Despite its ties to the beleaguered General Motors and its own capital concerns, GMAC Bank had little trouble attracting deposits after it established a bank holding company in December. Deposits surged 16 percent in the first quarter, to $22.5 billion.
With such a good start, why did the online bank abruptly shed the GMAC Bank brand in favor of new moniker, Ally Bank?
A recognition of independence, says the Midvale, Utah, bank. It didn't own the gmac.com domain name and, with General Motors steadily decreasing its ownership stake in Ally Bank's parent, GMAC LLC, the bank wanted to send the message that it is not merely a financing arm for GM cars.
"As we've been making improvements to the GMAC Bank experience, we felt like at some point we wanted to be in a position where we're investing in a brand that we can grow with… and feel that this is the right time," says Vinoo Vijay, brand, advertising and product executive at the $36 billion-asset Ally Bank.
But some marketing experts believe the switch had more to do with the bank distancing itself from the bankrupt carmaker, and GMAC LLC, which took in $13.5 billion in federal aid. GMAC Bank had also been hit hard by GM's woes, losing nearly $271 million in the six months that ended March 31.
"Rebranding itself as Ally does the major point of separating itself from the baggage that GM carries," says Bruce Clapp, president of the Dayton, Ohio, marketing consultancy MarketMatch.
That rebranding effort in mid-May with a new motto — "The world doesn't need another bank; it needs a better bank" — prime-time television spots, a major print buy (including a two-page spread in the first edition of a revamped Newsweek), and prominent Web placements on Yahoo!, among other major sites.
The campaign aims to win over consumers by promising no hidden fees, no balance restrictions and no minimum deposits.
For instance, GMAC Bank ran a print ad in April offering a 12-month certificate of deposit with a 2.85 percent annual percentage yield, but the fine print noted that the minimum opening balance was $500. Ally Bank is running ads offering 2.80 percent APY — the highest in the nation, according to Bankrate.com — with no minimum balance and no fine print.
Ally Bank's aggressive rates have certainly rankled competitors. In May, the American Bankers Association said in a letter to regulators that it is "completely inappropriate, and indeed risky," for a bank receiving bailout funds to be paying rates well above the industry average.
Ally Bank officials dismissed the claim as "irrelevant" because the bank is considered to be well capitalized. Ally Bank says it is paying up for deposits because, with its debt rated well below investment grade, its capital-raising options are limited.
In trying to attract new deposits, the bank's ads play heavily on consumer frustration.
One TV spot, for example, shows a young boy playing with a toy truck that a banker gave him. But then the banker snatches the truck away and hands him a cardboard cutout of a truck because that was part of the deal. The child is not pleased. "Even kids know it's wrong to hide behind fine print," a voiceover says. "Why don't banks?"
Another ad shows a banker giving a young girl a bicycle but then says she can only "ride" it inside of a small, rectangular area that's taped off. A voiceover then asks, "Even kids know that an offer shouldn't come with ridiculous conditions. Why don't banks?"
Ally Bank is also touting 24/7 customer service and posts the call center waiting time on its homepage. "If our call center representatives weren't picking up the phone really fast, that would be a terrible thing to advertise," Vijay says.
Clapp says that if Ally Bank can deliver on its promises, it can continue to gain market share. "The strong plays for an institution that has to quickly gain a foothold and gain attention is in being a low-cost provider and being widely available," he says.
But Chris McDonnell, vice president at Greenwich Associates in Stamford, Conn., says if there are any missteps, the bank could quickly face a backlash from customers.
"Typically, it doesn't take too long for the market to realize that an entity has simply been renamed," he says.
Vijay says the bank understands this and has spent extensive time and money training staff on its new philosophy.
When choosing a bank, he says, "Trust is the No. 1 factor that consumers look for — Not rate, trust."