Magazine article American Banker

Massachusetts Thrift Pioneers with 'Virtual' Branch(Brief Article)

Magazine article American Banker

Massachusetts Thrift Pioneers with 'Virtual' Branch(Brief Article)

Article excerpt

Salem (Mass.) Five Cents Bank wanted to grow, but the thrift wasn't ready to commit to the high cost of buying banks or starting branches.

So Salem Five turned to the Internet, creating in 1995 a "virtual branch" offering checking accounts and savings products.

"We wanted to attract the time-starved customer, the person who might be interested in banking via the computer," said William H. Mitchelson, chairman and chief executive officer of the $1 billion-asset thrift. "Providing a new point of access seemed more efficient than building new branches."

That branch has grown to $65 million of deposits, with 2,600 customers in 49 states and 12 foreign countries. The operation is cutting edge, according to one industry observer.

"They were one of the first banks on the web in 1995," said Jim Bruene, the Seattle-based editor of Online Banking Report. "And they have been one of the first to do real selling on the web, using real clever strategies along the way."

Salem Five's basic Internet product is a checking account with no minimum balance requirement and no monthly fees. It provides a debit card, a limited number of free electronic transactions each month, and free access to the thrift's call center.

The best selling point, Mr. Mitchelson said, has been waiving fees and minimum deposits.

"People want to test drive the product," he said. "They don't want to write a check for $1,000 up front. They want to kick the tires, pay a few bills. If it works, they will keep it. …

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