New Regions Services Target Unbanked

By Andy Meek

One of the biggest banks in the country is preparing to compete directly with payday lenders, check-cashing services and the like in an effort to reach consumers who don’t have a relationship with a traditional bank.

Birmingham, Ala.-based Regions Financial Corp. by the end of the first quarter will have fully rolled out Regions Now Banking, a palette of new and expanded products and services targeting so-called unbanked and under-banked consumers.

Regions already has begun rolling out the new product and service lineup in select markets. It includes features like the ability for customers to cash a wider variety of checks and have funds immediately available; a general-purpose reloadable Visa prepaid card; and money transfers and expedited bill-pay services through Western Union.

“We are quickly adapting our product offerings and services to be more innovative and to compensate for the negative impacts from legislative changes, as well as customers’ changing needs and expectations,” Regions President and CEO Grayson Hall told analysts during the bank’s third-quarter earnings conference call.

Regions claims to be the only major bank to offer all those services under one roof and that its fee structure can be as much as half off the price of what non-bank providers charge consumers.

What’s more, the bank – which has the leading customer deposit market share in Tennessee and is the No. 2 bank by market share in the Memphis area – said its customers want these new offerings.

Regions customers were surveyed from December 2010 through January. The goal was to profile current usage behaviors and measure interest in the kinds of banking products being considered for customers currently on the margin of the financial industry.

The bank found a broad range of interest from customers in a variety of alternative financial services. For example, a slide presentation prepared by Regions shows 11.1 percent of respondents said they were interested in short-term payday loans or payday advances.

At a payday loan business, customers typically post-date a check and write it for as much as a few hundred dollars. To get an advance on a $200 payday loan, the customer would pay a fee of around $30, then repay the loan on his or her next payday.

If the customer can’t or doesn’t want to repay the loan within that window, he or she can roll the loan over. Critics of that system argue it too quickly sucks consumers into a debt spiral.

Regions’ survey found that one area of difference between traditional customers and Now Banking customers is that checking accounts are often the foundation of traditional banking relationships, while for the latter, the foundation is the ability to access cash and pay as you go for services.

Banks haven’t fully committed to this market segment for a variety of reasons, including the small-dollar amount of the loan likely making it not worth the investment and attention by the bank.

But as new federal legislation curtails fees banks can charge or recoup in some aspects of the business, entering new market niches might increasingly look like an attractive alternative.

The Chicago-based Center for Financial Services Innovation and venture capital firm Core Innovation Capital recently released a study showing that consumers who frequent alternative financial service providers collectively generated about $455 billion through loans, payment transactions and deposits last year.

Along with its new products and services, Regions is partnering with Everfi to offer complimentary online financial literacy education to Now Banking customers. Everfi is a leading provider of online financial literacy courses and education.