Banks that don't offer credit cards lack competitive advantage, particularly in the community banking arena.

To remedy this, the Independent Bankers Association of America (IBAA) plans to launch a so-called "monoline" bank, called the Total Credit Management Bank, or TCM Bank, to underwrite and securitize Visa and MasterCard credit cards carrying the logo of participating community banks. The expected participants are small banks-some with as few as $50 million in assets, says TCM CEO Michael Hosemann.

The strategy is to assist community banks in establishing credit card franchises. Hosemann says the venture will be an agent bank program, similar to those offered by MBNA Bank and First USA Bank. TCM will get the applicant banks licensed by the card associations, and handle the underwriting, securitizing the receivables and issuing $100,000 certificates of deposit as a funding source.

Each bank will get fees in the five-to-ten dollar range for each customer signed up and receive the same amount for each customer sticking with the program. Marketing will be mainly via direct mail and standing displays at bank counters, plus some limited telemarketing efforts.

IBAA will use the venture's profits to support its lobbying efforts as well as its other association activities. Hosemann says the IBAA currently doesn't know how much money it will make, but he expects underwriting to be about $250 million in revolving credit balances in the fifth year of operations, and perhaps $500 million in total transactions.

The IBAA has been issuing credit cards with the technical support of Equifax, Inc., for about 11 years. This is a so-called direct issuer program under which the IBAA, which has a group issuing license with both card associations, packages small banks in pools and offers them to the card associations. That program totals about 2,000 banks; Hosemann says he expects the new program to eventually include 6,000 banks.

The first issuance will be a mag stripe card. Hosemann says that the group has no current plans to issue smart cards. "We want to launch this card with existing technology and leverage that. Data mining and merchant discount services are being planned for but are not out of the box; we don't plan to offer them for about three to five years."

TCM hopes to begin beta testing in August, pending approvals by the Office of the Comptroller of Currency and the Federal Deposit Insurance Corp.


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