do as well or better, he said.
“Walmart is promoting check cashing for $3 and there are those consumers in the market who may not understand that you can open a checking account at BayCoast with a minimum balance and we don’t charge to cash checks,” said Rice.
BayCoast offers student checking for those under 24 and senior checking for those 65 or older with a $10 deposit, no monthly fee and the first order of checks for free, he said.
Despite the increasing competition from nonbanks, BayCoast Bank is more than holding its own.
BayCoast, based in Swansea, has 17 branches, with one in Tiverton and the remainder in southeastern Massachusetts.
While those 17 branches are growing in local market share, BayCoast and other regional banks are fully aware of the volume of consumer education needed to hold off the nonbanks when it comes to thin pocketbooks, a tight economy and the often-mentioned behemoth –Walmart – to contend with. The retail giant may be the reason some in the financial community are concerned about the increasingly vague borderland between bank and nonbank.
“We’re absolutely not trying to be a bank,” said Walmart spokeswoman Molly Blakeman, who is based in Bentonville, Ark. “We’re a retailer that offers financial services.”
Check cashing was one of the first financial services that Walmart offered, with check cashing costing $3 for checks up to $1,000 and $6 up to and including $5,000.
Walmart also offers its Bluebird checking and debit alternative in partnership with American Express, said Blakeman.
Customers can have direct deposits made into Bluebird, transfer money to it from another savings or checking account, or add cash at a Walmart register, she said. Bluebird has no hidden fees, no ATM fees and offers preauthorized checks, so there’s no overdraft.
Walmart also has its Walmart-to-Walmart transfer service that allows a father in one state, for instance, to send money to a son who is a college student in another state, with cash picked up on the receiving end – all in a matter of 15 minutes, said Blakeman.
Walmart has also launched an auto-insurance price comparison service in collaboration with major insurance companies, including Esurance, that compares prices based on customer information and locks in that price. That service is in eight states, so far, not including Rhode Island.
Westerly-based Washington Trust is one regional bank not seeing much of a competitive threat from Walmart, said spokeswoman Elizabeth Eckel.
One concern some bankers have in relation to nonbanks’ expanding financial offerings is the absence of a level playing field.
“You don’t know if they’re following the same rules,” said John T. Knierim, executive vice president and chief financial officer for People’s Credit Union.
“Banks and credit unions are focused on the financial world,” said Knierim. “There are so many regulations we have to follow in the banking industry and that can be difficult for a company that focuses on so many stores and the number of products that Walmart sells.” •

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