Banks Innovating to Attract College Students' Attention
Raab, Maria, American Banker
Students at the University of Illinois can use their identification cards for more than the standard campus tasks. The new "i cards" issued to the 66,000 students in the Springfield and Chicago campuses in the summer of 2007 are also debit and ATM cards for those who open checking accounts with TCF Financial Corp.
So far, about 70% of incoming freshmen have signed up, said Kevin Kuntz, TCF's director of campus banking. (TCF paid to manufacture the cards.)
The Wayzata, Minn., company expects that percentage to rise over time. At the University of Minnesota - where TCF inked a similar deal in 1994 - this past fall about 80% of incoming freshmen linked their U Cards with TCF checking accounts.
TCF has struck ID card partnerships with eight other Midwest colleges, including the University of Michigan and DePaul University. "We have a very good chance of retaining these people as long-term customers," Mr. Kuntz said. The $15 billion-asset TCF is "very satisfied" with its post-graduation retention rate with this group of customers, he said: The number of student accounts has risen 40% at year-end 2007 since the end of 2005, to 125,000. In its deal with Illinois, TCF agreed to open three on-campus branches, provide an annual donation to the school's scholarship fund, and install up to a dozen campus TCF automated teller machines.
At the University of Minnesota, TCF pledged $35 million over 25 years in exchange for naming the school's new football stadium opening in August 2009 as TCF Bank Stadium. "This is not just about opening checking accounts," Mr. Kuntz said. "One of the important things about these relationships is that we weave our way into the fabric of these universities."
TCF, of course, isn't the only financial services company pursuing this market, where marketing tactics such as plastering university bulletin boards with fliers hawking credit cards have been replaced by more sophisticated methods. Some of these student lenders have recently taken heat for engaging in revenue-sharing and loan cobranding arrangements that use the school's name or logo, and consumer groups say that overdraft fees are excessive.
Bankers say their main goal is to help students become responsible customers. Some banks target teenagers while they are still in high school to help them plan to pay for college, encouraging them to open checking accounts when they land their first jobs.
"This is a consumer segment that we want to acquire early in life," said Bonnie Carlson, a senior vice president and the national sales manager for the consumer segments at Wachovia Corp." We are trying to get them early, educate them, partner with them, and then be there to provide them with additional products post-graduation." Wachovia, which offers free student checking accounts through its College Connection program, reports that the number of these accounts has grown over 20% per year since 2005. The company keeps 89% of this customer base one year after graduation, said Ms. Carlson.
In October, Wachovia started a Web site that focuses on the student market and includes a link for parents that covers subjects ranging from estimating college costs to preventing identity theft.
This is a way to gain student customers, said Brady Whalen, the director of marketing at Market Insights Inc., a retail banking consulting firm in Chicago.
"Kids are likely to listen to the financial recommendations of their parents," he said. That's how Ryan Sobel, a finance major at the University of Colorado in Boulder, became a customer of FirstBank Holding Co. in Lakewood, Colo. Mr. Sobel said his parents opened up a FirstBank savings account for him when he was a child, and heturned to FirstBank in 2006 when he wanted to open a checking account before starting college.
Between waiting tables and mowing lawns, he had amassed $17,000 in savings by then. In addition to his checking and savings accounts at FirstBank, Mr. …