Modern Woodmen of America, a fraternal life insurance society, has opened the doors of an Internet thrift in a bid to market bank accounts to its members.
Steven J. Ollenburg, the president of the new thrift, said the society obtained a charter because it realized "it really needed to expand its contact with its members and expand its product offering."
On Monday, the thrift, called MWABank, opened its sole branch in Rock Island, Ill., the city where the life insurance society is based. Mr. Ollenburg said the thrift's Web site will go live in 90 to 120 days, offering nationwide access to its banking products.
Modern Woodmen has more than 750,000 members around the country, "so a brick-and-mortar strategy to enter banking was not going to work," he said. "We have a very sizable membership, but it is dispersed."
Once the thrift is fully operational, "our goal, at a minimum, would be to penetrate 1% of our membership base for active new accounts every three years," Mr. Ollenburg said. The thrift's research showed that the penetration goal is achievable, he said, and he plans to surpass it.
Assuming 1% penetration, he said, MWABank expects to gather $85 million of assets every three years. Modern Woodmen decided to form the thrift after surveying its membership.
"The overriding theme we found was that our members are not generally pleased with their existing bank and its price structure and services," Mr. Ollenburg said. Though some members reported using Internet banking, "those that have used Internet banking or direct banking found it to be a very fragmented environment," he said.
Modern Woodmen's goals are to provide low-cost products that are easily accessible and that overcome some of the difficulties of earlier Internet banks. He said the thrift had searched out top technology partners, including Open Solutions Inc., which supplied the online bank's processing system. MWABank has also contracted with several ATM networks to supply access to cash and give customers the ability to make deposits.
Before joining Modern Woodmen, Mr. Ollenburg and the thrift's vice president, Mark Sperfslage, worked at Principal Bank in Des Moines, the online bank of the Principal Financial Group. Mr. Ollenburg was its president and CEO of Principal Bank before coming to Modern Woodmen in 2001.
Though Modern Woodmen has 1,600 life insurance agents in the field, they will not be used to sell banking products, Mr. Ollenburg said, though they can refer customers to the thrift.
MWABank intends to market products through its parent's quarterly magazine and by direct mail, he said.
Last year Modern Woodmen formed MWA Financial Services Inc., a broker-dealer, so that it can sell variable annuities, mutual funds, stocks, and bonds.
In addition to selling life insurance and annuities, the society provides public service and social opportunities for its members. Founded in 1883, it has lodges for social activities, camps, and youth clubs, and it organizes charitable and patriotic activities for members.
The group is one of 80 similar fraternal benefit societies in the United States.
