First Horizon National Corp. is preparing to use a deposit service developed for branchless banks by NetBank Inc. to offer traditional banking products and services to more customers outside its brick-and-mortar coverage area.
The Memphis company has long tried to use its mortgage operations, which have a much more extensive geographic reach than its retail banking businesses, to win banking customers. The company typically builds a branch in a city after it has built a "critical mass" of banking customers, according to Sarah Meyerrose, First Horizon's executive vice president of operations and technology.
"We intend to build out a national deposit-taking presence," she said. NetBank's QuickPost service "is one piece of being able to do this."
The agreement, announced last week, is NetBank's fourth such deal since March and demonstrates the growing interest among traditional banking companies in nontraditional deposit services. First Horizon expects to begin offering the service this quarter, and it will pay NetBank a per-transaction fee.
Six financial companies, including First Horizon and NetBank, are using QuickPost or have agreed to do so. Its first customer was USAA Federal Savings Bank, which agreed in September to test it. The San Antonio savings bank said last month that it would offer the service to all of its customers.
Ebank, the Atlanta thrift unit of Ebank Financial Services Inc., signed up in March, as did Navy Federal Credit Union, the world's largest credit union. Dime Savings Bank, a unit of Dime Community Bancshares Inc. of Brooklyn, N.Y., signed up this month.
First Horizon's retail banking base is in the South; its First Tennessee Bank operates mainly in Tennessee, and its First Horizon banking unit operates mainly in Texas, Virginia, and Georgia.
Ms. Meyerrose said that her company tries to sell its banking services to its mortgage customers. However, "to build a relationship with customers, you have to be able to take their deposits," she said. "QuickPost gives us that reach."
First Horizon has a nationwide mortgage business, with particular strength in California, Kansas City, Kan., Phoenix, Seattle, and Denver. "It's not feasible to have brick-and-mortar branches in all those places," she said. "What we are doing is using QuickPost as a way to make ourselves more convenient for our customers."
QuickPost is a partnership between NetBank's payments subsidiary, Financial Technologies Inc., and United Parcel Service Inc. Customers can take checks they want to deposit to a UPS store and put them into a pre-addressed envelope. (They cannot deposit cash through QuickPost.) The Atlanta courier company flies the deposits to its central processing center in Louisville and then delivers them to a nearby Financial Technologies processing center.
The deposits typically arrive at about 2 a.m. and are processed overnight. They post to the customers' accounts later that day, and Financial Technologies sends an e-mail to confirm the transaction.
UPS says that about 72% of U.S. residents live within five miles of one of its more than 4,100 stores.
NetBank originally introduced QuickPost in March of last year as a way for the Internet bank's customers to make deposits. It also said then that Financial Technologies would market the service to other companies.
At the time, observers called the service a natural fit for an Internet bank like NetBank. Such banks have attracted savings deposits with their high-yield accounts, but many people say they are reluctant to use the banks, because they lack physical branches, and especially because it might be difficult to make deposits. QuickPost was designed to solve that problem.
However, Doug Freeman, NetBank's chairman and chief executive, said a growing number of banks that have branches have realized they can use QuickPost to offer deposit-taking services away from their established branch network.
"We are offering branch convenience for people who want to extend the reach of their branches," Mr. Freeman said. "This allows companies to extend the reach of their branch franchise without spending a nickel on bricks and mortar."
Alenka Grealish, who manages the banking group at the Boston market research firm Celent LLC, called First Horizon a "deposit-hungry institution" with a good track record in "figuring out innovative ways to collect deposits." For example, it was one of the early leaders in offering remote capture services, which let corporate customers convert checks into images and transmit them to the bank for deposit.
Robert Hunt, a senior analyst at TowerGroup, a Needham, Mass., market research unit of MasterCard Inc., said the QuickPost service appeals to community and regional banks, because it "allows banks to keep in contact with customers that are on the road a lot."
For example, Dime Savings has 21 branches, all in the New York area. Customers who retire and move to another area might switch to another bank, but with QuickPost, "Dime might be able to retain that customer," Mr. Hunt said.
Most of Navy Federal's branches are near naval bases, and members who retire from the military or go on leave may need to make a deposit even if they are nowhere close to a branch, he said.
The service is "a very clever way to extend your reach," he said. "It's a nice niche product."
