How U.S. Bank Powers Its Growth Strategy Via ‘Capital-Light’ Partnerships
As U.S. Bank's partnership with insurance firm State Farm passes its fifth anniversary, a new deal with investment firm Edward Jones nears fruition. It will double the bank's partnership marketing reach.
By Steve Cocheo, Senior Executive Editor at The Financial Brand
As several major banks pursue aggressive expansions of their branch networks how can — or should — competing brands respond?
For example, in March at the RBC Capital Markets Global Financial Institutions Conference, analyst Gerard Cassidy asked U.S. Bank executives how they planned to compete with others’ push for brick and mortar growth.
Arjit Roy, senior executive vice president and head of consumer and business banking products, immediately sought to dispel any notion that U.S. Bank wasn’t invested in — and investing in — its 2,159 branch network in 26 states. The bank plans to spend around $200 million annually, going forward, not only on renovations but also on targeting high-growth "flagship" markets. At an earlier UBS conference, Gunjan Kedia, president and the bank’s new CEO as of mid-April, cited Phoenix, Nashville and Charlotte as some of the key areas the bank wants to fill out. "So, branches will continue to be a really important factor," said Roy, as well as the bank’s ongoing investment in developing and maintaining digital capabilities for serving customers.
But what "really excites" Roy and the leadership at U.S. Bank are what they call "capital light partnerships."
One of these is a partnership with State Farm, that began in March 2020 as the mutual insurance company was closing its federal savings bank. Since then, U.S. Bank has been steadily adding products and services to that relationship, which leverages State Farm’s 19,000 agents across all 50 states as sales reps. State Farm is the nation’s leading property and casualty insurer, according to a ranking by S&P Global Marketing Intelligence of late last year.
The other is a major partnership under development with Edward Jones, the financial advisory company, due to launch later this year. That firm has almost 19,500 financial advisors in all 50 states.
The State Farm Experience that U.S. Bank is Building On
"State Farm is a partnership that taught us a lot," Roy said during the bank’s investor day last fall. He said that it helped the company learn how to leverage the agents’ relationships with customers to enroll State Farm customers in both deposit and credit products.
One of the earliest forays: The bank took over the State Farm-issued credit card, and turned it into a co-branded product. One feature of the no-annual-fee card is 3% cash back on insurance payments charged on it, with up to $4,000 in premiums eligible annually for the reward. Certain other categories, such as gasoline and electric vehicle charging, carry 2% cash back returns. All others receive 1% cash back.
Another feature is reimbursement of auto insurance deductibles. Customers who experience a covered loss can be reimbursed for up to $200 of a deductible, if they have made eight qualifying purchases in the previous month. Other features include purchase protection against theft or damage for 90 days for items bought on the card, as well as cell phone insurance.
Since the partnership began the bank and the insurance carrier have been adding new products to the mix, so that now both business and consumer deposit accounts can be opened at State Farm agent offices. Certain consumer and business loans can also be initiated there, or online. U.S. Bank announced in March that it was adding a new product to the lineup available through State Farm agents: personal loans of up to $50,000.
"When the State Farm agent is looking for solutions for their customers, the U.S. Bank products are one of the options they can leverage," says Laura Ronlund, head of strategic alliances at the bank, in an interview. The processing and ongoing account service all come from the bank end of the arrangement. Ronlund says that agents can also reach out proactively to customers when they see a need for a product among their book of business.
"This partnership has been a great way for U.S. Bank to grow efficiently," says Ronlund.
Citing privacy in its partnership arrangement, the bank won’t release any details regarding how much in deposits or loans has been specifically produced by the program, and there are no clues in the company’s financial filings. Ronlund does say that, from inception, the partnership has delivered products to over 900,000 State Farm customers. (During the investor day presentation Roy put up a slide indicating that the partnership generated approximately 120,000 accounts in 2023 on what was then roughly 850,000 customer relationships — with no branch property, operations nor staffing costs.)
As structured, the partnership expands the bank’s presence into many states and markets where it has no physical retail footprint. State Farm has presence in the Northeast, Middle Atlantic, South and Southeast that U.S. Bank’s retail branch network system lacks. The partnership’s sales effort functions independently of the existing branch system and business development, according to Ronlund.
Given the compliance responsibilities that offering banking services entails, agents must complete a digital training regimen in order to be certified to offer banking products within their agency.
There’s no cash taking or direct servicing of the accounts themselves at the agent level. They essentially hand off once the consumer enrolls with the bank, at present. The bank handles servicing via digital channels and other means.
Read more:
Overlaying Another Partner’s Network on U.S. Bank’s Map
The Edward Jones partnership, announced last August, remains under development, according to Ronlund. She says that the bank expects to roll out co-branded checking and credit card products designed for the needs of the advisory firm’s clients in the second half of the year. (The card marks an expansion of an existing product offered by the bank’s Elan Financial Services operation.)
Roy is especially excited by the potential of the deal with Edward Jones. During the RBC conference, he cited a McKinsey study that contained a nugget he found irresistible: Among U.S. households there is typically $1.5 trillion in excess cash parked between investments. The implications that figure has for potential business with those customers is the stuff of retail banker dreams.
"Think about the notion of an Edward Jones advisor working with you and being able to open a U.S. Bank operating balance account in five minutes or less because of our digital capability," said Roy. "That’s a pretty massive differentiator for us." The accounts will be set up so that they can be accessed through the Edward Jones mobile app and the firm’s website. Connections to digital wallets will be enabled through the app.
An Edward Jones fact sheet indicates that the firm works with more than 8 million individual investors — an enviable place to plant a flag promoting banking services. The Edward Jones office network covers all 50 states but is especially dense in Eastern markets where the bank is light.
"The opportunity to take our learnings out of a partner like a State Farm and extend it into Edward Jones is monumental," said Roy at the investor day. "These will be core checking relationships, not sweep accounts and not high-yield CDs that we expect to offer to 8 million clients in virtually every county in the U.S."
Read more: After Onboarding, Banks’ Most Potent Sales Strategy Is Patience
