America's Community Bankers has teamed up with a Texas bankers' bank to offer credit cards to ACB's smaller members.
The Washington trade group has offered credit cards to its larger members for several years, and through its new partnership with TIB-The Independent BankersBank in Irving, it is now marketing a credit card to its members with less than $350 million of assets.
ACB and TIB launched the program in mid-November. David Ridley, manager of card services for ACB Business Partners, a for-profit subsidiary of the group, said that three ACB members have signed up to offer cards to their customers and agreements and that other banks are in the pipeline.
Mr. Ridley said ACB had been looking to start a credit card program for its smaller members for some time but had not found a suitable partner. Its members were not entirely comfortable working with large banks that are also competitors, he said, and ACB's current partner, InfiCorp Holdings Inc., does not work with banks that have less than $350 million of assets.
ACB is also counting on the program to help retain and attract members - especially start-up banks. As banks compete for customers, trade groups compete for members, and one of ACB's rivals, the Independent Community Bankers of America, has offered a wide range of credit card products to its members for about a decade.
"What we ran into is we needed to have a credit card program that a start-up bank could easily sign up for and have some incentive to grow with," Mr. Ridley said. "This product allows those types of banks to do that, and looking at the competition out there, this is something we had to have."
ACB has about 1,275 members. Member banks that sign on to the credit card program would be agents for the $1.5 billion-asset TIB; the bank's name would be branded on the card, but TIB would handle underwriting, set interest rates, and service the accounts, said James Hudson, a senior vice president at the bankers' bank.
Participating banks can choose the type of card (Visa Platinum or MasterCard Gold) and decide whether the card will offer a rewards program, Mr. Hudson said, and banks would receive monthly payouts from TIB based on interest rates and interchange fees. ACB would receive royalties for each member it signs up.
Though many small banks offer credit cards to customers, most do so through partnerships with bankers' banks, correspondent banks, or ICBA.
Bank of America Corp. and InfiCorp, an Atlanta unit of First National of Nebraska Inc. in Omaha, have agent relationships with hundreds of community banks.
About 40% of ICBA's nearly 5,000 members participate in its credit card programs either as direct issuers or as agents of ICBA's credit card bank, said Linda Echard, the president and chief executive officer of ICBA Bancard.
Ms. Echard, for her part, said she is not too concerned about ACB's new program eating into ICBA's market share because she believes the industry still has plenty of room to grow. She said she is just glad ACB chose a bankers' bank rather than a larger bank like Bank of America as its partner.
This "gives community banks one more option that isn't as harmful to them as a program where they are handing over the names and addresses of their best customers to a bank that could compete with them," she said. "I don't know what is worse, doing nothing or partnering with a competitor."
