There's nothing like pressure to jump-start creativity. And if you don't believe that, just ask the people at Cincinnati's $6.5 billion Provident Bank. Under pressure from its two bigger competitors, Fifth Third Bank and Star Bank, Provident came up with an innovative, patent-pending product that could goose its net income well beyond any mere loan program. Called MeritValu, it's a relationship card that allows merchants giving cardholders a rebate of about 2.5 percent on sales, access-for a fee-to Provident's data mining capabilities and consulting and marketing services.

Under the program, the bank holds those accumulated rebates, which the cardholder can cash in at any time. When the merchant swipes the MeritValu card, the customer sees both the rebate and the accumulated balance in the Merit Money account. This account is, in effect, an interest-free loan from the merchant to the bank until the customer spends the balance.

Provident also requires participating merchants to accept its credit and debit cards, widening Provident's market share while increasing its non-interest income. "Banking is becoming a business of scale if you do it in the traditional way; a regional bank would have a very difficult time prospering long-term if all it did was focus on monetized products and services, and slashing costs," says Provident svp Ronald E. Koch.

If computers give companies the ability to micro-market, most banks have barely scratched the surface of this marketing opportunity, identifying big demographic segments that could respond to a slightly different mass marketing approach rather than to actually use their databases to market to individual customers. But at Provident, customer- specific tactics are the prevailing philosophy and the foundation of MeritValu.

Koch says that the bank has issued over 300,000 MeritValu cards in Cincinnati, and that, aside from a deal with the Fort Lauderdale Chamber of Commerce to market MeritValu nationally under a private label brand, it plans to market the idea in the nation's 50 largest cities. Provident is also exploring marketing it in Africa, Europe, Australia and South America. Koch declined to identify the nations under consideration.


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