Can a cheesy superhero and a new checking account rescue First Indiana Corp. from its doldrums?
Executives at the largest bank based in Indianapolis are betting they can. They've launched a new marketing campaign featuring First Indiana Man, a youngish white guy sporting an orange cape and a white jumpsuit with the First Indiana logo.
But the superhero is just a means to introduce the real star of the bank's most aggressive marketing and account-growth effort in a decade: a free checking account First Indiana hopes will generate 20,000 new accounts in the next year. The bank now has about 70,000 accounts.
The Live Free Checking accounts will be about 20 percent less profitable for the bank than other offerings, but they're a better deal for consumers, said Marketing Director John Dietrich. The account offers free checks, free ATMs worldwide (including refunds up to $5 per transaction for fees charged by other banks) and $25,000 of identity theft insurance--all without a minimum balance requirement.
"There's no mystery to what they're trying to do," said Mike Renninger, banking consultant and principal of Carmel-based Renninger & Associates LLC. "It's their attempt to retain and grow low-cost deposits."
Most banks offer some variation of free checking, but there's usually a catch. That is beginning to change as bank margins are squeezed and competition heats up.
Deposit accounts, always a key part of banks' bottom lines, have taken on new importance as banks are forced to lend money at nearly the same rate as they pay to borrow it. The rate squeeze has put downward pressure on the stocks of publicly traded banks. First Indiana's stock price is down more than 16 percent since June 2006.
Growing competition has prompted banks to aggressively launch new products and offerings to differentiate themselves. To the extent consumers take notice, they stand to benefit, Renninger said.
While ATM-fee reimbursement was once rare, many banks--including Old National, National City and National Bank of Indianapolis--now have it as an option. And this month, Huntington Bank unveiled a program called Select Checking that allows customers to choose from benefits including no-fee ATMs, free overdraft protection and a free safe deposit box.
The new offerings are as much about keeping existing accounts as they are about getting new ones. Convincing customers to leave their old bank isn't easy.
"Most consumers are reluctant to switch their primary deposit account relationship, especially when direct deposit and automatic payments have been set up," Renninger said.
Banks can afford to cut into their profits on checking accounts, knowing that customers who have them are likely to do other business with the bank, said Guy Molde, a senior vice president with Huntington.
"If the bank can secure the core checking account and build on that, they are going to optimize profitability with the customer," Molde said. "The focus is on getting the customer in the door."
First Indiana's research shows its new checking account will save the average customer about $200 per year. That number factors in the cost of identity theft insurance, free checks and ATM fee reimbursement, Dietrich said. First Indiana's existing customers also will be allowed to opt for the new account.
It's a price the bank is willing to shoulder.
"We're hoping to make that up by gaining some new customers we wouldn't have otherwise," said Dietrich, who started at First Indiana in February.
Dietrich previously worked at Compass Bank in Alabama, where he rolled out a similar product that quickly was copied by other banks. Others may offer similar accounts, but another bank superhero seems unlikely.
First Indiana Man was developed by the Indianapolis office of Publicis, which the bank hired in May to handle its advertising, branding and public relations. First Indiana is one of the largest local clients for the global advertising firm.
The bank didn't have the budget for TV ads, but it has launched a radio campaign and is planning billboards and Internet advertising. First Indiana Man also has a MySpace page featuring several photos with Indianapolis landmarks as backdrops. His song is "Eye of the Tiger," and his favorite show is "Heroes."
"He doesn't have any super powers," Dietrich said. "He's just really upset with banks taking advantage of him."
First Indiana also hopes to continue to open new branches, at a rate of two to four per year, all over the metro area, said Reagan Rick, an executive vice president. The aggressive new checking account should help support the expansion, he said.
"It'll be interesting to see how quickly other banks change," Rick said. "Our advantage is our ability to be a little quicker. This is our only market."