Not many years ago, bank marketing efforts aimed at college students seemed like a smart idea. After all, a lot of folks still use the same credit card brands they signed up for outside the student union decades ago.
But events of the last decade have won banks no fans on the quadrangle. The flashpoints included a financial crisis that fueled political protests; aggressive marketing tactics that spawned reform legislation; and contracts between companies and universities that raised conflict-of-interest issues. And don't forget the intense debate over spiraling student debt.
Given that backdrop, a recent partnership between Bank of the West in San Francisco and the University of California, Berkeley, bears watching as the two sides are trying to reconcile their business needs (banks' thirst for growth and sticky customers, and universities' vast appetite for funds) with the public relations clouds of the past.
In exchange for a $17 million commitment, the $83 billion-asset bank has become the university’s preferred banking partner and gets a space in the student center for a branch and seven ATMs on campus. Some of the investment will go toward merit-based scholarships, the hiring of student interns and yearly donations to the university’s emergency food pantry fund.
“People are struggling to find that ethical balance,” said Amy Gardner, Berkeley’s director of project affairs, including the university partnership program. “How do you appropriately bring a company on campus so that it doesn’t feel invasive, doesn’t feel biased, it feels supportive and natural and for the benefit of the community?”
Gardner emphasized two points that make this partnership feel more comfortable: Bank of the West is not allowed to market credit cards to students, and the university receives no special kickbacks or “bounty fees” for each student that opens an account, which she said is sometimes the case in these types of partnerships.
Student participation was also a key component of the selection process. Berkeley has similar partnerships with other companies, including Brita, Peet’s Coffee and Under Armour, and in choosing each of those partners the university sought input from undergraduate and graduate student representatives chosen by members of the student government. The university has no say at all in which students are chosen, Gardner said.
Beth Hale, chief administrative officer of Bank of the West's consumer banking unit, said bank officials were delighted to work with students and receive their input. Roughly a dozen students and four faculty members participated in the advisory council, which even gave input into the design of the branch Bank of the West built inside the student center. That branch is LEED-certified and uses reclaimed wood in the furniture, two design elements that were important to the students.
All their input has proven valuable as Bank of the West thinks about consumer banking beyond the college campus.
“We’re using [their feedback] now to think about, how can we bank differently and what could work?" Hale said. "It’s something of an incubator of what could also work well for us outside the Berkeley footprint in a broader reach to our customers."
Additionally, Bank of the West employs about five Berkeley students in the branch at any given time and has lent support to FLEJcon for two years now. FLEJcon, short for Financial Literacy and Economic Justice Conference, is a financial literacy initiative organized by students interested in educating their peers about their financial rights and responsibilities. Bank of the West chipped in financial support, as well as speakers, program recommendations and other bank resources.
University partnerships such as the one between Berkeley and Bank of the West are becoming increasingly popular as colleges and universities struggle to balance declining revenues with a desire to keep tuition affordable for students. Gardner said she fields phone calls about every two weeks from other colleges and universities exploring similar corporate partnerships.
Yet these partnerships can raise legal and ethical questions about how schools can balance those potential revenue streams with their obligations to students, and financial products can be a particularly tricky area.
On one hand, college students are a vulnerable population that is only just entering the financial mainstream and forming money habits. For that reason alone, student and consumer advocates raise an eyebrow at such partnerships. On the other hand, access to some basic banking services is generally necessary for building wealth, and there certainly is a place on campus for financial literacy programs, which bankers are uniquely qualified to deliver.
“We need to pay attention to hidden costs to students themselves and also to any impact it might have on faculty autonomy of the curriculum,” said Lynn Pasquerella, president of the American Association of Colleges and Universities. “It doesn’t mean [those partnerships] should all be proscribed. Some of the educational programs they’re developing, some of the services they’re offering are critically important. … But we always need to pay attention to the concerns about whether these partnerships are truly serving the needs of the student.”
Today, companies are forbidden from offering freebies (think pizza, T-shirts or hats) to students for signing up for cards, and they are banned from marketing credit cards within 1,000 feet of campuses. More recently, the Consumer Financial Protection Bureau has begun to look at checking accounts and prepaid debit cards offered on college campuses. Regulators and consumer advocates are now less concerned with credit cards than they are with banking products laden with hidden fees or subject to excessive overdrafts.
Bank of the West checking accounts marketed to the Berkeley students require a $20 minimum opening balance and carry no monthly service charges or minimum balances after the opening, the bank said.
Lauren Saunders, associate director at the National Consumer Law Center, acknowledged the benefits of such relationships, like convenient access to banking services, but said, “If a school is going to allow its logo to be used by a bank and imply endorsement of that bank or give the bank a special place on campus, then the school has a special responsibility to look at the accounts and fees around their practices, especially around overdraft fees.”
For its part, Bank of the West is allowed to promote student checking accounts and wealth management products with special rates for faculty members. It offers university employees up to 25-basis-point bonuses on rates for certificates of deposit and money market accounts. And beside the financial literacy programs, its branch offers the use of conference rooms to any Berkeley student or staff member, regardless of whether they are customers.
“I think what [the students are] seeing is our commitment to their programs," Hale said. "They’re not seeing a stodgy old bank coming in and saying, ‘Open up a checking account.’ They’re actually sitting shoulder to shoulder participating in their programs. It’s really a two-way partnership, which I think is different and unique.”