Frost Bank Offers Early Pay as Old-School Lenders Ape Fintechs


Cullen/Frost Bankers Inc. will allow customers to access deposits two days early as traditional lenders look to drum up business by mimicking their financial-technology rivals.

Frost said its clients with direct deposit will be automatically enrolled in the new “Early Payday” feature when it rolls out July 13. Frost will fund their accounts as soon as it receives a notice of payment from the Automated Clearing House Network. When those deposits arrive, the bank will pocket them to cover the amount floated ahead of time.

“Everyone doesn’t always need it all the time, but there are times when customers need money a little bit quicker because of something that happens,” Chief Executive Officer Phil Green said in a phone interview. Around two-thirds of the bank’s clients -- roughly 250,000 people -- would qualify for the service. “It just helps,” Green said.

Fintechs have driven an industry shift by offering flexible products with tantalizing perks. Chime Inc. introduced its own form of early payment last year, and other digital lenders have done away with overdraft fees that have long been ubiquitous. Traditional financial institutions took note of those strategies and opted to emulate some of them.

San Antonio-based Frost’s recent revamp of its overdraft-fee policy is an example. Consumers who have direct deposits totaling at least $500 in the past 33 days won’t face penalties unless an overdraft exceeds $100.

Frost isn’t the only bank learning from fintech challengers. PNC Financial Services Group Inc. CEO Bill Demchak derided overdraft fees as an “unsustainable revenue stream” in April while touting a new program the bank said would help consumers dodge $125 million to $150 million of the charges annually.

Demchak characterized the move as a market-share play that would help PNC gain ground against upstarts. Green said that Frost’s more-forgiving overdraft policy and the new early-payment feature can do the same.

“From a strategic position, our focus is solidly around organic growth, the ability to grow this company without having to do acquisitions,” he said. “The more that we provide these kinds of offerings and features to our accounts, it just -- it makes us competitively better.”

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