New online banks are successfully targeting groups such as long-haul truckers, high-tech workers and the gay and lesbian community, says a report from Meridien Research.
According to analyst Christine Barry, affinity banking offers a solution to small institutions fighting to carve out a niche and survive in the fiercely competitive online banking space. "They can differentiate themselves, increase customer loyalty and reduce customer acquisition costs," she says.
Affinity banking lets consumers show pride and support for groups they're affiliated with. For some people, that's more important than the bank's fees or interest rates, says Barry.
Virtual Bank, a Florida-based company, has adopted this strategy by working with technology companies such as EMC, Textron, Compaq and WorldCom and creating co-branded banking sites for their employees.
However, while these affinity banks have gotten off to a fast start, it's uncertain whether the business model will succeed over the long term, Meridien says. This new generation of banks is set to face growing competition from established institutions that are investing in customer relationship management tools and starting to customise their services.