Federated Will Promote NetBank to Cardholders

Federated Department Stores Inc. has struck a deal with Atlanta-based Internet bank NetBank to market certain NetBank services to its more than 20 million proprietary credit card holders.

The department store holding company, which operates Macy's, Bloomingdale's, Burdines and other retail outlets, will test the program among select cardholders and its 130,000 employees in the fourth quarter. The company plans to roll out the program to all cardholders early next year.

Financial terms of the deal were not disclosed.

NetBank said it will offer Federated cardholders checking and money market accounts, CDs and IRAs through a co-branded Web site. In addition, NetBank hopes to extend the relationship and offer Federated cardholders services like debit cards and online bill payment.

“They have a long-term marketing plan that will benefit us well,” said Mike Fitzgerald, NetBank's president.

Federated also will promote the services within its stores. NetBank will receive a maintenance fee for operating the Web site and will pay a referral fee for each new account. The program will be administrated by Federated through its Financial Administrative and Credit Services Group, which handles the company's credit services.

The Web site and marketing program currently are in development and Federated was not willing to divulge any information about either project.

But NetBank's Fitzgerald said Federated is fine-tuning the Web site, which essentially will be a portal that aggregates all of the third-party products and services available to its cardholders.

“They have essentially become an aggregator of aggregators,” Fitzgerald said. “It's almost like an aggregation site for the best deals.”

The agreement with Federated is part of NetBank's plan to aggressively pursue pay-for-performance partnerships to control acquisition costs. In addition to lending “legitimacy” to its products, Fitzgerald said, the Federated deal helps NetBank lower its acquisition costs.

“It lowers our acquisition costs because we only pay for new funded accounts,” he said. “They handle all the communications with their customers.”

NetBank's pay-for-performance partnership program, which was launched last year, contributed to its 50 percent reduction in acquisition costs in 2000.

Earlier this year, NetBank launched a pay-for-performance partnership with Tupperware Corp. The bank is offering Tupperware employees, sales consultants and customers financial services through special promotions on the food storage supplier's Web site.

Federated said its customers opened more than 3.6 million proprietary charge accounts and that 27 million customers used their store charge accounts last year. It has about 71.7 million accounts on record.

NetBank, founded in 1996, is an Internet-only bank offering federally insured deposit and checking accounts, online bill payment services, CDs, IRAs, credit cards and ATM services.

For the third quarter, the company reported net income of $2.1 million or 7 cents per share, compared with a loss of $370,000, 1 cent per share a year ago. NetBank said it has more than 160,000 accounts.

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