In October and November 1974, Bank One in Ohio and Louisiana National Bank came out, one after the other, with the first Visa debit cards, called Entree. Twenty-one years later, these debit pioneers are poised to join forces through merger as Banc One Louisiana Corp. In late July, Columbus, Ohio- based Banc One Corp. agreed to buy Premier Bancorp, the Baton Rouge, La., holding company for what was once known as Louisiana National. The merger comes as consumers are finally understanding how an automated teller machine card can work as an electronic check. But in 1974, when ATM cards were fairly new, Louisiana National Bank had its work cut out trying to teach this lesson to demand deposit account customers. G. Lee Griffin, Premier Bancorp's current chairman and chief executive officer, and H. Brooks McElveen, president of Premier Bank, were in the thick of that struggle. The bank simply replaced its LNB24 ATM card with an Entree card. For six months, the bank pulled the plug on LNB24 cards, and customers who held the cards could not use them. Meanwhile, cardholders could use Entree for access to their accounts and to make debit purchases at retailers that accepted Visa. After the trial period, cardholders could ask to have LNB24 again at no charge, or pay $1 a month for Entree. Of those who had used Entree, 86% opted to keep it, Mr. Griffin said, while 45% of those who hadn't used it kept it anyway. Ed Lakin of Baton Rouge, one of the bank's first debit cardholders, recalled, I signed up the first month I saw it offered and have been using it ever since. It's been a lot easier to deal with than checks. It is the exact equivalent of using a Visa card and just as easy. He was only one of the many early users who made the new payment card a success and who made Louisiana a curiosity to bankers elsewhere who had to labor in debit cards' early stages. There were a lot of concerns in the industry that debit cards would eat into credit cards' volume, but we found the opposite was true, recalled Mr. Griffin, 50. A debit card really is a substitute for cash and checks, not for the credit card. So our credit card volume kept on charging along. The debit program kept chugging even after Louisiana National Bank entered a merger of equals in 1985 with Ouachita National Bank in Monroe, La., and with First National Bank of Shreveport, La. Three years later, those banks and others adopted the Premier name. In 1989, the $5.5 billion- asset holding company decided to change the name of the debit card to CheckSmart. Entree was a provocative name, said Mr. McElveen, 60. But it probably didn't define the utility of the cards. It was a well-timed move for another reason. MasterCard International and Visa U.S.A. adopted the Entree name for their planned debit card joint venture, which succumbed in 1990 to an antitrust challenge mounted by several state attorneys general. With Premier's timely name change, the bank was ready to embark on a statewide advertising blitz. Video Park, a Baton Rouge ad agency, came up with The Twilight Diner, a television spot that was shot in black and white in a takeoff of the TV program The Twilight Zone. As forbidding music plays, a character named Benjamin Howard tries to pay for his lunch at a diner by check. The cashier, named Jewell, nods to a sign emblazoned No Checks. The waiter snarls, and a customer cackles. Unruffled, the customer pulls out his CheckSmart Visa card. The cashier smiles and swipes the card through the verifier. A Rod Serling-like narrator intones: She thinks it's a credit card, but Benjamin Howard has just written a check and entered a new dimension. The dimension of CheckSmart, only from Premier Bank. The ad won awards and got results, Mr. McElveen said. Customers understood that CheckSmart gave them access to their accounts through an ATM, he said, but worked like a Visa card at a store. Applications just went through the roof. To supplement advertising, Premier runs annual promotions to add cardholders and to encourage existing customers to use CheckSmart more often. For example, the bank in 1993 offered customers a free camera for using CheckSmart once at the point of sale. A slick, four-color brochure designed to look like a canister containing photo negatives and saying CheckSmart is a snap to use gave cardholders an idea where they could use the card: the hardware store, for take-out food, and at the gas station. Premier initially wanted to get CheckSmart into the hands of 20% of its demand deposit account base. Two decades later, the company said, it has reached 47% penetration of its 235,000 customers. Of those, 50% use the card for an average of 11 transactions per month. We attribute that to being able to describe the utility of that card to a customer, Mr. McElveen said. By comparison, Premier's credit card program has nearly 50,000 active accounts, with a relatively paltry $50 million of balances outstanding. However, the executives were quick to point out that their company sold its credit card portfolio in 1987 to raise capital and only reentered the business in 1991. Recently, MasterCard and Visa have developed marketing strategies to help banks better communicate the benefits of debit cards and accomplish what Premier did long ago. Some banks have been more aggressive than others in adopting Visa Check and MasterMoney. They were committed to it then and are committed to it now, said Carol Cosby, vice president of Visa's Southeast region, referring to Premier. The bottom line is, they believe in the Visa Check product. Premier enjoys two revenue streams it doesn't get from checks: a $1 monthly fee per card, and merchant discounts. We couldn't figure why the industry took so long on this thing, Mr. Griffin said. His theory is that most banks, including Banc One, separated credit from debit in their organizations. Cross-communication was difficult, and credit card divisions might have feared they would lose customers. Premier found you could lay the debit card operation on top of the credit card operation, so the cost was very modest, Mr. Griffin said. We had our credit card people responsible for debit. The credit card folks had an incentive to make sure both cards worked, so there was no internal bickering . . . or the risk that one program would become a parasite of the other. I think that's one reason why our program worked. What's next for CheckSmart? I think it will access more than just checking, Mr. Griffin said. It will reach every kind of relationship a customer has with the bank. Mr. Griffin, a member of Visa U.S.A.'s board of directors, welcomes a future with stored-value cards and chip cards, and he predicts Premier will move in that direction within five years so that customers can have access to many accounts. And he points out that Premier has a history of embracing new products and technology ahead of others. In 1983, the bank came out with a bill- paying service and a home banking program tied to the early personal computers but shelved it two years later.
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