American Banker

SECTION: No. 90, Vol. 170; Pg. 1 ; ISSN: 0002-7561

HEADLINE: A Texas Bank's Unseen Driver: The Unbanked; NetSpend Corp. All-Access National Savings Program

BYLINE: Reosti, John

BODY:

Though they will probably never know it, low-income and unbanked consumers around the country may soon be helping a rapidly expanding community bank in McAllen, Tex., fund its growth.

Inter National Bank is the bank behind the newly unveiled All-Access National Savings Program, which links a prepaid debit card with a savings account. Previously, Inter National's deposit-gathering was limited to its 10 branches in El Paso and the Rio Grande Valley.

NetSpend Corp. created All-Access, which made its debut May 2. The 7-year-old Austin company plans to market the program to the unbanked through a nationwide network of check cashers, grocers, and other storefront retailers.

That plan has substantial implications for the $ 912 million-asset Inter National. The government estimates that nearly 30 million Americans are unbanked, so if NetSpend succeeds it could add tens of millions of dollars to Inter National's deposit base.

More than a million people use NetSpend's prepaid debit card product, which is also offered through Inter National.

"If the savings program is anything like the prepaid side of the business, or even a fraction of it, we're going to be very happy," said Carlos Garza, Inter National's president and chief executive.

Inter National could easily put any money generated by All Access right to work. Though dozens of out-of-state and start-up banks have entered Texas' red-hot banking market the past three or four years, Mr. Garza said virtually all of them have concentrated on major metropolitan markets like Houston and Dallas. They have ignored the fast-growing border region, leaving banks like Inter National with all the business they can handle.

Inter National's loan portfolio grew 41%, to $ 512 million, in 2004 and Mr. Garza said the company has every intention of keeping the momentum going throughout 2005. His plans call for it to open three branches and announce at least one acquisition deal this year.

Buyers of NetSpend's prepaid debit card are eligible to set up an All-Access savings account, which they can do online or by calling a toll-free number. Once they establish an account they can make deposits by shifting some of the money they load on to the debit card into their savings, which will carry an introductory interest rate of 0.75%.

There are no minimum balances and no monthly maintenance charges. Members of Financial Service Centers of America, the check cashing industry's largest trade group (and NetSpend's other business partner) have agreed to process transfers into the All-Access savings accounts in their stores for free -- to act in effect as customer service agents for the program.

Michael S. Barr, who was assistant secretary of the Treasury for community development policy from 1997 to 2001 and is now an assistant professor at the University of Michigan Law School, said the absence of fees and minimum balances would appeal to the unbanked.

"The fees matter, and if you can make it easy to participate, my hunch is you'll see a very positive response," Mr. Barr said. "This is an exciting development. Low- and moderate-income families need a convenient way to save."

The deposits will probably be small, he said, but, "If you can get people to put aside $ 120 a year in real, long-term savings, I would call that a major accomplishment."

The money deposited into the All-Access program is held in a single, aggregate account, and the funds of each individual depositor are divided into subaccounts. Mr. Garza said that since the Federal Deposit Insurance Corp. treats the subaccounts as separate accounts, they are eligible for deposit insurance.

Inter National uses a similar aggregation system to account for the money that NetSpend debit card customers load on to their cards. Adapt the system to a savings program was not difficult, Mr. Garza said.

"We saw an opportunity to leverage technology to put us into a playing field we've never been in before," he said.

NetSpend says the All-Access program gives it an advantage in the race to capture the giant unbanked market. It sees itself fulfilling a banking function, with the debit card serving as customers' primary checking account and the All-Access National Savings Program addressing their savings needs.

Eventually, NetSpend envisions adding a diverse menu of financial products through the card, such as car loans and certificates of deposit.

"We're in the business of building relationships, not doing transactions," said NetSpend CEO Rick Savard. "We're dedicated to these customers and we're the first ones in their wallets."