Cable companies love to offer combo deals on telephone, Internet and a slew of TV channels you’ll never watch. Product bundling also is standard in industries as varied as fast food, cars and software.
It’s the same with banks, most of which won’t sell you a simple checking account except in a fixed-price package with add-ons such as debit cards, mobile apps, online bill payment or savings accounts.
Now, in an effort to distinguish itself from the pack, Union Bank is offering customers an a la carte menu — the banking equivalent of breaking up the value meal and promoting burgers, fries and drinks separately.
The new program aims to address criticism that banks bury the true costs of their services in fine print, said Arthur G. Smith, Union Bank’s chief marketing officer. The San Francisco bank has always catered to business owners, who pick various services to suit themselves over time. It now wants to allow consumers the same ability to choose, he said.
"We think this approach sets the high-water mark for transparency," Smith said. "The consumer sees a discrete choice for every option, so this puts them in a position to make a value judgment about each one."
Union Bank, the product of a series of mergers in the 1980s and ’90s, is the second-largest bank based in California after Wells Fargo & Co., with 396 offices in California, 45 in Washington, three in Oregon and one each in New York, Texas and Illinois.
The Banking by Design program, rolled out gradually since last fall, starts with an unusually low $3-a-month basic checking charge, which can be waived with a monthly direct deposit of $250.
Customers are offered a menu of 16 additional services. Six come at no additional cost, including a debit card and mobile banking. Others include paper statements for $1 a month and a savings account for $1.50 a month.
Another $1.50 a month will put customers at the head of the telephone queue when calling the bank — a service popular with time-crunched doctors and lawyers, bank officials said. Online bill pay is free, but only through the end of the year. Once a customer is hooked, that’s another $1.50 a month.
Union still offers its own package deals, but its basic checking package costs a lot more — $8 a month with online statements and $10 with paper statements. That’s roughly in line with costs at other large banks.
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Union’s plan is to add additional options later, Smith said, such as brokerage and investment management services.
Consumer advocates said they knew of only one other bank unbundling services in this way, Frost Bank of San Antonio, which is a quarter the size of Union and charges a base $5 a month for checking.
Union’s new offerings are promising but need improvement, said Susan Weinstock of the Pew Charitable Trusts, who has accused banks of hiding fees and penalties. Union’s disclosures about its services appear inadequate to enable consumers to compare costs, benefits and drawbacks with those of other banks, she said.
Union’s new menu doesn’t include information on its charges and procedures for protecting customers from balance-busting overdrafts, Weinstock noted.
"This a la carte approach is an interesting concept. Maybe it’s a better way," she said. "But without additional information, you have no way of knowing."
Pew’s Safe Checking in the Electronic Age project, which Weinstock directs, recommends that banks provide consumers with a comprehensive list of plain-language disclosures about key services, including overdraft protection, in a few pages.
Overdraft protection is not an option in Union’s Banking by Design program, Smith said. Union charges $33 per overdraft, he said, which is explained to consumers in separate documents and on the bank’s website. "We are very transparent," he said.
Union’s parent company, UnionBanCal Corp., has $97 billion in assets and is a subsidiary of Japan’s Mitsubishi UFJ Financial Group Inc., which operates Bank of Tokyo-Mitsubishi, Japan’s largest bank.
Nobuyuki Hirano, president of Mitsubishi UFJ’s core banking unit, told Reuters news service in November that the Japanese bank is considering a major acquisition in the United States that would vault it into the top 10 of U.S. banks. Hirano could not be reached for comment by the Los Angeles Times for this report.
Union Bank has been on a smaller-scale acquisition spree of its own recently to expand its footprint in California and adjoining states. One major deal, the $1.5 billion acquisition of Pacific Capital Bancorp, closed in December.
The bank also has launched a "Doing Right" ad campaign featuring actor Edward James Olmos and writer Maya Angelou, emphasizing that it never made subprime mortgages. (It’s a major originator of jumbo mortgages, the outsize loans for wealthy borrowers.)
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