The reshaped checking account: Peoples Bank in Marietta, Ohio, reconfigured its checking account offerings in response to changes in regulation and market conditions. Customers were happy because the bank built in ways for them to avoid most service fees.

• Author: Albro, Walt

SINCE MANY BANKS TODAY ARE LOSING SERVICE FEE REVENUE, they face two business options: (1) increase fees on services that were previously free, or (2) find new sources of revenue.

Since both approaches involve major challenges, what's a banker to do?

One bank, Peoples Bank N.A. (assets: $1.8 billion), Marietta, Ohio, tackled the problem by reconfiguring its checking account offerings in such an attractive way that many customers--when given a choice between free checking or a "value" account with a monthly service fee--opted for the value account. The bank introduced its new checking lineup in January. During the first six months of this year, service charge income was up by 62 percent or $184,000. This compares to a decline of 16 percent among all banks nationally during the same period, according to the FDIC

"We tried to create checking accounts that offer value that customers understand and are willing to pay for," notes Michael C. Balsimo, CEMP, assistant vice president, marketing officer.

Here's a look at the bank's new checking products and how it went about creating and marketing them.

Simplifying the product lineup

Peoples Bank, which has been in business for 109 years, serves a market in southeast Ohio and over the border into West Virginia. The footprint also extends south into the state of Kentucky. The area is predominantly rural, with numerous small towns. The population is skewed slightly toward the elderly, although there are concentrations of young people in several towns with colleges and universities.

The bank faces much competition, including national and super-regional banks as well as community banks and a wide array of credit unions and other financial providers. Within its own footprint, however, Peoples Bank has the dominant market share.

Several years ago, the bank's management recognized that pending banking regulation was going to have an impact on revenues. It responded by organizing several strategy teams, including one to explore changes in retail products that would reduce the bank's dependence on free checking. The retail product team consisted of representatives from retail banking, marketing, information systems and finance.

One of the team's objectives was to simplify the bank's retail product lineup. At the time, the bank had more than 32 different types of personal checking accounts. Some were legacies that had been inherited from acquired banks. Others had been added one-by-one over the years--without...