Audio podcast: Being a virtual bank keeps customer fees low

August 01, 2011

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Chris Bjorklund: Hello, I’m Chris Bjorklund for the Virtual Business Center. Today I’m talking with Ed Lette, chairman and CEO of the Business Bank of Texas. Ed, we’re going to talk about bank fees today. I’ve read recently where many large banks are raising fees to have checking accounts. It seems to me that with technology making banking simpler, fees should be going down, not up. So what’s the deal?

Ed Lette: Well, the deal is very simply why we developed Business Bank of Texas. We’re a virtual bank. Having been in this business so long and this is my fourth bank charter, one day I was talking to some people and they said, “Well Ed, if you started a fourth charter, how would you do it?” And I described the virtual bank and I’m sitting here describing it and I said, “Well, doggone, I’m going to do it.” So that’s how the bank came about. We do not have a drive-in window. We don’t have the teller line. All of our customers bank by remote capture and not only does that lower our overhead tremendously, we don’t even have to have branches. We have customers more than 300 miles away from us banking with us every day and we collect their money twice as fast as a paper bank. So it’s working and it’s working very well. We have many people come to see how we’re doing this. In fact, we had a Fortune 500 company in here three times.

Chris: So you’re saying now, if I use your service like a virtual teller, my business can save money with that?

Ed: Oh yes. Number one reason you could save money with it is we don’t charge anything for it. And when it comes to fees, we are a golly, I don’t buy big when I say we don’t have fees. If you looked at our call report and compared it to any other bank, you’d see that we do not make much money, if any, off of fees. Our main thing is the old-fashioned way; interest off of loan investments and the use of the customer’s demand deposits are very helpful to us. So we give the remote capture product away. We don’t charge fees.

Chris: What other kinds of fees should I as a business owner be worried about that banks pass along to me?

Ed: Well, at this point, I am seeing all kinds of fees that are being passed through one of the most unusual ones is that they have a fee on most account analysis for commercial banks that charges you for your FBIC insurance. I’ve actually had one of those banks tell me that they’re required to do that and I said, “No, you’re not required to do that. Your management requires that to be done.” But you will see your FIBC insurance fee on your account analysis and you’ll be charged for it. We don’t do that. That’s the same way with all of the other products. If an example, if you went to one of the big four of the too big to fail banks, you would want to have our remote capture product, you would pay between $1200 and $1500 just to sign up and get the hardware and software. We don’t charge anything for that. You get charged for the usage each month. We don’t charge for that. That’s our branch so we do not charge for it.

Chris: You know, Ed, it sounds like it’s so hard to compute the cost of having a banking relationship. It’s almost as bad as trying to figure out my cell phone bill.

Ed: Oh, it is. It runs from not only your checking account but let’s say you have a merchant credit card, we actually ask the customer for four months in a row of their merchant credit card activity charges so we can really truly find all the fees and analyze it. That’s how complicated it gets there and on the account analysis side, I see situations where there’s double charges and unless you’re a banker, in some cases, it’s like the telephone person. You’ve got to understand what you’re looking at so it is very complicated. We just moved a customer from a large local bank and they were paying $6,000 a year to keep more than a million dollar average balance in that bank. I mean $6,000 a year to keep a million dollars in the bank. Ludicrous.

Chris: Ludicrous! Ludicrous.

Ed: Yes.

Chris: So how do I know if my bank has overhead? I think it’s easy for me to know that they have great service but I guess I should be wary when it’s a fee for this and a fee for that. Just start looking around.

Ed: Yes, because you need to go shopping and I heard someone comment today on the radio about how it’s so difficult to move your account. It is but boy, if you do your homework, you can move your account and save lots of money. Six thousand dollars a year is a lot of money. So it is important to do a little homework.

Chris: You’ve been listening to Ed Lette, president and CEO of the Business Bank of Texas. Our Virtual Business Center is a free resource for all businesses, made possible by the Business Bank of Texas. I’m Chris Bjorklund.

Topics: Featured, The Corner Office, Customer Service, Accounting & Finance, Podcasts

Ed Lette

Business Bank of Texas

Ed Lette is a Founder of Business Bank of Texas. Serving as a licensed CPA since 1983, Ed’s extensive experience in the banking industry has led him to become the founding president of four national bank charters including Business Bank of Texas, N.A., and the chief financial officer of five national banks during his 45 year career. Ed serves as director of the Texas Bankers Association District 4, chairman of the Executive Advisory Council to the School of Business at Texas Lutheran University, and is a life member of the Texas Association of Business.
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