How Insurance Companies Like Nationwide Are Making a Push to Be Your Next Bank

Simon Zhen

By  Updated on Wed Aug 13, 2014

Simon Zhen is an analyst, staff writer and columnist for MyBankTracker.com. His columns draw focus to all aspects of personal finance and to bank rates, products, and services. More Columns »

Insurance companies are telling banks to step aside as they make an aggressive push — you’ve probably seen some of their advertisements — to become your next bank.

How Insurance Companies Like Nationwide Are Making a Push to Be Your Next Bank

Nationwide

While big banks have seemingly-recovered from their tarnished reputations following the financial crisis, the entire consumer-banking industry has been booming, especially non-brick-and-mortar financial institutions. Major insurance brands — including Nationwide, State Farm, TIAA-CREF and more — are emerging to battle for a piece of the pie (i.e. your money).

But, insurance companies won’t set themselves apart if they cannot interest you in an account in which you find great value. I’ve seen my fair share of banks that have made valiant attempts to create accounts that are worthy of your deposits — it is not as simple as offering the same old accounts that can be found everywhere else.

Look for the ‘wow’ factor

Insurance-branded online banks cannot expect to grow by selling run-of-the-mill accounts — they have to offer deposit products that you want.

In our current, low-rate environment, you’re not going to be too impressed with a rival account’s rate that is just a few basis points higher. You will, however, take notice of those extra 40,000 ATMs to which you could have access.

Without that competitive edge, you’ll probably go with one of the bigger, more established banks.

So how are the existing insurance-branded banks making it work?

Nationwide Bank

One growing insurance-branded bank is Nationwide Bank, which also offers a wide range of deposit accounts. It’s E-Checking account appears to be the most attractive of the bunch.

It does have a monthly fee of $8, waived with direct deposit and eight debit card transactions per month, or a combined $10,000 in Nationwide Bank deposit accounts. But, there are a couple features that proves the account desires your attention.

The E-Checking account pays interest — as high as 0.60 percent APY on balances of $10,000 and up. Compare that to Ally’s popular checking account that pays the same rate, but requires a $15,000 balance to earn that rate.

Also, Nationwide Bank is partnered with four ATM networks — Allpoint, PNC Bank, Alliance One and MoneyPass — to allow for surcharge-free ATM transactions. (You’re going to get six free out-of-network ATM transactions per month.)

Here’s the “wow” factor: You can actually make deposits at some of these ATMs. Most brick-and-mortar banks allow deposits only through their own ATMs while most online banks can only accept check deposits, usually by mobile deposit or mail, while cash deposits are impossible.

In fact, Nationwide Bank knows that the E-Checking account is worthy of the spotlight because it recently started promoting the account with a generous $200 sign-up bonus (expires Oct. 31, 2014).

Nationwide Bank was established in 1998 and it carries an “A” rating from MyBankTracker due to the bank’s low fees, above average rates and great mobile banking features.

State Farm Bank

Another major insurance-branded online bank is State Farm Bank. It has a full suite of deposit products but its most popular deposit account would be the Free Checking account, based on the number of customer reviews on the bank’s website.

With no monthly service fees, the Free Checking account already has a leg up on many traditional banks (and even some online banks) that do not offer absolutely-free checking accounts. You can get up to $10 in ATM-fee rebates per month and unlimited rebates with a direct deposit.

Plenty of online banks provide similar free checking accounts and State Farm Bank’s Free Checking account doesn’t have any features that makes it look better. But frankly, most people won’t ask for much more.

State Farm Bank had its bank charter since 1999 and the bank has a “B+” MyBankTracker rating due to its extremely consumer-friendly fee structure.

TIAA Direct

Now, here’s an online bank that had a “wow” factor, but underestimated the number of rate chasers out there.

When retirement and life insurance company TIAA-CREF launched its online bank in 2012 — called TIAA Direct — it took the savings community by storm. TIAA Direct’s “wow” factor: an online savings account with the best nationwide savings rate.

At that time, the savings rate was 1.25 percent APY, which was extremely enticing. In fact, TIAA Direct had to suspend sign-ups after two months following its launch. The online bank said it marked the conclusion of a pilot program, but I think the influx of customers and deposits was becoming too much to handle.

Over the years, the savings rates started to dwindle. Although TIAA Direct’s savings rates remain competitive among other online banks, savers who chase rates are leaving (TIAA Direct’s deposits fell in the past year). This is an example of how a unique set of account features play a major role in capturing and keeping customers.

TIAA Direct is a part of the TIAA-CREF Trust Company, Federal Savings Bank, which was established in 1998. The online bank touts a MyBankTracker grade of “A” for its great financial health, competitive rates and good mobile banking capabilities.

Getting what you need

In the end, what matters is how one particular account will help your money grow — you probably don’t care that a bank is actually a division of an insurance company. You care if the account is useful and if it is affordable.

Insurance companies can capture your business only by introducing bank accounts that have standout features that you care about. It’s up to you to decide how you can maximize them.

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Post a Comment

  • Stephanie Hood

    Banks and insurance companies are as similar as chickens and pigs. Sense my sarcasm? The fundamentals of each business model are completely different. Different purposes, customer needs, legalities, etc. This doesn’t make sense to me.

    • http://www.mybanktracker.com Simon Zhen

      For major companies like insurance giants, it’s easy to get into banking — especially if they’re willing to contend with the regulations. Generally, profits are the name of the game, regardless of the business model. It’s why GE, a huge conglomerate, or Charles Schwab, a brokerage, would enter consumer banking.