KeyCorp, which released a new transactional account with transparent fees this June, has a long history of trying to serve underbanked customers.

In 2004, Bruce Murphy, now head of corporate responsibility for the bank, was the market president of Cleveland branches, the home market of KeyBank. By analyzing bank traffic and sales figures, he realized the bank wasn’t serving the needs of customers, so he helped launch a check-cashing business. “We realized it was not about if we had the right clients, it was about if we had the right product,” he told Bank Innovation. 

The program widened to provide additional services as well as financial education (paging Ron Shevlin,) eventually providing training on budgeting and the use of credit to 35,000 customers.

“We were dealing with customers that are known today as ‘underbanked,'” Murphy said. The customers were considered low-margin and high-risk but Key found that its program serving them was profitable and popular. The term “underbanked” is somewhat controversial, but can generally be taken to refer to customers that make use of nontraditional financial services such as prepaid cards and check-cashing.

“What they worry about most is fees,” Murphy said. There’s a good reason for that worry. A CFPB study of overdraft protection, released July 31, says that most overdraft fees, which average $34, are levied on purchases totalling $24 or less.

Key Bank still offers check-cashing today.

In late May, to serve these customers and to create a starter account for younger customers, KeyBank launched its “Hassle-Free” account. Murphy referred to the account as part of the bank’s “client acquisition strategy.”

Below are the terms of the account:

• No Monthly Maintenance Service Charge and no minimum balances.
• No overdraft fees. No bounced checks — there are no paper checks on this account.
• Free monthly statements (paper or online)
• Free 24-hour access to your account with Online Banking and KeyBank Bill Pay for quick and easy online bill payment
• Free, unlimited use of KeyBank’s convenient local and nationwide network of ATMs (out-of-network usage will incur a $2.50 fee)
• The adult account owner may request that a minor (age 13-17) receive a debit card for access to this account¹
• Our enhanced KeyBank Relationship Rewards program allows you to earn points just by actively using your checking account, debit card or by expanding your banking relationship with Key

The product, like Bank of America’s SafeBalance account, resembles a prepaid account in many ways, but Murphy says the difference is that Key envisages a long-term relationship with Hassle-Free customers.

Marketing for the account — an ad can be seen below — focuses on not worrying about fees. Marketing will be comprehensive, across television, radio, billboards, and digital, including social media.

After account-holders have maintained their accounts for a certain period of time, customers can qualify for small loans through the bank’s credit programs. This separates the account from new account types such as Moven, Simple and GoBank, that offer similar features, plus superior mobile experiences. Hassle-Free users use the same mobile app as other KeyBank retail customers. This app features check deposit but was last updated in August 2013.

The only money KeyBank will make on the account will come from interchange fees on card purchases and the $2.50 fee for out-of-network ATM use.

“We’ve learned a lot since our first attempt at check-cashing,” Murphy said.