MARINE MIDLAND Bank seems to be proving that the agent banking business is still viable, and not just for the biggest credit card issuers.
Prominent players like Banc One Corp., MBNA Corp., and Norwest Corp. may be better known as card issuers and for operating card programs for smaller institutions. But Marine Midland has kept its relatively small-scale agent business on track, even through hard times when a less determined institution might have tagged it for the auction block.
Now that the bank, an affiliate of the HSBC Group of London and Hong Kong, has wiped away most of its earning problems, it has appointed a new consumer finance chief who is reaffirming commitment to the specialized agent segment to the credit card business.
Since joining Buffalo-based Marine in July after 11 years with CoreStates Financial Corp., senior executive vice president Peter B. Davidson is overseeing relationships with 170 institutions in 22 states. Those banks have $100 million of receivables, or about 8% of Marine's $1.2 billion portfolio of owned and managed card assets.
"The banks we work with want to offer a credit card to their customer base," Mr. Davidson said, "but in most cases, they do not have the expertise or the desire to incur the expenses associated with managing receivables."
At Corestates, Mr. Davidson, 39, played a variety of roles in consumer lending and finance, including credit cards, mortgages, and indirect lending. He was most recently senior vice president in the specialty products group.
Mr. Davidson had previously worked at Beneficial Corp. for three years. He was assistant to the president on a turn-around project, then went into the marketing department where he specialized in strategic planning.
Through an agent relationship, a bank can issue a "private label" credit card without incurring credit risks and other costs of running its own card business.
Marine Midland is the back office for the smaller banks offering cards to their customers. Marine processes remittances and assumes responsibility for collections, security, and fraud management.
Marine is known as the sponsor, owning and managing the receivables and sharing some revenue with the smaller, "downstream" banks that act as Marine's marketing agents. Agents' names are printed on their cards, a tangible link with local customers.
Customer-service responsibilities are shared. Marine Midland puts an 800-number on the cards, but the smaller banks also play a role that Mr. Davidson sees as a potential advantage in the increasingly intense competition with the industry leaders.
He said holders of General Motors or other nonbank cards who have questions or problems must "deal with a representative on the phone. But with us, they can go into their branch and deal with someone they know. It's an added level of customer service."
Robert K. Hammer, chairman of R.K. Hammer Investment Bankers in Newbury Park, Calif., said customer service is crucial for banks like Marine that want to stay serious about agent banking.
"The agent banking business per se isn't contracting," Mr. Hammer said. "What we're seeing and will continue to see more of is individual marketshare shifts among key players."
Mr. Hammer said service levels, pricing, and commitment to the business are the three most important factors in an agent relationship. "If an agent bank isn't receiving the quality or commitment it deserves, the bank simply leaves and goes elsewhere," he said.
Mr. Davidson acknowledged that the agent business has become an increasingly tough one. Smaller banks are wary of entering into such relationships, and the many savings and loan failures removed a lot of potential customers.
But like the Independent Bankers Association of America Marine presents itself as a bulwark for smaller institutions against the industry giants.
Mr. Davidson said it is not uncommon for smaller banks to be seduced by the large issuers profit reports and expect to get in on the action themselves. Some agent customers that Marine lost have returned to the fold. If and when the economy turns, "a loss can come back to haunt you," he said.
Community bank executives who work with Marine Midland report positive results.
"We're trying to position ourselves as a premier retail bank, and [such a] bank has to have a credit card," said Joseph Kotowski, senior vice president of BankAtlantic, a $1.3 billion-asset thrift in Fort Lauderdale, Fla. "Marine Midland has made it very simple for us to build a business in that area.
Mr. Kotowski said BankAtlantic Atlantic had had a relationship with Marine Midland for several years but only started aggressively promoting credit cards last fall.
"In the past, our marketing efforts involved leaving a brochure in a rack," the Florida banker said. "Now, we're targeting other loan customers, setting up credit card information tables at branch openings, and providing incentives to employees who help build the business."
Mr. Kotowski said he is pleased with the Marine Midland relationship because it enables his institution to focus on what it does best: marketing to people in its community.
He declined to say how profitable the operation is but said it has made money quickly.
"We don't have the internal expertise or manpower to run a credit card operation ourselves," Mr. Kotowski said, "so for a bank like ours, the Marine Midland relationship is ideal."
Most of Marine's agent customers range from $10 million to around $1 billion in assets. Mr. Davidson said he and his staff are preparing an aggressive marketing plan to bring banks of all sizes into the program.
"There are number of banks that haven't gotten around to issuing a card and which might want to," he explained. "There are others that have issued their own cards, experienced a loss, and are looking for someone to handle their receivables.
"In this market, we see a real demand for our services."