Nationwide Financial Services Inc.'s newly chartered savings bank will deposit payouts from its sister insurance companies directly into customers' savings and checking accounts and will eventually offer them insurance, investments, and other products, the bank's president says.
"We're just trying to expand our capabilities in financial services," said John Skubik. "It's a play to retain clients, serve them better, and hopefully attain new clients."
The Office of Thrift Supervision granted the Columbus, Ohio, insurer's request this week to extend the powers of its wholly owned subsidiary, Nationwide Trust Co. FSB, a limited-purpose federal thrift. The expanded thrift, which is to begin operations late this year, will be renamed Nationwide Bank, the company said, and will offer a full range of banking products and services. Customers will have access to the bank by mail, telephone, and Internet.
"The first natural business will be to give people that receive claimant and benefit payments to be able to have those as guaranteed bank deposits," said Mr. Skubik. He hopes "we will attract new customers by the quality of service we provide."
The bank will start with basic products like checking and savings accounts, Mr. Skubik said; credit products will be added within six months.
Depositing insurance payments in the bank will streamline the process of giving beneficiaries their money and let Nationwide keep the money in-house, said spokeswoman Carah Brody. Ultimately, she said, the bank will offer an easy way for customers to move among "all of Nationwide's products and services."
Cross-selling to its customers is "a large piece" of the plan for the new bank, said Mr. Skubik: "That increases our value to them and their value to us."
Nationwide is a major distributor of annuities through banks; its $1.2 billion of fixed and variable annuity sales last year ranked it 12th in the channel, though volume was down 41% from 2004, according to Kenneth Kehrer Associates, a Princeton, N.J., consulting firm.
Michael White, a bank insurance consultant whose firm, Michael White Associates, is in Radnor, Pa., said Nationwide's operation is unlikely to cannibalize much business from its partner banks.
"I can't imagine it would be a great threat to institutions in any widespread basis," he said. "I think the real idea is to maintain control over assets and to maintain an existing customer relationship after the benefit payment has been made."
Banks are especially unlikely to lose existing clients of their financial advisers, he said.
"If I'm a registered rep engaged in financial planning and consultative selling to my customers, it strikes me that I'd have a heck of a lot to say to a customer about which services they should be utilizing," he said.
Nationwide is not breaking ground with its move into banking. State Farm and Allstate each has a thrift unit. And MetLife Bank was created in 2001 when the insurance company bought an existing institution in the wake of the Gramm-Leach-Bliley Act. The Bridgewater, N.J., bank had $6 million of assets and $4.3 billion of customer deposits at Dec. 31. It has a dedicated call center in Warwick, R.I.
Nationwide Bank, too, will have a dedicated call center, said Mr. Skubik. It will use Fidelity National Information Services, a subsidiary of Jacksonville, Fla.-based Fidelity National Financial Inc., for much of its back-office technology, he said, but all person-to-person customer contact will be made by bank employees.
The bank's Web site will be part of the parent company Web site, he added, meaning customers will be able to click back and forth among various arms of the financial services company. "It's important to us to be integrated into the Nationwide experience," he said.
Nationwide Trust was formed in 1998 to offer trust, custodial, and agency services for sponsors of Nationwide Financial's qualified retirement plans and public-sector deferred compensation businesses. Nationwide Bank will still offer these services through its trust operation, the company said.
