Two months after launching a "paperless checking account," ING Bank FSB has taken a further step toward meeting customers' traditional transactional needs by providing surcharge-free access to a network of automated teller machines.
The ING Group NV unit, which uses the brand ING Direct, is offering access to about 32,000 ATMs in the United States operated by Allpoint, a unit of Cardtronics Inc. that to date has served mostly community banks.
ING Direct is expanding its banking services at a time when many retail banks are emulating its flagship product: a branchless savings account with a high interest rate. Its rivals have offered better rates and more features, including ATM access.
For ING watchers, the addition of ATMs to its lineup provides more grist to an ongoing discussion about the limits of the direct banking model as practiced by the company.
In the past the Wilmington, Del., unit has resisted adding staple banking services — like ATM access — emphasizing that its core Orange Savings account was not designed to function as a customer's primary account. However, though ING Direct enjoyed phenomenal deposit growth in its early years, that growth has slowed more recently.
The Electric Orange account offers an interest rate of 3% on balances of up to $50,000, 5.05% on balances between $50,000 and $100,000, and 5.3% on balances above that.
Customers can access their funds with a debit card and pay bills through ING's Web site. The account also comes with $250 of automatic overdraft protection (which charges 12.25 interest when utilized).
Electric Orange account holders do not get a checkbook. Instead, they can initiate check payments to anyone online, which are sent by mail.
A spokeswoman for ING Bank said that Jim Kelly, its chief operating officer, was not available to comment after the deal with Allpoint was announced. Electric Orange customers have been able to use Allpoint ATMs since Dec. 6, but the deal was not announced until Thursday.
Cathy MacFarlane, who heads corporate relations for ING Bank, said in an interview Thursday that Electric Orange, and the ATM agreement, reflect the unit's maturing roster of banking products and services.
"As we grew, and the demand" for more banking products grew, "we decided to branch out," she said. Despite the array of transactional features that let people to do just about all of their banking through Electric Orange, ING says it is not trying to persuade customers one way or the other.
"We don't do encouraging," Ms. MacFarlane said. "We don't have any campaigns that are going on that say make us your primary bank." And since ING has no plans to issue checkbooks to its Electric Orange customers, "we're not for everyone," she said.
When asked whether ING recommends that potential customers maintain checking accounts at other banks — as is required for an Orange Savings account — an ING spokeswoman said its policy is to neither encourage nor discourage this.
However, Ms. MacFarlane said some people have chosen to switch over completely to Electric Orange. "We let people make up their own mind, and they've made up their mind, a lot of them, that they do want us as their primary bank."
Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, said that offering a checking account — even a paperless one — "is a natural, incremental step" for ING Direct.
As the unit grows, "the next step is, if you want to get more of the customers' business, you need to get that DDA account," he said.
Increasing competition for online depositors is also factor, he said. "A lot of banks are moving in with direct banking strategies that merge brick with click."
The Orange Savings model has been emulated by numerous banks that have branches and ATM networks to support other services. Emigrant Bancorp of New York has offered an online savings account since January 2005 and has said it would keep its rate higher than ING's. HSBC Holdings PLC, Citigroup Inc., and Washington Mutual Inc. offer similar, high-yield online savings accounts.
Penny Gillespie, the president of Gillespie International Inc. of Centreville, Va., said that ING had to address its lack of payment functions. "One of the criticisms of the pure Internet bank players was it made it tough to deposit cash and it made it tough for withdrawals."
Customer demand for such functions likely got too big to ignore, she said. "Companies don't make those kinds of changes" unless their customers "are saying, 'Hey, we really want this, and if we don't get it we'll go somewhere else.' "
Still, Mr. Schatt said that the lack of traditional checks could deter some people. Many ING customers may keep an account with another bank, because they find they cannot do business without a checkbook, he said. "Someone who writes a lot of checks is going to have concerns. Even younger people that are opening up" their first accounts "tend to look for a branch."
ING has offered Electric Orange to employees since last year and to its 4.3 million savings customers since Nov. 29. As of Thursday, 42,000 people had Electric Orange accounts. Next month the company will make the account available to people who do not have an Orange Savings account
Ms. MacFarlane said that a key benefit for Electric Orange customers is faster access to funds in its savings accounts. Electric Orange account holders can initiate transfers between their ING accounts online (but not at an ATM), and the funds are moved immediately, she said.
Customers can make withdrawals at any ATM, but only those on the Allpoint network will not charge a fee. Deposits into the Electric Orange accounts cannot be made at any ATM.
Ben Psillas, the president of Allpoint, said in an interview that the agreement with ING gives his company a new opportunity to pursue Internet banks.
"This is our first true Internet bank," he said, and others are interested in working with Allpoint. Many online banks offer to refund the fees customers incur for using other companies' ATMs. "The problem the Internet banks are finding is that this is fine when you have 5,000 accounts," but when a bank has 10 times that number, "that's a significant hit on your fee income."
Banks that offer their customers free access to Allpoint ATMs pay only a flat monthly fee, Mr. Psillas said. "It's kind of like joining a health club."
Though many of its customers are small and midsize banks and credit unions, large banking companies also are turning to Allpoint to broaden their reach. In November, BB&T Corp. of Winston-Salem, N.C., agreed to offer access to Allpoint ATMs in Florida, where it is expanding.
"They are trying to penetrate Florida, but yet, they don't have any physical branch or ATM presence there," Mr. Psillas said. Allpoint helps banks that have "gaps to fill" in their coverage area.
