When your car breaks down on the highway and you need a tow truck fast, you undoubtedly are grateful if you belong to AAA and can call it for immediate help.

But would that gratitude inspire you to open a bank account with AAA? To get your mortgage through the auto club? To let the organization manage your individual retirement account?

AAA, the organization formerly known as the American Automobile Association, seems to think that motorists who put their faith in its cross-country Triptik maps and emergency roadside assistance will also trust it as a custodian of their money. AAA already offers a few financial products, and intends to offer more. The centerpiece of the plan is an online bank that the Orlando-based association has set up under the charter of Milwaukee's Marshall & Ilsley Corp.

Though AAA does not expect a significant number of its 37 million U.S. members to move their primary deposit accounts to its bank, it does hope to book $3 billion to $4 billion of deposits and loans in the next five years, said Scott E. Denman, managing director for financial services.

"We want to take care of our members in a number of different ways," Mr. Denman said. "We want to capitalize on the trust and security our members have with us by providing them with good value services."

AAA, a federation of 89 independent regional clubs, already offers Visa credit cards (through MBNA Corp.), fee-free American Express Travelers Cheques, and a comparison shopping service for auto leases and purchases. On the horizon are auto loans - which some clubs already offer through arrangements with local lenders - plus a range of other traditional banking services.

Though AAA is offering a basic menu of financial services, it has no intention of becoming a full-service bank, said its chairman, Charles Allen, president of Detroit-based Graimark Realty Advisors Inc. Even if it did have such aspirations, the organization might find an impediment in its decentralized structure. The local clubs are independently owned and operated, and though some have chosen to connect themselves to the Internet bank run by M&I, others have not and may never do so.

Mr. Denman said AAA's hope is that members will think of the organization when they have financial needs and at least give its offerings a look.

"Our genesis was as an auto club," said Robert P. Murray, senior vice president for corporate affairs at AAA Southern New England, which serves eastern Massachusetts and Rhode Island. "Now we view ourselves much more as a membership organization. As a membership organization, our range of activities on behalf of the members is as wide and varied as the members' interests themselves."

AAA Southern New England is a club that has struck out on its own to develop banking services that are at least as ambitious as the ones being offered through the national organization and thus does not plan to take advantage of the national club's relationship with M&I. AAA Southern New England has gradually added boat, personal, and home loans to auto lending, which was its first such product, Mr. Murray said.

In September, the Southern New England club teamed up with Sovereign Bancorp of Wyomissing, Pa., to offer deposit accounts. Unlike AAA's deal with M&I, AAA Southern New England is making cash deposits and withdrawals easy for its members: Those who sign up for accounts at Sovereign can use its automated teller machines and branches, including the 280 in New England bought in July from FleetBoston Financial Group.

Mr. Murray said the certificate of deposit rates Sovereign is offering to AAA members are about one percentage point higher than the ones offered to other customers. The bank pays higher rates, he said, because the AAA accounts are incremental business with much lower marketing costs.

To help those of its affiliates that have not entered financial services already, the national AAA organization is looking broadly at ways it can take advantage of the aggregated buying power of its members. Executives say AAA has done this throughout its history: The organization was founded in 1902 to promote the construction of better roads; introduced roadside help in 1915; and later expanded into travel planning, defensive driving courses, and automobile buying assistance. The first club to get into financial services, AAA Southern New England, began making auto loans in 1939. The national organization started offering Travelers Cheques in the early 1950s and got into credit cards in 1978.

The leap into mortgages and retirement accounts may not be as obvious as the earlier moves, but individual clubs have been edging in that direction for a while, AAA executives say. Many regional clubs, for example, have shopping card programs that give cardholders discounts on such nonautomotive merchandise as contact lenses and flowers. Some clubs buy movie tickets in bulk and pass along the savings to members.

In addition, the clubs sell $6 billion a year of insurance, about 85% of which is for automobiles. Other lines include homeowners and life coverage, said Bill Hardy, head of insurance for the national organization.

AAA's pact with M&I, announced last April and just getting rolling now, is to expand the clubs' financial service offerings to include savings accounts, money market accounts, and IRAs, as well as certificates of deposit. On the opposite side of the ledger, automobile, boat, and personal loans are to become available, along with first and second mortgages. The branchless bank will do all its business with customers by telephone, mail, or the Internet.

AAA has tried to take this path before, but it hit a dead end. In 1996, it and PNC Financial Services Group Inc. formed a partnership that was seen as cutting-edge at the time. The deal was announced with fanfare, and PNC was hailed as a visionary credit card issuer whose teaming with the premier auto club gave it access to an enormous customer base.

PNC kiosks were installed in AAA sites nationwide, with the idea that PNC could build a branchless banking empire (in the days before the Internet rose to power as a consumer channel) and AAA could attract a younger clientele (at the time, more than half its members were older than 50). As part of the deal, some private-label AAA products - most notably credit cards - were offered.

PNC tried aggressively to be the chief issuer of AAA credit cards, even, in 1997, buying a large chunk of card receivables from Bank One Corp., which had made $1.2 billion of card loans to AAA members, and all of what was then Mellon Bancorp's AAA card portfolio. But the relationship with PNC unraveled, for several reasons. Among them: Regional clubs that had separate relationships with other banks did not want to go along with the PNC link, and AAA members did not sign up for PNC products en masse.

In 1998, PNC's credit card chief resigned amid concerns that his portfolio was underperforming, and the lackluster growth of the AAA part of the portfolio - which was said to be about half the $4 billion business - was blamed. Later that year, PNC sold its entire credit card portfolio to MBNA. Mr. Denman said the AAA card business, which will stay with MBNA, has two million accounts with $2.3 billion of outstanding balances.

Mr. Denman said that that before the alliance with PNC disintegrated, the banking company had booked about $350 million of deposits and $650 million of loans. M&I is negotiating with PNC to acquire its AAA-member accounts, he said.

Neither AAA nor M&I would disclose terms of their agreement, but Mr. Denman said it generally calls for sharing marketing costs and for AAA to get a cut of M&I's net interest income. The banking services will be marketed through the clubs' membership magazines, direct mail, club offices, and club Web sites.

Mr. Denman said AAA's push into financial services is not profit-driven but inspired by a commitment to providing services that members want. He said M&I is committed to offering competitive rates on each product in each market but that the real benefit to AAA members is the ability to obtain a service from a trusted agent.

"The key to a program like this is that the AAA brand has tremendous pull with its members," said Thomas J. O'Neill, senior vice president at M&I and an executive of its Origins unit, which outsources banking services to AAA and other nonbank companies.

The local clubs are free to take or leave the national organization's arrangement with M&I. Three of the biggest - in southern California, Michigan and Missouri - have tied in their Web sites to the banking offering but do not plan to send out their first direct mail offer for it until early January.

Mr. Denman said he hopes to have clubs comprising about half the national membership participating in the banking program by yearend 2001. Though pitches for AAA-branded money market accounts and personal loans may never reach all the members, the ability of individual clubs to go their own way may mean more, not less, competition for traditional banks.

Robert Arning, industry director for banking at KPMG LLP, the accounting and consulting firm, said AAA's foray into banking should play well with its constituency. "If, when you think of them, you think of peace of mind and comfort and security, you're going to feel pretty good then when they recommend something to do with your money," he said.

Mr. Stoneman is a freelance writer based in Albany, N.Y.


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