What is Group Banking?
Group banking is a term that refers to a type of banking plan offered to groups such as employees in a corporation of people instead of individuals. These plans provide incentives and other benefits for those who participate, which are not readily available to the bank's other customers. Group banking can also refer to the control that a company has over two or more financial institutions.
- Group banking is a plan offered by banks to large groups of people such as employees at a company.
- Potential incentives for group banking can include low- or no-fee checking accounts, lower interest rates, special perks, and discounts.
- Plan participants generally have better perks than they would otherwise be able to get on their own.
How Group Banking Works
Group banking works a lot like a group health insurance policy that is offered by insurance companies to employees. A bank will team up with a corporation and offer its employees a group banking plan. Employees are usually not required to sign up for group banking benefits offered by an employer.
The perks of signing up for group banking are usually attractive enough to compel many employees to take advantage of the plan. Group banking provides banks with a pool of customers they do not have to actively recruit. It also reduces the costs associated with transactions like direct deposit. Group banking also gives banks access to more capital via the money deposited by group members.
Along with those who participate, group banking also benefits banks because it brings in new clients and more capital.
Banks offer those who sign up special benefits that they don't make available to the general public. Potential incentives for group banking include lower interest rates, lower fees, and other discounts. Group banking plan members usually have access to better perks than they would otherwise be able to obtain on their own. Employees are usually able to choose the account types and financial products that meet their individual needs. Some banks may offer group banking members reward points that can be redeemed for travel, gift cards, cash, or merchandise.
Other benefits of group banking plans include a bank representative who is generally more knowledgeable of the group's plan and needs. This person serves as the regular point of contact between the bank and plan participants. This leads to a more personalized banking experience for all members of the group. Banks may also offer group members seminars on personal finance topics or one-on-one financial advice to help them reach their financial goals.
Employers benefit from offering group banking plans because many employees consider it to be an employment benefit on a par with paid time off, sick leave, health insurance, and retirement savings plans. This means partnering with a bank to offer group banking can help businesses attract and retain high-quality talent. Group banking plans can allow employers to expand their employee benefits packages for a minimal additional cost. As companies try and become more competitive with hiring, every benefit counts—at least from a potential employee's perspective.
Members of a group banking plan do not have to be employees of the same company. In fact, members of any organization or cooperative may be able to take advantage of a group banking plan. Group banking plan members may be members of the same church, homeowners association (HOA), or other group. Even family members can sometimes be granted access.
Example of Group Banking
The Big Bank may offer banking services to employees of Company A. While employees are not required to take part in the group plan, The Big Bank offers a special checking account with low or, in some cases, no fees to each and everyone who signs up into which employees can have their paycheck deposited directly. In exchange for their business, The Big Bank may also offer preferred interest rates to Company A employees with the checking account. Employees who don't have a checking account may also qualify for other, competitive rates as well. The Big Bank may also provide other promotions and special perks such as higher interest rates on savings accounts and certificates of deposit (CDs).