In a sign of the growing importance of the small-business segment, Wells Fargo ($549 billion in assets) has expanded the rollout of its weekend sweep account service for small business customers in certain Western U.S. markets. The Wells Fargo Business Weekend Sweep service is an FDIC-insured service for small business owners that automatically sweeps a portion of their checking account balances into an interest-bearing savings account over weekends.
According to Sherry DiTirro, head of Wells Fargo's small business cash management group, the San Francisco-based financial institution launched the service in response to a perceived need to satisfy its customers. "This is a group of customers that can't earn interest while larger corporations can use sweep accounts [for this purpose]," she explains. "We want to give small businesses the same opportunities to earn interest on their money."
The Weekend Sweep service transfers money from clients' checking accounts to interest-bearing accounts as of the last transaction recorded on Friday night and sweeps it back into the checking accounts as of the first transaction Monday morning, DiTirro explains, noting that the bank was able to develop the systems behind the service completely in-house by leveraging the sweep expertise from Wells Fargo's treasury business. "This was all a matter of utilizing and leveraging what we had," she relates. "Wells Fargo has very sophisticated treasury management products, so we partnered with our treasury group to develop this."
DiTirro points out that the small-business service is not simply a "dumbed down" version of the large corporate sweep service. Rather, the product needed some customization for the smaller businesses since Wells Fargo would be dealing with nonanalyzed checking accounts, versus the analyzed checking accounts used by large corporates. Analyzed accounts are designed for high-volume, high-balance customers: Fees and other features are based on an analysis of account activity.
The service is completely automatic and uses overnight processing to move the transactions, according to DiTirro. Customers receive one combined statement, and they can view balances at a variety of channels, such as the ATM or online.
A 'Sticky' Service
The sweep service is a good customer-retention tool in conjuntion with its lower balance requirements and fees when compared with competitive products, according to Patricia Hines, a senior analyst at TowerGroup (Needham, Mass.). "Some traditional small business sweep accounts carry minimum balances as high as $100,000 with fees approaching $50 per month. With its $5,000 balance threshold and very affordable $5 monthly fee, the Wells Fargo Business Weekend Sweep service is a very attractive offering for small businesses," says Hines. "The Wells Fargo offering makes sweep accounts accessible and affordable for small business owners. The benefits for Wells Fargo are retention of investable balances, increased fee revenue and potential to cross-sell additional cash management services."
This is precisely what the bank is seeing, according to Wells Fargo's DiTirro. "We're getting very positive feedback on this service both on the customer and the banker side," she claims. "Our bankers grabbed onto this product. It's very sticky and helps us build relationships."
DiTirro could not specify the number of small businesses that have signed up for the sweeps program, which has been available in California since November and now is offered in Nevada, Texas and Washington. While she says she hopes this is the start of a wider rollout, Wells Fargo has no immediate plans for a nationwide rollout.
Celent (Boston) senior analyst Edward Woods says the industry likely will see more such programs emerge as technology advances. "A correctly featured sweep service can be a great area to add value to the small business relationship," he says. "As technology has emerged making it cost-effective to offer sweep capabilities to a much larger number of customers, it is more common to see them offered to small businesses. ... The banks are looking for more ways to attract and keep deposits on the books -- offering a sweep account in-house helps keep more deposits in the bank rather than out at a brokerage or other bank."