First of America Bank Corp. has introduced a calling card service that can generate noninterest income for the bank and give cardholders competitive rates on calls they make away from home.

The service, Credit Calling, enables customers to use their Visa or MasterCards to make calls, receive voice mail and faxes, among other features.

First of America, a $23 billion-asset bank in Kalamazoo, Mich., will offer the service to all its cardholders by mid-October.

The bank will deliver the service through Premiere Communications, a long distance carrier, based in Atlanta, with more than one million Credit Calling customers.

Credit Calling is similar to other credit card calling services because it's billed monthly to the Visa or MasterCard holders.

But it offers a host of new features found mostly on prepaid phone cards -- voice mail, fax mail, speed dialing and customized voice greetings from the caller's financial institution -- functions not available on traditional calling cards.

"I think we are ahead of the curve in offering these enhanced services to our customers," said Marc Altman, senior vice president of marketing and sales for First of America's retail credit division.

"It's a high value proposition compared to other out of home telephone programs," he continued. "Our prices will provide a big discount off AT&T and MCI charges."

Calls will cost an initial access fee of 65 cents, and then a flat rate of 18 cents per minute, anywhere in the United States at any time.

The big three phone companies charge 75 cents to 80 cents for network access, plus the traditional long distance rates according to calling distance and time of day.

With Credit Calling, customers pay no monthly fee for the voice mail services, but are charged 25 cents per minute to retrieve messages and faxes.

To activate the service, cardholders will dial an 800 number and choose a personal identification number.

To make calls they will also use an 800 number, then dial the number they wish to reach and their own 10 digit account number and PIN.

Although Premiere markets prepaid cards as well as Credit Calling, Greg Smith, executive vice president of Premiere, said,"You can get all the advantages of the prepaid card with Credit Calling and it's postbilled."

He also pointed out that banks can offer the service to their customers with little expense compared to the manufacture and distribution of prepaid cards.

While First of America continues to offer VisaPhone, a service with Sprint Corp., to its Visa cardholders, Mr. Altman said there is very low enrollment and usage. He is more optimistic about the new service.

The bank expects penetration of 3% to 5% of their cardholder base on any given month, and should generate $500,000 in noninterest income each year, through a percentage of revenues shared with Premiere.

Mr. Altman said the bank would target customers whose usage indicates they would find the service beneficial -- business travelers, frequent leisure travelers, and Students -- but all Card members will be notified. Premiere will cover most of. the direct marketing costs.

Mr. Smith said that Credit Calling is not a simple valueadded enhancement, but "a way to communicate with customers."

He said the card can be Used as a marketing tool to reach consumers that rarely enter bank branches, opting to use automated teller machines and home biking.

With the added voice greeting features, First of America can market varied bank products over the phone.

Another plus for bankers is the real-time billing advantages offered with Credit Calling.

The bank sets a telephone credit limit, and Premiere maintains an "open to spend" balance. Once the limit is reached, Premiere will call First of America for authorization on future calls, much like any other merchant.

Premiere also controls fraud, a major issue for banks, by monitoring fraudulent behavior, allowing only one user at a time, and maintaining real-time billing and credit limits.

"VisaPhone works similarly, but they don't have the real-time billing to keep track as closely," said Mr. Altman.

Robin Pence, spokeswoman for Sprint, said that VisaPhone's overall rates are lower than Credit Calling. VisaPhone's rates range from 24 cents to 15 cents during the day and from 12 cents to 9 cents at night.

But Juanada Teas, manager, corporate media relations said that Sprint didn't offer all the enhanced services of Credit Calling at this time.

Hector DesMoine, a director for MasterCard International said, "Those functions aren't unique -- things like message forwarding, fax mail, speed dialing, conference calling -- there are a number of programs being put together, particularly by the smaller [telecommunications] companies and I have to assume that the bigger companies are looking into it."

But he added, "First of America appears to be taking a lead in introducing these functions to the consumer market." Offering the functionality of a credit calling card with enhanced features may put the bank ahead of the competition, but industry experts said it wouldn't last.

"I think they're entering a very competitive market," said David Streeter, vice president, Sterne Agaee & Leach, an Atlanta-based brokerage firm. "Maybe they feel they have a window of opportunity to offer an enhancement and take some market share before someone else."

John Baskin, president of Omnicom Corp., which markets Credit Calling for Premiere and for LCI International, a telecommunications company, based in Columbus, Ohio, said that there's no reason why the big phone companies couldn't come out with a similar product, but he pointed out they haven't done so yet.

Mr. Baskin mentioned that about 25 financial institutions are at differing levels of negotiations for the service at this time. "The difference with our product is the price for the cardholders and bank participation in revenue sharing," said Mr. Baskin. "That sets it apart at this point, until someone comes along with a competitive product."

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