What is an Associate Bank?

An associate bank is a banking institution that has a connection with some type of regional or national organization. This connection is usually established through some type of membership program offered by that organization. Depending on the nature of the connection, the association may connect the bank to a wide range of regional or national services, such as some type of payment network, a credit card network, or even a relationship with one or more banks to provide financial services to the customers of each bank in the network.

The most common approach to an associate bank arrangement is connecting the bank to other institutions through an automated clearing house (ACH). This makes it possible to process credits and debits involving other institutions more efficiently. In turn, customers of each associate bank in the network are able to have access to their deposited funds in a shorter period of time. In the case of credit cards, an associate bank may be part of a network that makes it possible to offer specific credit or debit card options to customers, rather than those clients seeking outside opportunities for those same services.

Another example of an associate bank relationship involves the establishment of a working agreement between two or more banks to provide financial services to customers of each institution. For example, if Bank A in the United States has a connection or association with Bank B that is located in the United Kingdom, US citizens that bank with “A” can obtain services from “B” while visiting the UK, and vice versa. This arrangement makes it possible to preclude the need for a national visiting a foreign country for an extended period of time to open a temporary bank account.

The membership of an associate bank is normally established by the institution choosing to comply with any qualifications put in place by the network. Those qualifications will vary, with the requirements normally structured to allow the network to remain in compliance with any regional or national banking standards related to the nation in which the network is established. In addition, the associate may be allowed to buy shares in the network as a means of providing support as well as earning some type of ongoing return from the connection. In other situations, the ability to purchase shares may not be available. When this is the case, an associate bank member normally pays membership dues or fees in order to maintain the relationship.