With AAA Alliance, PNC Sets Off On Highway of Branchless Banking

A potentially powerful nationwide financial services network is taking shape in the partnership of AAA and PNC Bank Corp.

By installing kiosks throughout the auto club's network and relying on other direct marketing means, PNC plans to offer to AAA's 40 million members a wide array of banking and investment products.

The alliance was announced 19 months ago, and a PNC thrift affiliate received regulatory approval July 1 to open offices in AAA locations nationwide. It could become one of the boldest and most ambitious initiatives in branchless marketing of financial services.

"We are all watching this very carefully to see how a bank can build a base without brick-and-mortar," said Merrill Lynch analyst Sandra J. Flannigan.

The PNC strategy will unfold in tandem with an AAA transformation. Shaking off its historical auto-centric image-and in deference to its broader role as a provider of travel, insurance, and banking services-it has adopted AAA as its official name and brand.

AAA wants to attract younger members. More than half its current members are 50 or older.

The 95-year-old association unveiled a new "youthful" logo this month, replacing a design in use since 1983.

"PNC sees branchless banking as a core purpose of our partnership," said John M. Tassie, president and chief operating officer of AAA financial services. "However, we do want to test whether we can enhance the value to the membership by providing some financial services in our offices."

PNC itself refused to comment or elaborate on previous statements about the AAA alliance.

Mr. Tassie said the idea is to sell credit cards, mortgages, personal loans, auto leases, deposits, and investment products. So far only credit cards are being offered.

"Direct selling" of financial products via direct mail and advertising is not new-the monoline credit card companies specialize in this approach. The AAA-PNC venture is unique in that it encompasses a broad range of products sold to a large and existing membership base.

Mr. Tassie said AAA will concentrated on serving its members-36 million in the United States-rather than soliciting new business. AAA credit cards are in the hands of 4.3 million members, or 12%. Mr. Tassie wants to get other financial products into the hands of 25% of members by 2000.

One way to do that is to reach out to people that prefer face-to-face service, said Mr. Tassie.

In the current quarter, PNC will set up kiosks in AAA offices to sell loan products. AAA members will be able to "apply in the morning and close in the afternoon," said Mr. Tassie.

AAA is also toying with the idea of offering vacation loans through its travel offices, similar to how cruise lines market loans to customers. An AAA travel agent might refer a member who is planning a vacation to an on- site PNC representative to apply for a loan that could be instantly approved.

The AAA brand could enhance the appeal of favorable financial terms. AAA credit cards are competitively priced, with a 6.9% teaser rate that goes up to the prime rate plus 3.99%

"There is no attempt to build an awareness of PNC among AAA members," Mr. Tassie said.

George A. Bicher, an Alex. Brown analyst, questioned how receptive AAA members will be to switching their banking relationships. "There is a certain amount of inertia involved when it comes to" changing banks, said Mr. Bicher.

But if the partners are successful, Ms. Flannigan of Merrill Lynch contended PNC will likely build on its affinity marketing expertise. She said, "If it works, why wouldn't they find another group" with which to affiliate?

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER