Hosted by top 5 banking and fintech influencer, Jim Marous, Banking Transformed highlights the challenges facing the banking industry. Featuring some of the top minds in business, this podcast explores how financial institutions can prepare for the future of banking.
Now’s the Time to Pick Battles with Fintech Challengers
Traditional banks and credit unions continue to face competition from challenger and online-only banks willing to offer higher yields for savings and deposits. However, now may be the perfect time to use market instability to build new banking relationships with innovative deposit and lending products.
In addition, banks can leverage an understanding of consumer behaviors to detect deposit-pricing sensitivities and tailor promotional offers to reach consumers most at risk of attrition and those who may move relationships to your organization.
We have Ryan Walker, Executive Strategist for Kasasa on the Banking Transformed podcast. Ryan shares how banks and credit unions target promotional deposit and loan offers to grow relationships without sacrificing profitability and margins.
This episode of Banking Transformed Solutions is sponsored by Kasasa
As the Fed continues to raise rates, an account with a compelling rate may have many consumers rethinking where their loyalty lies. In this podcast, you’ll learn how community financial institutions have a unique opportunity to use the instability to establish new banking relationships now that ultimately lead to primary financial institution relationships — generating more non-interest income, and higher loan volumes.
Jim Marous: Hello and welcome to Banking Transform, the top podcast in retail banking. I'm your host Jim Marous, founder and CEO of the Digital Bank Report and co-publisher of the Financial Brand. Traditional banks and credit unions continue to face competition from challenger and online only banks, willing to offer higher rates for savings and deposits. However, now may be the perfect time to use market instability to build new banking relationships or to expand relationships that you already have. In addition, banks can now leverage an understanding of consumer behaviors to detect deposit pricing sensitivities, and tailor promotional offers to reach consumers that are most at risk of attrition, as well as those that are willing to use new offers to become new customers of your organization. We have Ryan Walker, executive strategist for Kasasa on the Banking Transform Podcast. Ryan shares how banks and credit unions can target promotional offers for both deposits and loans to grow relationships without sacrificing profitability or margins.
Jim Marous: Many industry observers used to think that the battle in banking was between the new and smarter FinTech players versus the boring and slower moving financial institutions to the legacy banks and credit unions. Today, while challengers continue to seek new ways to chip away at our market share, the reality is that traditional banks and more legacy finance institutions are using data, insights and innovation to modernize their existing offerings. Ryan, how has the battlefield evolved over the past several years, enabling legacy financial institutions, of all sizes actually, to compete against challenger organizations with more of a modern tech stack, maybe better products and maybe better ways using data analytics to drive results?
Ryan Walker: Yeah, for sure. The last 20 years, obviously it's been so disruptive, it's been this historic time of all kinds of change, but just imagine 20 years ago trying to explain to somebody, "People are going to be open and even excited about banking with a computer company." That's a thing that's coming and now that's obvious, it's a given. Apple's out there. There's software companies out there. What we see though is, within the midst of that, there's this huge opportunity for these institutions to understand they're sitting on a gold mine of data.
Ryan Walker: And all these companies that we see as the big disruptors, the big challengers, Google and places like that, they're paying a fortune right now in different acquisitions and different things they're doing to acquire, what is in many cases, a fraction of the data that some of these institutions already have on their own members and customers they've had for 25 years. And the unfortunate thing is a lot of them aren't doing anything with it. They don't understand the value there, but the ones that are starting to really capitalize and do some exciting things, that's really what we're all about at Kasasa, is working with some of those institutions and being great partners with them to leverage some of that data.
Jim Marous: We're in a strange situation now. We're in a time of very interesting economic stress, uncertainty, but also rising interest rates. And there's a lot of bankers that have not seen rising interest rates for a decade or more. It used to be a challenge that financial institutions, the digital banks, the neobanks would use teased interest rates as an acquisition tool. But with rising interest rates, are there opportunities out there today for traditional banks, both big and small, to acquire new customers maybe without really over amping up the interest rates, but also to solidify their existing new relationships and get new ones?
Ryan Walker: For sure. I think the interesting thing, like you mentioned, it's been a while since rates were anywhere near this high, and I think there's still a lot of room for them to grow up. The other interesting thing, I think consumers are more aware of the interest rate environment than they've ever been. It's in the news, it's a political topic. It's not just something that is in the financial section of the newspaper.
Ryan Walker: And it creates this big opportunity, but institutions have to be really smart about it. You can get yourself in a lot of trouble with teaser rates, especially as rates are going up. You can get yourself into this rat race. And there's an opportunity for, especially the smaller institutions, if you're not a Chase, a Bank of America and you can really do some interesting things with your balance sheet, there's a lot of ways to do that beyond just, "Let's have the biggest rate in town." A lot of it too comes down to what can you offer the consumer in terms of flexibility, in terms of a product they can interact with and do something with. And that's a big part of what we're doing too.
Jim Marous: It's interesting you just referenced it, that sometimes we forget who are competing against. As a financial institution, I'm not necessarily out there to beat the most aggressive player because then I'm going to get the person that's more likely to shift in and shift out as their interest rates rise or go down. But right now, is there a new mover advantage? Should those organizations that find ways that can keep their existing customers, but more importantly, can possibly expand relationships where they may be at, what let's call the bigger financial institutions, that aren't going to play this game? Let's say, I don't have to be the biggest player, but is there a first mover advantage to being out there today with things that may interest a consumer more than it has in the past?
Ryan Walker: Yeah, I think consumers are in an interesting place too right now. They know even less than the bankers. Every banker we talk to, we say, "What do you think rates are doing the next three years?" And the answer we consistently get is, "You tell me, if you could answer that question, I'd pay a whole bunch of money." Consumers are even less sure. And they're trying to make moves. They don't want to feel dumb. That's the biggest thing consumers are afraid of is making a move and then two years later, everyone's like, "Well, how did you not know to do this?" One of the products that we specialize in is a reward checking product. And the thing that consumers love about it is the flexibility of understanding I didn't just sign up for a three year CD and now I'm locked into who knows what's going to happen.
Ryan Walker: I've got a checking account. I'm going to use a checking account no matter what. If you can offer me the best one and the one that does something nothing else does, it really gets consumers excited about it. A lot of these institutions are going to market with rates that are competitive, they're really good rates, but in a lot of cases, there's some other product in town that has a higher rate, but they're still able to attract consumers because they have a different value proposition, which is not just get the biggest yield, but also maintain some flexibility. Have it somewhere where you're paying attention to and you don't have to feel like you show your Edward Jones guy your checking account. You can look at it yourself and manage it yourself. And I think consumers really get excited about that.
Jim Marous: Can you explain a little bit about your reward checking products? I know this is not a new product from Kasasa but it's your foundational product. It's the one that everything else that you're doing at Kasasa is built against. Not only describe a little bit about the reward checking product, but how that can help solidify an existing relationship as well as possibly make consumers actually take interest and come to your bank or credit union as opposed to where they are today.
Ryan Walker: The product, just to give a real quick overview for those who aren't familiar, is basically saying, "Hey, we're going to pay a great interest rate." In today's environment, it typically tracks with, think about a five year CD rate. If people are offering two and a half, 3% on five year CDs like they are today, some of those are going up. We have institutions that are right in that range with a checking account. But the only way to get the 3% rate is you've got to basically treat this your main checking account. If you're using your debit card, take an e-statement, basically be the customer that every bank wants, the member that every credit union wants. If you'll do that, we'll give you the best rate. And the philosophical advantage there is right now, like you mentioned, if I go and offer some monster rate, who am I going to attract?
Ryan Walker: I'm going to attract the people who are, we call them gamers. The people who are the rate scouts, the guy who has got a rate guy who gives him a call whatever rate goes up. That's who you're attracting. And as soon as the next bank offers a monster rate plus 10 basis points, well now you've lost that consumer as well. The way this works, it flips that on its head and says, "We're not going to offer the best rate to the rate chaser. We're going to offer the best rate to our best customer, the person who actually uses the product and is our PFI, primary financial institution type of customer."
Ryan Walker: The people like that, you're going to keep them a really long time. It's probably worth paying maybe even a premium, let alone a competitive rate to those guys. And that's really what has enabled us to leverage this product in the last 20 years in every different rate environment, because institutions, what they get out of it now is you've got this monster flexibility, and maybe right now, three and a half percent is the right rate to go be a market leader and get a lot of consumers. In three years, that rate might be totally different.
Ryan Walker: And instead of offering a new CD specials and sun setting things, you've got one product that can really has all the horsepower to take you through those different changing seasons.
Jim Marous: Let's talk a little bit about your results. I can see how this can help retain deposits and retain customers and even grow deposits with existing customers. How does this product do in the acquisition mode?
Ryan Walker: For brand new people you don't have a relationship with?
Jim Marous: Right.
Ryan Walker: Is that what you're saying?
Jim Marous: Yeah.
Ryan Walker: Exactly. That's definitely the focus for a lot of institutions. And I think it should be, especially whether you need deposits or not, everybody's looking for consumers. And do you have something that can get consumers excited? What we see with institutions, on average, is about a 20 to 50% increase in that acquisition. If you're opening a hundred accounts a month right now, you can expect 120 to 150 new accounts with this product.
Ryan Walker: And it's because most institutions today are going to market with a product. And it's not that it's a bad product, it's a product they haven't put any real thought into in 15 years, and it's a checking account that maybe worked for them at one point. They were opening some new branches and they had some success and they just haven't gone back to the drawing board and said, "What do consumers want right now?" And that's a lot of what we're doing at Kasasa. Just say, "Hey, if you just have the conversation internally and start thinking about what people want, there's plenty of solutions that'll work, but you've got to put some thought into that and bring something to market that consumers can get excited about."
Jim Marous: And I know one thing about Kasasa is you do a lot of research about the impact of your product over time by institution against other competitors. I think almost every banker and every credit union executive realizes that one of the biggest players out there on a direct mail basis of all things is Chase. They offer up to $600 to open a new account. Now mind you, this is often just sent to people that are new to marketplace, new movers, things like that. But how does your product do against players like that?
Ryan Walker: And the Chase thing is amazing because it's not just a blanket offer. They're not just going to the market and saying, "Here's an offer for everybody." I get the $600 and my neighbor gets the $700 offer, and I'm starting to wonder how much is my neighbor making? I didn't realize it was that much. But Chase knows. Chase understands. We want this guy a little more than we want this guy. And it's a very competitive space. What we see with our product relative to the Chase approach is you're going to get a consumer not only interested because you've got, in a lot of cases, a better offering. The $600 is cool once, but now I've got something that can pay me three or 4% forever. The other thing though is from the consumer perspective, what's my incentive? I take the Chase offer, I go in and they have some boxes you have to check, you have to move a direct deposit and things like that.
Ryan Walker: Three months after I've made that decision, what's my loyalty to Chase? The $600 is already spent. I've done all my criteria and now it's just Chase thinking, "We think we can hold them hostage. We think people don't want to move their account just enough that they'll stick here, even though they have no reason to stick here." And with the Kasasa accounts, what we see is the consumer has an incentive every month to say, "Not only do I want to keep my account here, I want to keep engaging with this institution." And it's really effective, especially for the kinds of consumers that a lot of these institutions want, which they want the person who is willing to bank local and thinks that's a value and wants to stay at one place for a really long time, as long as they're getting treated right.
Jim Marous: That's a great analogy because I think the discussion around how they look at the customer versus how a Kasasa client looks at a customer. But even more importantly is if I'm in the marketplace for a checking, because I may be satisfied with my current player, who by the way may be Chase, the reality is I may not be getting that Chase offering my mailbox to the time I would be wanting to make that decision. Again, while we may know it's out there, it's not like I can go into a Chase bank and say, "Hey, I want $600 for opening an account." Secondly, Chase isn't the only player in the marketplace.
Jim Marous: Yes, they have pretty good market share, but the reality is if I'm looking for new customers, it's not like every customer is getting a Chase offer or is a Chase customer. Another element right now, especially with the marketplace being the way it is that there are some leadership teams that say, "You know what? I'm not right now looking for deposits. Deposits aren't that important to me, and even less important maybe is what I'm considering to be high rate deposits." Are we talking about just adding more high rate accounts or is it much deeper than that, from the perspective of Kasasa?
Ryan Walker: It's definitely deeper than that, but it's so counterintuitive because like you said, a lot of bankers haven't been in this environment for a decade and the last time they were, it was a different situation. People didn't come into the last rate boom as flush with deposits as they are now. And we have conversations all the time with institutions who are saying, "I know rates are going up. I know my banker school told me this is what you do, but I'm looking at my balance sheet and we've got so many deposits, why would I be investing right now to grow deposits that I have no interest in that might even be a negative for me?" And it's a counterintuitive thing to say, "Yeah, the deposits are part of the picture," but the opportunity that's there right now for that kind of institution specifically is to say, "Is this a chance to invest and purchase some consumer relationships?"
Ryan Walker: The deposits are going to come as part of that, and there's ways you can manage that and make sure you don't have to blow up the deposits. You could bring in some deposits, but to say, "Hey, if you can invest right now and offer something appealing, you're offering it on the deposits, but what you're actually acquiring is a loyal customer relationship. Someone who's going to come and bank with you and be a really loyal person that you can go sell all the other stuff to." What those institutions need is loans and things like that. But the reason they're not growing in a lot of those cases is they don't have enough of a warm relationship base to sell to.
Ryan Walker: And the way to do that is say, "Hey, go invest right now. Rates are, they're higher than they were a year ago, but they're probably lower than they're going to be a year from now." There's an opportunity to say, "Get in now. Buy a stock that is rising." And when you buy that stock, the cool thing is the payoff you get is these consumer relationships and they're worth everything. Every player they're threatened by right now understands that. And what they're investing in is... Chase doesn't need more checking accounts. Chase doesn't look at their balance sheet going, "We got to have another 10,000." They don't care. They want more consumers. And then they know the checking account is just the easiest front door to bring them into.
Jim Marous: That's a key foundation upon which Kasasa is built, is you're not building deposits, you're building customers. And at the end of the day, you can't build loan relationships, you can't build credit card relationships, you can't build deposit relationships, you can't build loyalty without customers. And I think that if we put it in this very shortsighted way of looking at, is this a deposit product, as you said, we're very shortsighted. Now, let's take the opposite of that. Let's look at those organizations that are looking for deposits. Is today's economic environment even better than maybe ever before in our memory around acquiring new deposits?
Ryan Walker: It's definitely a great environment. It's also a very tenuous one. A lot of them need to be really smart about how they proceed. If you need deposits, there's an opportunity here to build a really, really appealing balance sheet, but you got to be smart about how you do it. We mentioned teaser rates and things like that. A lot of institutions, because right now is so important if I need deposits, then the next three months matters and I really have to acquire them even if it comes at a premium. But a lot of them can get into trouble and they get their balance sheets so levered over to CDs and things like that. Now you become beholden to this rate environment instead of getting to be the one that takes opportunity, you're a victim of it. And that's the reason that we lean so hard on reward accounts is they're so configurable.
Ryan Walker: There's so many ways to do it. We just ran this stat actually yesterday. We calculated it again, we track this all the time. Our institutions right now offer various promoted rates all over the country. We have institutions from two to four and a half percent all over the place. The average discount right now that they're getting, when they advertise a 2% rate or a 3% rate, the average discount of what they're actually paying on their cost of funds for that instrument is 64%. Those institutions are paying 3% or they're offering 3%, they're paying less than one and a half on that portfolio. And it gives them this big advantage. It's a great time for those institutions that need deposits to say, "Hey, build a portfolio right now that as rates continue to rise, you're going to have all kinds of different ways to manage that." And this is just a cost to funds conversation. The other cool thing is we can talk about cost of deposits.
Jim Marous: That's what I was going to just ask you is what are you talking about there the difference between cost of funds and cost of deposits?
Ryan Walker: Cost of deposits is something we look at. Cost of funds is the end all be all for bankers when they talk about their deposits and how are they doing and how are they managing those, especially when rates get hot, everyone's looking at, "What's my cost of funds, what can I manage? What's my risk?" And cost of funds is obviously huge. Interest expense is one of the biggest expenses for an institution. What we look at though, when you look at your different kinds of deposit instruments and checking accounts are a big opportunity. If you think of free checking accounts, simplest example of free checking account. Okay, it's got a 0% cost of funds. Every CFO says, "Yahoo, I love a 0% cost of funds." The reality is free checking is what you tell the consumer. Every bank knows there's no such thing as free checking.
Ryan Walker: You got to pay to process every paper check, you got to send statements, you've got core costs. That cost of offering that free check account might actually be substantial. It's definitely going to be something. And then you think about club accounts and all the other things banks love to throw in to entice consumers. The other thing that check accounts can drive if you engineer them right and you get consumers excited, is non-interest income. What's your check account doing for your institution is a big question. What we do now is we look at the cost of funds, the interest expenses there, but let's look at the non-interest picture and see what's happening there. For a lot of institutions we have right now, they're offering a 3% promoted rate. Their cost of funds is maybe half of that 1.4, 1.5%. And when you look at their cost of deposits and say, "What's happening in this account?"
Ryan Walker: Because of all the non-interest activity, a lot of these institutions have an accountant 0% or even a negative, actually generating revenue to the institution. They could have been doing that in a CD at 3%. And guess what? 3% is their cost. There's nothing. The CD customer doesn't come and drop any change in the bucket. They're just taking that interest expense out of the bank. And it's a big difference when you look at that more holistic approach of what is your account doing for your bank? It's not just about deposits, there's other factors.
Jim Marous: You reference the fact that you have rates across the country at different institutions that are at different rates. How many customers, clients do you have right now? And how do you work on behalf of your entire client base to build research and analysis that can help a new customer, a new client build the program that's right for them?
Ryan Walker: Data's huge. Data's a huge part of what we do. We have about 800 clients right now that we work with. They're all offering different mixes of our products and different things. But one of the big things we do for them is we're tracking data all the time. This summer when the Fed decided, "Hey, every other Tuesday we're going to raise the rates again." We're proactively talking to all those clients and saying, "Here's our 20 year history of data. Here's what we see and let's talk about your goals." If you're saying right now that we're worried about losing deposits from our current customers, maybe for some institutions that's the big risk. We've got all these deposits, we don't want them to go away. We're helping them mitigate that risk and say, "Okay, what our data says is the right timing for you to move your rates up, if that's the case, is this. The right amount to move them up is this."
Ryan Walker: One of the things we say is, "You don't want to move your rates over and over again. You don't want to stair-step 10 times. You want to make one move and then stick there for a while and then wait for the next move." There's all kinds of things that our data informs, but one of the big conversations we're always trying to remind them is, if you're having this conversation inside the bank about what can we afford or what do we have to offer, these other institutions are doing this, how high do we have to go to match them? You're always playing defense. You're always beholden to the rate environment and to who you perceive as your competitors. A lot of times the conversation we're trying to have with the institution is, "What can you afford to offer?"
Ryan Walker: When you look at that cost of deposits, it's like, "Hey, there's all kinds of built in income with these accounts. Instead of asking what you have to offer and playing defense, what if you became the market leader." And say, "What can we afford to offer? Right now we're willing to offer 3% on a CD. Obviously we have some kind of appetite for deposits that's pretty high." If you're willing to offer 3% on a CD, you could probably afford to offer 5% on a reward checking account. It'd be in the same exact or better situation financially as that 3% CD, but now you're the one playing offense. You're the one bullying other institutions in town and deciding here's what the market's going to be because we want the consumers right now.
Jim Marous: It's interesting, Ryan, you talk about how Kasasa has been a product innovator for your companies. You're also, as you just mentioned, a research company. You're providing research to your clients, you're providing product innovation to your companies. I think you also help them in the marketing function as well, don't you?
Ryan Walker: We do. A big part of that data is... A/B testing is expensive. Chase can afford to go out to market and say, "Hey, let's try the $600 offer in this zip code and we'll do a 550 in this zip code and we'll figure out." Most institutions at the scale they're doing, it's really expensive to run that campaign in the first place. They can't afford to do it five times to figure out which one is the best way. Chase can afford to do that. And that's one of the big impediments to growth for a lot of these smaller institutions is saying marketing is expensive not just because media's expensive. It's because learning how to do it the right way takes time and a whole lot of money and it's worth it for these big scale institutions. For smaller ones, a lot of them are just saying, "Hey, we just have to go to market and hope we got it right the first time and if we didn't, we'll try again next year."
Ryan Walker: And that's not where you want to be. So one of the things we do at Kasasa is we help pool a lot of that stuff. We have 800 institutions. Think about it like a beehive. They're all working together and all speaking the same language. And we can understand, "Hey, we did this market test in Sacramento. We got really, really cool results. Now we can go roll it out in Nashville to three different institutions." And say, "Hey, we know this worked over here. We can try it here. And we're not starting from scratch." And it really helps those institutions with what is the message you're putting out there? For a lot of these institutions, you can't afford to go have that conversation 50 times with the consumer like you'd love to. Those first couple touches really have to be effective. And that's a lot of what we've leveraged is giving that data to these institutions and helping them understand here's what you need to go to market that first time.
Jim Marous: It's interesting because I've worked for some small financial institutions in my past, it's been a while, but it is in my past. The reality is you work as the marketing product development and innovation department for a finance institution that may not have that. Or if they do have it, they may not have the time or the money to implement against that. And what you're really doing, you're taking some of the risk away. You're making it so that I know if I'm going to implement something that it's going to work, it's been tested, it can be fine tuned for my institution, but over time you can do it at scale. Let's shift a little bit here. Let's get into the lending side. Given what's going on right now, if an organization is hoarding for loans, is there an advantage to more of a relationship pricing model that Kasasa has towards having the rewards account as the foundation?
Ryan Walker: This is where I think data is king in such a huge way on the lending side. One of the things... We've been talking about this with community institutions for years, and I think they're finally starting to feel the pain and it's becoming a felt problem, which is these FinTechs on the lending side, it's monstrous. I think two years ago we just passed the threshold where 50% of all consumer loans were originated at FinTech.
Ryan Walker: Wow. And that number's been growing steadily for a long time, but that 50% mark feels enormous and these institutions understand it. One of the things that means is, I think that days for some of these community institutions of saying, "Let's go do a loan special and advertise it to the community." You can do that and a lot of institutions are still doing stuff like that. I think the effectiveness is waning dramatically because a lot of consumers are just going, "SoFi is like right here. I can just get this loan so fast and so easy. And I'm not even shopping. I used to be shopping four or five institutions and rates. I'm playing the rate game and all that stuff." I think nowadays a lot of these consumers are saying, "I'm going straight to SoFi. If they have a good rate, I'm just going to book it."
Ryan Walker: And what that means is the way you're going to get your next loan is probably through a customer you already have. It's probably not generating something with the loan relationship being the front door because SoFi's got that front door so covered. It's really about saying let's generate a bigger base of people to sell stuff to and what our data says, this is where data becomes so important, our data says those PFI people, those people you've already got who don't just have an account with you but they're really banking with you. Those are the people you've got the best shot at building a lending relationship with.
Ryan Walker: And that's what our institutions are seeing. A lot of their success is coming not just on the non-interest stuff and all that with the consumers, but we look at the data and say, "Hey, you opened 300 of these accounts last month." Now we're looking six months later and saying, "How many of those people have a loan with you?" And the numbers are astronomical relative to some of their more vanilla relationships that are not as engaged, maybe not as PFI. A lot of those people are not lending with them at any great rate because of all those challenges, but they're able to still build really healthy loan relationships with those PFI consumers.
Jim Marous: The most famous line in probably the entire movie Field of Dreams is, "If you build it, they will come." What's interesting is bankers. A lot of bankers and credit union executives feel like if they built the best product, the customers will automatically take advantage of it. That's far from the case. In fact, I recently talked about the final mile and I've referenced the fact that a lot of organizations really do a very poor job of making it known to their customers and their prospects that they have this innovative product, that they have these solutions that can really meet the need both from a deposit and a lending perspective. How do your clients market what they get from you as products?
Ryan Walker: I love the Field of Dreams line and I think you're right. Bankers, I think, have that mindset in spite of a lot of experiences, to the contrary. Most of them will tell you some horror story of something they launched and they thought it was the coolest thing in town and nobody adopted it, nobody opened it. And yet they still think that way, I think, going forward. How do our institutions market? A lot of the marketing will help inform a lot of our data is telling them who to market to.
Jim Marous: It's not a mass marketing scenario, you're really targeting who's going to be the most likely to respond then, aren't you?
Ryan Walker: Yeah. When you say, "If you build it, they will come." The question you should be asking is who is they? Who do you want to come? And Chase can afford to send out a whole lot of those direct mails, most institutions can't. And a lot of the help that we provide is some analytics around who are the right people? And we can work with all kinds of different third party marketing agencies and things that banks want to do. But we can also help inform the institution or those agencies, "Here's who you should be marketing to. Don't go send to everybody because it's probably way outside your budget to send to everybody." And a lot of those people are people you might not really want to bank. They might be the rate chasers, they might be somebody who's a switching banks every four or five months.
Ryan Walker: They might be high debit risk, things like that. We're helping you understand who are some people that you really would want. Members of the community, they're people you'd want to bank and they're people who are going to stay with you a long time. But then the other big thing, when you think about who do we want to reach? You got to be able to find them. But you also got to know what does that person need to hear? What's the right message for that person?
Ryan Walker: And that's where, again, you can't do it without scale because it's so expensive to send out five different messages and track which one was the best one. You just wasted all this money in media just for a research project and for your average $300, $500 million institution, that's just not feasible. And the scale really becomes cool and we can make that thing happen nationwide with hundreds and hundreds of institutions. And then as soon as we crack the case and figure out, "This is the message," we can leverage it and deploy it to all these institutions and they get lots and lots of mileage out of it, which is really cool to see happen. It's really cool to watch.
Jim Marous: It's interesting as you talk about this, it's really like that Kasasa is this very big bank and you have all these sub-banks underneath it that can use your insights, use your product development, use your analytics at the backend to drive better results, isn't it?
Ryan Walker: Yeah. One of the analogies I use with institutions when we're talking about it is, think about it just like a timeshare. You think about the example of... The example I love actually is Bank of America. The first time I switched banks from the community bank I opened up with my mom and my first check account, first time I switched banks, I switched to Bank of America because they were advertising, "Keep the change." I don't know if you remember that. It was like 20 years ago and I was a college student, I didn't know how to save money, I didn't have anything in my savings account. And I said, "I want that. If you're going to make me save automatically and I get something out of it, that's fantastic." I tell banks, "Think about that." Some smart guy at Bank of America came up with that idea and it was really clever, really neat idea.
Ryan Walker: But they didn't just offer it the next day. Bank of America sent it to the back office where they have 300 MBAs that they employ that have nothing to do, but sort out the compliance and the profitability and how we're going to do everything. And the really tough challenge for these smaller institutions is you just don't have that back office with 500 MBAs. You've got to go out yourself and you already have five other jobs. Every one of them we talk to has too much on their plate. And we become almost like a timeshare.
Ryan Walker: It's like, "Hey, instead of hiring the MBAs, hire them on a really part-time basis. We'll do all that stuff for you. And now you have the marketing, the compliance, how you train your staff, all of that blocking and tackling that helps you get to where you want to go." It's not going to be that first step of just offering the product, it's going to be how do you really take it to market and most of these institutions understand the one thing they don't have is a lot of human resources free to go do new projects. And it's really a cool thing to be able to work with them and partner with them and bring that kind of stuff and give them a whole lot more resource of exactly what they need for the products they're excited about offering.
Jim Marous: Finally, Ryan, we've been talking about the first mover advantage, being able to take advantage of what is a unique economic environment right now, at least unique over the last 20 years. What should financial institutions do today to take advantage of the opportunities that's out there and to beat their FinTech rivals?
Ryan Walker: The FinTechs are huge. The institutions that are going to be successful, I think, are the ones that know what they want and they're willing to actually take bold steps to go and get it. And that sounds obvious, but so many institutions right now, I think, are still a little bit frozen. In 2020 and COVID and the way rates just fell out of nowhere and all the challenges of that happened, I think, a lot of institutions are still afraid to move and afraid to be bold. And a lot of the conversations we're having is, "What do you want? Here's your balance sheet, here's the rate environment. Tell me what you want to happen. Do you want another $5 million in court deposits? You want another 300 customers? What is the thing that's going to move the needle for you guys?" And then once you know that, that's step one. But then it's are you willing to take a bold step to go get it?
Ryan Walker: Because what I know isn't going to work is staying in cruise control and hoping you can get that result. It's just not going to work. You got to take a bold step. And the scary thing, I think, for a lot of these institutions is taking a bold step is now you're talking about risk and you're talking about being the first one out of the boat. And that's where we come in as we can say, "Hey, be the 801st one out of the boat." We have 800 institutions doing this. It's a bold step, but we have lots and lots of data to tell you how to do this in a way that's very risk mitigated, very financially sound, and has a lot of controls in place for you to move it over the long term.
Jim Marous: Ryan, if an organization or a listener here today wants to find out more about what Kasasa offered, because I know we have just scratched the surface on the different products and services and the offerings you have in making financial institutions more competitive in the marketplace, how do they get ahold of you?
Ryan Walker: They can go to kasasa.com right now. They can request a demo. We also have a new white paper. We actually just published a lot of this material about rates and the current rate environment is captured in that white paper. We really produced it for community institutions and there's a lot of gold in there, whether you choose to partner with us or not. There's a lot of value in there about how to think about the rate environment and some different things to what to leverage some of these relationships we're talking about and take them a little further. You can request that white paper at kasasa.com and get in touch with us and we'd love to have a conversation and whether it's a demo or just an introductory call to talk through some of the things that we offer.
Jim Marous: Ryan, thanks so much for being on this show today and good luck with everything you're going at and let's hope we all can take advantage of this unusual economic time we're in.
Ryan Walker: Great to talk Jim.
Jim Marous: Thanks. Thanks for listening to Banking Transform the winner of three international awards for podcast excellence. If you enjoy today's interview, please give our show a five star rating on your favorite podcast platform. Also, be sure to catch my recent articles on the Financial Brand and check out the research we're doing for the Digital Banking Report. This has been a production of Evergreen Podcast, a special thank you to our producer Leah Haslage, audio engineer Sean Rule-Hoffman and video producer Will Pritts. I'm your host Jim Marous. Remember, the battles in banking aren't always around product features and benefits, but around the use of data to drive better results.