Although major banks, like Bank of America, are big donors to charitable causes, their generosity is relative. Compared to their assets, even a few hundred million dollars is comparative small potatoes, and it’s really customers who are paying that in the end, in the shape of fees and other charges.
Moreover, argues Heather Campion, chief administrator of a new charity-focused bank, customers have to swallow enormous marketing and advertising spending, and pay for services they don’t necessarily need—like physical branches.
By having no branches, and spending nothing on offline promotion, Boston-based AbleBanking aims to offer both higher rates of interest and higher rates of charitable giving. When it launches this quarter, its customers will get a free $25 to give to a nonprofit, plus a further $2.50 annually on every $1,000 they keep on-account.
Campion says that works out as $2.5 million in donations for every $1 billion in deposits, or 10 to 12 times what traditional banks give away. Last year, Bank of America donated about $200 million, or 0.02% of deposits. AbleBanking plans to give away about 0.25% of deposits.
"If customers knew how much money banks were spending on marketing versus their charitable giving, they’d be pretty surprised," Campion says. Also, AbleBanking will allow its customers to give to any registered 503(c)3 non-profit, rather than going along with whatever choices banks have made on their behalf.
"We are taking the majority of our marketing dollars and giving them back into the community by letting our customers choose which non-profits they want to support," Campion says.
"Customers know their communities best. We believe they should be able to choose where they want to make a difference, and we’re giving them the dollars to do that."
AbleBanking, which initially will be invite-only, is part of Northeast Bancorp, a community bank group with 10 branches in Maine. It will offer rates of interest similar to other Internet-only banks like Ally and ING Direct—though she insists AbleBanking is different from those companies because it won’t sponsor football games, or advertise on billboards.
AbleBanking is an attempt to tap into the growing market for charity-infused businesses, as well as disenchantment with banks following the financial crisis. Some community banks saw their deposits grow as customers turned away from bigger institutions in 2008-9.
Campion says traditional banks will find it increasingly hard to compete with Internet-only services like those offered by AbleBanking because of their legacy costs and underlying business models.
"The Jamie Dimons of the world aren’t going to slash their marketing budgets, and just give it to customers. They are heavily invested in traditional advertising, because it works for them. We’re just saying this works better for customers and communities, and because we’re a new bank we can afford to do that."