Banks have long courted students with free checking accounts and other enticements. Now, they’re partnering with colleges and universities to introduce an array of services linked to student life: on-campus ATMs, debit cards and electronic handling of financial aid.
PNC Bank, part of Pittsburgh-based PNC Financial Services Group Inc., partners with four colleges in the state: Morgan State University, Mount St. Mary’s University, Towson University and University of Maryland, Baltimore County, all of which offer some combination of the bank’s financial services.
Students at Mount St. Mary’s and Morgan State can choose to link their campus ID cards to new or existing PNC accounts, creating a dual-function card they can use as they would a regular debit card. Linking the card requires creating a PNC account if the student doesn’t already have one.
At some colleges, linked debit cards have become the new method of distributing financial aid and other payments and refunds. School officials deposit money into linked checking accounts, and students can access it using their new debit cards. Officials said it’s far more cost-effective and less labor-intensive than mailing paper checks and more convenient for the students.
Johns Hopkins University partnered with Higher One, a lender based in Connecticut, last spring to provide these services to students. Higher One offers students three options for retrieving the funds: paper check, direct deposit into an existing personal bank account or direct deposit into a new Higher One checking account with an associated debit card.
So far, about 2,720 Hopkins students have enrolled to receive their refunds from Higher One, said university spokesman Dennis O’Shea, but only 20 percent elected to use a Higher One checking account.
Mount St. Mary’s doesn’t offer financial aid funds through the school’s linked debit cards. It chose to offer the cards when students asked for more off-campus spending options for their meal plans, which are administered through their IDs, or MOUNTcards, said Karen Barnes, who supervises the program.
She said participation has been low, either because students aren’t satisfied with the administration’s solution — the new program did not in fact address the meal plan issue — or because they don’t want to open a PNC account.
“Part of it depends on if there is a PNC Bank in their hometown so they can utilize [the linked card] when they are home,” said Barnes. “PNC is pretty prevalent here on the East Coast, but not everywhere our students are from.”
For years, some partnerships between banks and institutions of higher learning drew criticism, particularly over contracts known as affinity agreements.
These agreements came in many different variations, but one common theme was that universities or their alumni associations sold contact information for students or graduates to banks, which recruited them for new credit cards, often branded with school logos.
Many schools also permitted bank representatives to set up tables at campus events, where many would tempt students — including incoming freshmen — with giveaways or other perks. In many cases, the universities received royalty payments when students or alumni opened a card, and in some cases when they carried a balance.
Consumer advocates accused marketers of using predatory tactics and school officials of benefiting financially at the expense of their students. For years, advocates pushed for tighter regulations of credit-card marketing. In Maryland, a number of state legislators championed the cause, but across-the-board reforms never made it through the General Assembly.
In 2009, however, Congress passed the Credit Card Responsibility, Accountability and Disclosure Act, which prohibited targeting students (but not alumni) for credit-card offers. Now, affinity agreements are limited to graduates, and many schools feel the controversy is behind them.
Hopkins still partners with Higher One, a lender often singled out for its practices before the 2009 legislation. O’Shea, Hopkins’ spokesman, said the university never received compensation from the deal with Higher One — “In fact, we paid them,” he said — and added that school officials remain pleased with the relationship.
Towson doesn’t yet offer linked debit cards to disburse financial aid, but officials hope to be able to do so by next fall, said Robert Campbell, director of finance and information systems. Since August 2011, PNC has occupied the space in the student union designed for a bank and operates several ATMs across campus.
Campbell said Towson prohibited marketing to students long before the federal reforms, but given the past backlash over some banking partnerships, he said Towson would tread carefully moving forward.
“The lesson learned from the past is that colleges have to do it right,” he said. “We have to do it from a pure service standpoint and not be looking to take advantage of anyone. It’s about making sure the companies you do business with are of the same mindset.”
The university market is dominated by a handful of large banks, particularly national firms that are actively trying to grow their market share. That doesn’t leave much room for community banks — but the little guys aren’t complaining.
Officials at several small Maryland-based banks said they aren’t interested in targeting students. And come to think of it, they said, they don’t know any community banks that are.
Ellicott City-based Howard Bank operates a handful of branches in and around Howard County, but doesn’t have a presence on any college campus. President and CEO Mary Ann Scully said she doesn’t think the company, which primarily targets small- and medium-sized business owners, would have much to gain from increasing its visibility among college kids.
“We’re not a mass-market retail bank, so I don’t feel disadvantaged at all from not having a university relationship, because it’s not one of our target markets,” she said. “I commend the banks that do it — it’s mostly the large banks — but it just doesn’t fit with our strategy.”
ATMs at AACC
Baltimore-based 1st Mariner Bank, on the other hand, operates four ATMs at Anne Arundel Community College, but that’s the extent of the company’s forays into higher education, said Executive Vice President Dennis Finnegan.
It’s possible that having on-campus ATMs might prompt some students to open 1st Mariner accounts, he said, but that’s not the expectation. Their presence alone is beneficial — it creates visibility for the bank and establishes name recognition, he said.
“I think every bank is trying to figure out the moment in time when individuals are more inclined to want to initiate financial relationships,” Finnegan said. “In some cases, [banks] attempt to capture them when they’re in their college years; other people may be more targeted by their wealth.”
PNC isn’t exactly the “official” bank of Towson University, Campbell said. The school doesn’t endorse the company over competitors or benefit financially from its presence. But it might as well be, because according to PNC’s contract, no other banks may operate ATMs or a branch on the campus. PNC’6s monopoly on convenience creates an incentive for students to open PNC accounts rather than pay the $3 non-accountholder fee every time they want to use an ATM near their dorm. At least, that’s the hope, PNC officials said.
PNC has identified university partnerships as a central element of its growth strategy, both in Maryland and nationwide.
“Our goal is to become the trusted bank for students so they continue their relationship with PNC after they graduate,” said Matt Martin, PNC’s executive vice president and greater Maryland retail market manager.
But Scully, at Howard Bank, who has managed retail operations for large banks in the past, said forming university partnerships is “an untested strategy” that doesn’t guarantee a substantial increase in customers.
“It’s an unproven theory that if you develop relationships with students early on that you’re going to retain them as customers for their entire lives, in part because of the mobility of the student population,” she said.
“It’s all about how much banks spend on [marketing at universities] vs. how many people do stay with them. It’s more of a shotgun approach than a rifle approach. You’re trying to hit a lot of people hoping that a few of them will stay with you.”