SunTrust Banks Inc. keeps embracing new payments systems rather than try to steer customers to the older payment types that most banks favor.
Over the last six months, the Atlanta company has added several alternative ways to move money for consumers who have moved on from checks and credit cards. Most recently, SunTrust announced Dec. 7 that it had rolled out CashEdge Inc.'s TransferNow service, which enables so-called me-to-me payments and third-party account transfers.
By offering many options, SunTrust says, it can retain more customers. Industry observers say these offerings appeal to an extremely profitable group of customers — mobile banking users.
"This is a profitable and engaged segment that tends to have more products and use those products more frequently than other customers at the bank," said Andy Schmidt, research director of global payments at TowerGroup in Needham, Mass.
SunTrust's online banking services also include ModaSolutions Corp.'s eBillme, which lets merchants submit bills for online sales directly to customers' bank accounts. The bank has also tested an offering from Moneta Corp. for consumer-to-business payments.
"We want to make sure that our clients have the ability to make payments, whether they are making purchases or bill payments, and that they have the ability to do this in a way that is most comfortable to them," said Ginger Schmeltzer, SunTrust's digital channel manager.
SunTrust did a soft launch of TransferNow in July, Schmeltzer said. Louise Clynes, SunTrust's vice president of product management, said transactions to date have numbered in the thousands. Schmeltzer said they were "a good mix" of me-to-me transfers and payments to third-party accounts.
SunTrust does not currently enable account-to-account automated clearing house transfers, as many large banks do. Schmeltzer said SunTrust chose CashEdge, instead of building its own capabilities, in part because the vendor already works with hundreds of other banks and could capably handle the risk associated with those transfers.
Ironically, despite SunTrust's unusual openness to alternative payments, observers said its addition of TransferNow, a service designed for banks, is a bit late to the game.
"SunTrust is one of the last major U.S. banks to offer this [kind of] service, and my first response is that it's about time they did," said Emmett Higdon, a senior analyst for e-business and channel strategy at Forrester Research Inc.
Higdon also said a potential danger is that TransferNow could confuse customers, as often happens when banks launch new online services. For example, he said, customers might not understand the difference between eBillme and TransferNow.
SunTrust said TransferNow complements and is clearly distinct from eBillme, which lets customers make purchases online without keying in their credit card information. TransferNow lets customers move money between their internal and external accounts and lets them send money to third-party accounts if the sender knows the recipient's account number. Clynes said she viewed TransferNow as the basis for offering more kinds of payments.
"We do not have the ability to do true person-to-person payments, but this a first step toward that," Clynes said, adding that the bank also plans to enhance its business-to-consumer payment capabilities.
SunTrust studied online, mobile, and bill-pay customers in 2009 and 2010, according to a Oct. 4 TowerGroup research note written by analyst George Tubin. The note said that while SunTrust's customers using bill pay are 38% more profitable than the general population of online bankers, those who use both mobile and online bill pay were 53% more profitable.
CashEdge said its own research confirmed that payment services such as TransferNow increase customer retention and potentially increases deposits. "Increasingly banks recognize that enabling [alternative] payments and money-movement capabilities leads to higher levels of engagement and higher deposit values," said Catherine Palmieri, the global head of product and marketing for CashEdge. "They are finding that rather than taking away money from them it is bringing in more."
Citigroup Inc. uses CashEdge's Popmoney product for person-to-person transfers. Though Citi would not discuss its use of the product, Paul Galant, the chief executive of its Global Enterprise Payments unit, said, "I view [Citigroup] as a technology company with a banking license, and so I am going to integrate solutions to get the best possible service."
