Borrowing a page from travel auction Web sites, a new site aims to help small banks gather deposits by matching consumer requests with bank offers.
On MoneyAisle.com, consumers can specify the terms and rates they want on savings accounts and certificates of deposit, while participating banks can define the rates and other terms they are willing to offer. If more than one bank can meet the request, the site offers the consumer the product with the most favorable terms.
The owners of the site, launched June 9 by neoSaej Corp. of Burlington, Mass., say it will help community banks compete more effectively against larger rivals.
"The small banks, the midsize banks, they're trying to get the deposits, and the amount of money they need to spend to advertise" is too high, Mukesh Chatter, neoSaej's president and chief executive, said in an interview.
Marketing costs become a "dominant part of the expenditure" for acquiring customers.
There are 65 banks using the site now, and 25 more will be added within a few weeks, he said.
Other financial companies have tried similar models. IAC/InterActiveCorp's LendingTree LLC provides consumers with multiple loan offers, using guidelines provided by the prospective borrowers, and Zions Bancorp. uses a Dutch auction model to offer CDs.
Community bankers say the MoneyAisle model will help them attract customers, though they are using it with different goals.
Beverly National Bank in Massachusetts wants to use the site to win customers in other regions, while another Massachusetts institution, StonehamBank, is hoping to build deposits from people in its branch area.
The consumer's location is one factor MoneyAisle can evaluate. John Speakman, the $420 million-asset StonehamBank's executive vice president and chief operating officer, said it has told the site to offer its products only to people who live within 10 miles of one of the banking company's three branches.
As of Wednesday, 82 MoneyAisle users had requested CDs that fell within StonehamBank's parameters, though in none of those cases was the bank's product offered to the customer, because other banks' products had better terms.
Nevertheless, Mr Speakman said that MoneyAisle has proven useful. "For a brand new product that just got announced, I think it's great," he said. "That's like 82 phone calls to say, 'What's your rate?' "
The rates and terms StonehamBank is offering through MoneyAisle are comparable to what it offers in its branches, Mr. Speakman said. It may offer better terms after it gets a deeper sense of how the site works and what the online market demands, he said.
StonehamBank does not pay neoSaej for prospects who do not open accounts. Mr. Speakman says that feature is an improvement over advertising through online search engines.
Limiting searches is "a little more difficult to do" with search engines, "so you're paying for those clicks whether they're in your market or not," he said.
Mr. Speakman said he hopes to get $2 million of deposits in the near future through MoneyAisle.
Beverly National hopes to reach well beyond the vicinity of its eight branches. The $480 million-asset unit of Beverly National Corp. began offering savings accounts and CDs nationwide last year, advertising on Bankrate.com and Google Inc.'s search engine.
Through MoneyAisle, it has already opened a few savings accounts by offering a higher rate than it does through other channels, according to Paul Germano, a senior vice president with Beverly National Bank.
Its retail savings rate is 1%, he said. The one it advertises on Google is 3.1%. Through MoneyAisle, it offers rates ranging from 3.1% to 3.4%, depending on customers' requests.
"Given the different cost structure" at MoneyAisle, "it really affords us the opportunity to offer more aggressive rates in the channel," Mr. Germano said.
Beverly National hopes to get $5 million of deposits this month, and at least $40 million this year, through MoneyAisle, he said.
Mr. Chatter said banks spend at least $700 to land a customer through search engine advertising, including the expense of advertising to customers who do not or cannot open an account but click on the ad anyway.
Before launching MoneyAisle, his company tested the service with 102 banks, 90 of which agreed to use the site. Participating banks pay an annual enrollment fee of about $3,000, along with a monthly hosting fee of $250.
Banks pay neoSaej $37.50 for each customer who opens a savings account, and $40 for those who take out CDs of up to about $20,000; the fee is higher for larger CDs and is based on several variables, such as the duration.
Mr. Chatter said neoSaej eventually plans to expand the site to include other financial products, such as loans and credit cards.
Banks can let neoSaej's software judge how high their rates need to be to meet certain deposit goals, he said, and the software can adjust the banks' parameters accordingly. Banks can also see what rates are being offered to customers, and adjust their offers to reflect that information, though they do not get to see which rival has won.
Ron Shevlin, a senior analyst at Aite Group LLC of Boston, said that even though the advertising system is low-cost, it may not reach all potential customers, because the banks are advertising primarily on rates, which are not necessarily the most compelling aspect of any financial product. "Those banks with the absolute highest rate would be the ones with the best market share if that's how people actually shop, which they don't."
Even tech-savvy consumers are concerned about branch location, he said.
When people compare rates online, they are not necessarily looking to switch banks, Mr. Shevlin said. "They are testing whether or not" their current bank's rates "are at least in the ballpark" of what is offered elsewhere.
MoneyAisle was built to appeal to smaller banks, but "the fundamental question becomes do most small banks compete on rates, because clearly if you're not competing on high rates, you're not going to win these bids very often," he said.
Banks may be drawn to the site anyway, because of the pricing, Mr. Shevlin said. "On the FI side, it's probably worth experimenting to see what you get. … It sounds like it's relatively low-risk."
There is value even if banks never win a bid, he said, since they still get to see what rates are beating them. "Knowing what the win-lose trends are, I think this is an opportunity to gain some interesting market data around trends and usage."
