With the legal path now open for financial services industry convergence, MetLife Inc. is closer to providing banking services. The company has cut a deal with Fiserv Inc. for technology that will enable MetLife to offer online banking, pending its purchase of Kingston, N.J.-based Grand Bank, NA.Fiserv, based in Brookfield, Wis., was chosen for the "wide range of services they provide," says Judy Weiss, MetLife executive vice president. "We're still in the planning stage, so we need a company that we can work with."
The deal includes Fiserv's Comprehensive Banking System (CBS), which includes core processing services, Internet banking, customer relationship management tools, call center software, plastic card production and fulfillment, electronic funds transfer and back-office services.
A fundamental progression
MetLife executives declined to discuss its overall banking strategy, citing fears that it would upset banking regulators, who must still approve the Grand Bank deal.
However, according to documents filed in the spring with the Securities and Exchange Commission (SEC), the New York-based insurer intends to provide banking and related services by the first quarter of 2001.
Furthermore, when appointed in May to head up the banking unit, Weiss said that offering banking services is a fundamental progression for MetLife. The company pays more than $25 billion annually on policyholder claims, "and our new bank will help us retain those funds and provide new services to customers," she said.
MetLife provides services to 64,000 corporations, which employ more than 33 million people who could be targeted for banking products.
Pace picking up
How much of a bricks-and-mortar presence MetLife will rely on-or to what extent it will use its agents to sell banking services-remains to be seen.
"MetLife is just getting its toe wet" with the Grand Bank acquisition, says Dick Roby, director of research at the Tower Group in Needham, Mass. "Insurance customers tend to be a fairly conservative lot," he says. "They're not comfortable doing things online."
The pace is picking up, however. Principal Mutual Life Insurance Co. and State Farm Insurance Co. both launched their own banks using the Internet as the backbone. And both banking operations have experienced rapid growth.
Principal Bank, a subsidiary of Principal Mutual Life Insurance Co., Des Moines, Iowa, has grown to $285 million in assets and 45,000 accounts. "And almost all of them are Principal customers," says Steve Ollenburg, president and CEO of Principal Bank.
Similarly, State Farm Bank has $310 million in assets and 35,000 accounts. "We think we've done pretty well" since the bank started operating in May 1999, says Stan Ommen, president of State Farm Financial Services, FSB.
Acquiring a bank would have allowed State Farm clients faster access to banking services, Ommen says. However, the company did not take that approach because Bloomington, Ill.-based State Farm wanted to use it agents as the primary distribution channel.
MetLife appears to have similar plans. According to its S-1/A filing with the SEC, the insurer has 11,000 sales representatives and is increasing the distribution of its products through independent agents.
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