Beyond Phantom Growth: Building Real Relationships

Jim Marous (00:00):

Hello and welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous, owner and CEO of the Digital Banking Report and co-publisher, the Financial Brand. I'm thrilled to welcome back, Gabe Krajicek, CEO of the financial solutions provider, Kasasa.

Jim Marous (00:27):

Gabe joins us to discuss the challenges community financial institutions must address today, and how strategic products and marketing support can drive long-term relationship-based growth.

Jim Marous (00:40):

Gabe provides a compelling case study demonstrating Kasasa's impact on community banking. He stresses the importance of distinguishing between real growth and transient gains, offering strategic advice for institutions navigating today's financial landscape.

Jim Marous (00:57):

Gabe's vision for a robust community-focused banking future leads us with a deeper understanding of the pivotal role Kasasa plays in the banking industry.

Jim Marous (01:08):

More than ever, it's important to understand the pragmatic growth strategies that institutions must activate with the help of the innovative third-party solution providers that are available today. These solutions must be easy to implement and to measure, and to a degree be a handholding experience to make it so you can have growth happen even if you don't get intimately involved along the way.

Jim Marous (01:31):

Most importantly, leaders must bring commitment and investment to these possibilities into future ready bank growth realities. So, Gabe, for those who are not familiar with Kasasa, can you explain a little bit about your company and your company's mission?

Gabe Krajicek (01:46):

Well, what we are for community financial institutions is a way to generate strategically significant volumes of deposits. The kind of money that you would think about growing from a CD promotion or even what you'd just go out and buy but being able to generate it from checking accounts and savings accounts, which most people don't think of, is really the source of strategically significant volumes of deposits.

Gabe Krajicek (02:07):

And with what we've been able to hone over the last almost two decades of years, working with hundreds of institutions and managing about a $20 billion portfolio of deposits for those institutions, we can generate those incremental deposits from checking accounts and savings accounts at about half the cost of what it would be if the institution had instead turned to CDs or other things.

Jim Marous (02:30):

So, with rising cost of funds challenging today at almost any institution, what unique pressures do smaller organizations have compared to their larger competitors?

Gabe Krajicek (02:44):

Well, I think one thing that we're seeing across the board is that the primary financial institution relationship is very difficult to defend. I used to describe the mega banks as the big whales in the ocean, the big killer whales.

Gabe Krajicek (02:59):

And now you've also got the piranha of just thousands of fintech companies that provide little niche services that disintermediate little components of what the primary financial institution relationship would otherwise provide. And so, a lot of it is now with so much demand for liquidity in the market from so many different folks, you see a lot of those fintechs offering really, really high rates.

Gabe Krajicek (03:21):

And one of the things that we do as a service for our institutions is look at where their outbound deposits are going whenever outbound ACHs are heading out. And it's shocking how much is heading to companies like SoFi and other fintech providers of these high yield products.

Jim Marous (03:37):

It's interesting, about a week ago I had some guests down at our house and a friend said, "I was in the bank one day and I overheard a conversation at the desk that said a customer was taking out a hundred thousand dollars their funds because of a quarter percent differential between the rates that this organization was offering and the one down the street."

Jim Marous (03:56):

And there is no ability for the person internally to stop that outflow and that's a lot of money. And you get the feeling and I think my friend said that the person said, "Hey, I'm taking out more than half of what I have with you." So, this is what we would normally consider in the banking world, a significant customer. And yet nobody's getting positioned well in a marketplace that is not like it was been for 10 years.

Jim Marous (04:25):

I mean, we didn't have to worry about pricing deposits when pricing was at zero. But we have a situation now that not only do we not have the protections in place, we don't have the growth tools in place, and we don't even have the decision making in place to help an organization keep the funds they have, but more importantly, keep the relationships.

Jim Marous (04:47):

I mean, I call it silent attrition. When I go to a big event, I'll ask everybody in their room, which are all bankers, "How many of you have closed a significant relationship, your primary financial institution relationship in the last five years?" And virtually nobody raises their hand. I then ask, "How many of you have opened a new financial relationship in the last two years?" And everybody raises their hand.

Jim Marous (05:07):

And in fact, I even make it more specific, "How many of you opened a brand-new relationship with another organization last years?" Now these are bankers that have loyalty to their banks and they're doing it. I say, "Look around guys. This is happening with your customers and you're not doing enough about it."

Jim Marous (05:23):

So, when you look at the opportunities in the marketplace, what are the biggest opportunities for local banks and credit unions to use to sustainably grow?

Gabe Krajicek (05:33):

Well, what I love about your story, you call it silent attrition. Is that right?

Jim Marous (05:37):

Yeah.

Gabe Krajicek (05:37):

We call it phantom growth at Kasasa. Your story is a perfect example of the same concept. It was a hundred thousand dollars CD. And they lose it over 25 basis points, and that money is going to go down the road.

Gabe Krajicek (05:49):

And we saw this happening over and over to our clients. When they would go out with big CD promotions, they would grow balances in the CDs, but unless they were running our strategy with a high rate Kasasa cash account, which I'll talk about in a minute, then they would grow all that CD balance. But really it was just replacing core deposits that were bleeding off the balance sheet.

Gabe Krajicek (06:10):

So, they were repricing their balance sheet from a really low cost of funds in the 50 bips kind of range up to four or five. And so, you saw this huge repricing of big material chunks of balance sheets all across the board. And we saw this in the industry loud and clear, and it speaks to the risk with those high balance CDs, they're not loyal at all. They'll leave for 25 bips, they'll leave for 10 bips.

Gabe Krajicek (06:34):

They also are often very large balance holders. And checking accounts are fundamentally different. So, what we go out and do with a product like Kasasa Cash is, instead of putting the highest rate at the institution on the CD, which is guaranteed to be a disloyal consumer, somebody who will leave you for 10 basis points at the end of term, all the stuff, instead of giving the highest rate to them, give it to the checking account holder.

Gabe Krajicek (06:59):

But only if they meet the monthly qualification criteria that indicate that they're really using you as their primary financial institution. And the stuff that are qualification criteria, like use your debit card 10 times, have your direct deposit go there, stuff like that. We've got a suite of things that different FIs do, but it's really easy stuff for consumers to do if they bank there. It's really annoying if you don't.

Gabe Krajicek (07:19):

And so, we create this scenario where we're paying the best rate at the institution to consumers in checking accounts, but only if they use that checking account. Like that's what they do for all their banking. And so, it attracts these PFI relationships.

Gabe Krajicek (07:32):

It also means that some fraction of the consumers fail to qualify. So, if you went out with like a lot of our consumers today, with a 6% free checking account, it sounds crazily high, but what you know is about a third of the people will fail to qualify, which means that 6% becomes about 4% cost of funds, which is already lower than the CD would've been at that same institution. So, it's cheaper money, it's not more expensive, it's cheaper.

Gabe Krajicek (07:58):

And you also have the fact that, and this gets a little bit technical, but that promoted rate of for example, in this case 6%, it's only paid up to what we call a cap. It's a balance tier. And typically, in today's rate environment, that might be like $50,000.

Gabe Krajicek (08:14):

So, you would pay 6% up to $50,000, and on balances above 50, you might pay something like 1%. And so, that also blends the cost of funds down another 50 basis points at least. So, you're at like 3.5% in your total cost of funds with a 6% promoted rate.

Gabe Krajicek (08:29):

And it gets better because they swipe the heck out of their debit cards. When you ask them to swipe it 10 times, they'll actually swipe it on 30 because it becomes the top of wallet card. And you also have other sources of non-interest income that far exceed the non-interest expense.

Gabe Krajicek (08:43):

And when you put all that in the blender, it comes out to about a hundred basis points of additional cost to subsidization. So, what you went out with was 6%, your cost of funds was 3.5, your true cost net of subsidization from non-interest expense, non-interest income is about 2.5%.

Gabe Krajicek (09:03):

So, all day long, this is a cheaper way to get the money. And the better part is when you do it that way, like I said with an example of a $50,000 break point where the promoted rate is paid up to about 50, the average balance will be about 11 to $12,000. That's different for every market, every institution we would need to look at somebody to actually make that prediction.

Gabe Krajicek (09:20):

But I know the average would be about $11,000. And that's going to be comprised of a few people with $50,000, some people with 25, a few folks with a hundred, lots of people with 5,000, lots of people with 7,000.

Gabe Krajicek (09:34):

And what that means for the institution is they have a lot less liquidity risk in each individual consumer. The balances that they're bringing in are spread across a lot of consumers. And they basically change the math on the incoming volume of deposits coming into checking accounts.

Gabe Krajicek (09:53):

In the old strategy, the average balance per checking account was like $2,000. Now every checking account is like 10 to $12,000. And you can turn your front line, which is normally just a source of members or customers into an actual source of real retail deposits at a volume that would challenge what you could generate on a CD. But it takes that checking account being the headline product, the highest rate at the institution. And that's also what unlocks all the cost savings in the model.

Jim Marous (10:21):

It's interesting, as I was talking to a person who's been in banking almost as long as me, and we're talking about all this hot money that organizations are having to match different bonus rates. And I have a friend who's opened, I think he said 15 different accounts and gotten between 200 and $400 for opening those accounts. He manages his direct deposit really interestingly, where he has direct deposits going everywhere to meet that criteria.

Jim Marous (10:48):

And he's gaming the organization, he's gaming the system, but on top of that, none of them put enough criteria in place to make it so there's really a relationship. It's simply an account where it's paying out. And I remember I was in marketing for a long time. I didn't mind telling people how many accounts I generated out of a promotion.

Jim Marous (11:07):

I really got bothered when I had to go back a year later and say, "How many of those stuck around?" Because the reality is it was all sleight of hand and mirrors. And it's really interesting because it appears that your product, if I was to put this program in place at my financial institution, not only do I not have to worry about the cost of funds because you've built that into the entire process.

Jim Marous (11:29):

But more importantly, I probably don't have to worry about nearly as much about that outflow in a post promotional period to worry that I will not generate 10,000. I would generated 250 accounts. But you're going to be keeping a lot of these because of the different criteria you put in place to get the special offer, aren't you?

Gabe Krajicek (11:50):

Yeah. The attrition in our account types, the way we set them up is usually about 30% lower than the compared or free checking account at the same institution. And a lot of that has to do is because the only way you get the rewards is if you're doing things that make the account more sticky.

Gabe Krajicek (12:05):

If you're accustomed to using that online banking screen and you're familiar with it, if you're swiping that debit card and you have your direct deposit going there, then we know you're going to be less likely to change institutions.

Gabe Krajicek (12:17):

And that also those simple little requirements like that daisy chain into other behaviors that the consumer tends to exhibit. It's like you ask them for 10 debit cards swipes, they tend to give you 30. We don't even ask them to get more loans, but on average they end up with twice as much loans per consumer.

Gabe Krajicek (12:35):

And that's just because they think of that institution as a place to call if they need a loan. There's a lot of evidence in the data of deeper relationships that come from the way we set it up. So, you're not rewarding people that are just there, I always say, just there for the Tupperware as a shout out to the origins of our industry in retail promotional banking.

Jim Marous (12:54):

Yep. It's interesting, Gabe, I talked to you before we got on the line today that I said, I'm a raving fan of what you do. And one of the reasons why I am really a raving fan of your organization is that you don't stop at building a great product solution. You don't stop at building a really nice package of services that an organization couldn't put in place.

Jim Marous (13:15):

You actually go as far as to help an organization deploy that and market those products, which is where the deployment really is a part where a lot of financial just get overwhelmed. They'll put a product in place, they'll make it sit and hope it gets better. And it doesn't. You have to monitor these things.

Jim Marous (13:32):

What kind of components do you put in place at Kasasa that helps your clients succeed from the standpoint of marketing metrics and simply, and I'll call it holding hands. I don't mean that in a derogatory way, but in a way that says none of these firms have a massive marketing department. How do you make it, so these firms really have to work to not succeed?

Gabe Krajicek (13:55):

Well, it's funny you asked that. It reminds me of the second week I was on the job, and I've been here almost 18 years, so no gray hair when I started. So, we've made it quite a ways. But when I'd only been there about two weeks on the job, I asked one of the original founders what's the biggest thing that I'm not seeing that we face as a risk as a company.

Gabe Krajicek (14:15):

And we started with reward checking. It was a version of the same thing that I just said, we've evolved a lot and added a lot of other components and features and components of service. But it was essentially the same thing. And he said, well, the core processors, Fiserv, FIS Jack Henry, they're going to copy exactly what we're doing and they're going to give it away for free. And I remember thinking, "Man, I sure wish I'd have known that before I invested some money and moved my wife down here and taken this job."

Gabe Krajicek (14:38):

And he was right, within a year of us having any success at all in the marketplace, we had core processor knockoffs that were doing essentially the same thing that led a community FI, build a DIY version of the account.

Gabe Krajicek (14:52):

And yet, despite that, we've been here almost two decades. And what we did to make it, and what we kind of pivoted on was the idea that we're not going to sell technology alone. Technology is a part of what we do, but what we're really selling is bottom line results.

Gabe Krajicek (15:05):

We're selling the increase in deposits that we promised that you're going to get, the increase in profitability that that's going to have in terms of impact because it's a lower cost funding source. And so, we as a service provider should think about what are all the failure points that would cause that bottom line profit to fail to occur.

Gabe Krajicek (15:21):

And when you think about it at a community FI, there's a lot of stuff that can go wrong. It's usually not the ones and zeros stuff, it's the stuff that involves people. It's that the marketing didn't resonate with the people, or the frontline staff didn't have a way to communicate the message clearly. So, nobody adopted the product.

Gabe Krajicek (15:37):

Or there wasn't any out re-engagement campaign to get the consumer to adopt the product over the long run. Maybe there was something wrong with the compliance, maybe there was something wrong in the profitability analytics, the products didn't generate any value.

Gabe Krajicek (15:51):

There's all kinds of stuff that can go wrong. And we kind of took on each one of those failure points and said, we're going to make that our responsibility. So, it doesn't mean that we limit our FIs. We have FIs that call their products Kasasa, we have other institutions that name it something totally different.

Gabe Krajicek (16:06):

We support them in the way that they want to be supported. But our model is we're going to be able to make sure that if you need marketing materials, you're going to have marketing materials that we've tested with consumers that we know work. When we train your frontline staff, we're going to make sure they say it the way that we've proven it works every single time.

Gabe Krajicek (16:20):

When we're doing profitability consultation, we're basing that on the fact that we manage an almost $20 billion portfolio across a whole bunch of institutions, and they all are doing it differently. So, we don't have to be smarter than our clients. We just have to have a good bird's eye view of what's working and not working as our clients try different things and bring back the best practices and say, "If you want to grow deposits, you should do it the way this institution did.

Gabe Krajicek (16:44):

And we can give you a case study and let you talk to that CEO and see why he did it that way and we'll help you implement it their way. And so, we see ourselves as kind of like Bank of America would have a product department, Chase would have a product department.

Gabe Krajicek (16:57):

It's this idea that we're going to go look at the marketplace, we're going to see what types of products consumers get excited about. We're going to figure out how to match that consumer need with a balance sheet or P&L need that a community FI has and use a product to glue the consumer's desire and the FI's desire together in some harmonious way.

Gabe Krajicek (17:14):

And then we're going to think about how we launch that product from every aspect of the go-to-market to ongoing support. And that's what we provide for our clients at kind of a buy the drink.

Jim Marous (17:26):

How many clients do you have right now?

Gabe Krajicek (17:28):

About 700.

Jim Marous (17:30):

Wow. So, you have such a source of new insights into, geez, this company has tweaked it this way and it works even better. So, I liken it to a GPS system where it's a collective insight that say, here's the better way to go down the path based on everybody that's gone before you. By the way, here's a few detours you should not take because it's going to set you up for failure.

Gabe Krajicek (17:54):

So, the whole concept seems to be pretty turnkey and pretty foolproof. But I'm sure there's situations where things haven't worked the way you would hope they would've for the client. What is one of the reasons why one of your solutions doesn't work as planned?

Gabe Krajicek (18:12):

Well, it's not a field of dreams. It's not, if you just install these products, then suddenly you're going to have twice as many people calling. Marketing is a thing that you need to do to activate any product. And so, one of the things that we see institutions sometimes have expectations that without expend any dollars communicating to the market, that tons and tons of people will know about this and come in.

Gabe Krajicek (18:35):

So, we don't claim to be miracle workers. We also see a common mistake that people make and probably the most common one is not choosing to make Kasasa Cash the highest rate at the institution. And the reason why is … and I don't mean this in any kind of way, but I feel like this is an intelligence test. If you fully understand it. Once you fully understand the math, this is a really clear kind of binary. This is cheaper and better.

Gabe Krajicek (19:05):

If you go out there with a 5% CD, the cost of funds on that CD will be 5%. Earlier I mentioned you could go out with a 6% checking account and it's going to be a lower cost. But before we even discussed that, it's a lower cost. Just think about, it's a cheesy sales question. But if you're a consumer and you hear about 6% free checking or you hear about 5% CD, which one sounds cooler?

Gabe Krajicek (19:27):

It's obvious that it's easier to get market excitement around 6% free checking than it is something that the consumer can find anywhere online. And so, if you go out there with a higher yield checking, you're going to get more market enthusiasm. And then the really cool part is the cost of funds on that 6% checking account. When you factor in the tiers and the failure to qualify, it's going to be in the mid threes.

Gabe Krajicek (19:49):

So, you're already 150 basis points cheaper than the 5% CD. So, even before you factor in the non-interest income benefits and the way that can still subsidize that cost even further, if you just stop at cost of funds, there's no reason for an institution to choose to have a CD that's for a consumer that's disloyal, that's going to leave for 10 basis points better down the road.

Gabe Krajicek (20:11):

And have that be priced better than the rate that they would give to a consumer that would use their debit card 10 times, log into online banking, take the direct deposit, be twice as likely to get a loan from the institution, would tell their friends how cool their checking account is. It's just it's a different in kind of solution. And we see it bear out in the numbers. This is really fun.

Gabe Krajicek (20:29):

Last year was a super fun experiment because we had all of a sudden, a big need for deposits turned on overnight for all of our institutions. And we went out with bells ringing. I mean, it was like we sent all of our client directors out. They only have about 20 institutions each that they managed.

Gabe Krajicek (20:47):

So, they were on each one of them talking about why you need to make Kasasa Cash the highest rate at your institution as quickly as you can. And by the end of the year, they had about half of the total client base. It was actually closer to 60% of our total client base had chosen to do that. We only had about not quite a hundred of them, we had a whole 12 months of data.

Gabe Krajicek (21:07):

So, I'm going to tell you about the ones that had a whole 12 months of data. They went with Kasasa Cash as their highest rate right away. And by the end of the year, those institutions had grown 4.11% while the market had shrank.

Gabe Krajicek (21:20):

Now, you might not be that surprised that they grew because they were out there with five and 6% free checking. So yeah, they were growing.

Gabe Krajicek (21:27):

But what was cool was they grew their CDs two thirds less than everybody else. They weren't growing big high-rate CD volumes, they were growing core deposits and as a consequence, their cost of funds went up about 30% less than everybody else's did. And so, think about that. You're growing, but your cost of funds is going up less than someone who's shrinking. You're obviously doing something different in kind.

Jim Marous (21:53):

And you're building with the right customer.

Gabe Krajicek (21:55):

And you're doing it with people that are actually like, when you ask them where they bank, they're going to say the name of your community bank or your credit union. That's a way better deal than be like, "Oh, I've got CDs at several institutions. I always try to find the highest rate." Why is that person getting your best rate? Doesn't make sense to me.

Jim Marous (22:10):

Yeah. It's so interesting because you bring it up and we talk about it sometimes in the podcast that sometimes the best solutions do not do well because bankers can't get out of their own way. We talk about the digital account being processes, there's providers out there that can help you move a digital accountable being process to about three to five minutes.

Jim Marous (22:31):

And the problem is people hire these companies because they promise it, and everybody agrees to it. And then as soon as that company comes in, somebody in the room says, "I like everything you do, but we've got to start with the driver's license, whatever it may be." And all of a sudden you go, the person who sold this to a financial institute realizes they have just completely taken away the power that the solution had.

Jim Marous (22:52):

And it's the power digital. I mean, you have the ability now to track everything that everybody does through digital communications, through digital tracking and all these things. And sometimes you should let success alone.

Jim Marous (23:06):

It's like the guy who's driving the car that decides, "Yeah, GPS says this, but I know a better way." And then all of a sudden, he gets in a major traffic jam that wasn't expected. Well sometimes you got to take the intelligence you're given and run for it. Or run with it.

Jim Marous (23:23):

You grade a great definition and it's interesting because it's so true. It's so many different organizations. When you keep on talking about this being a product for smaller community banks and credit unions, why couldn't it work at a mid-tier regional?

Gabe Krajicek (23:38):

Well, it could, I mean we are currently talking to a $25 billion institution that's very interested in working with us when we have clients up to around the $10 billion range right now, a little bit over. There is a advantage that the smaller institutions have because the Durban amendment and the small institutions small FI exemption for higher interchange when we get those consumers swiping their debit card 30 times a month, it generates around 10 bucks or so of interchange. So, that offsets an awful lot of the rewards costs that are going to those consumers.

Jim Marous (24:10):

Got it. Let's say you're a leader of financial institution, you're really struggling for loyalty and you're having transaction erosion. What's the self-assessment they need to do to realize they have a problem? Not that they don't know it, but they just may not know where it's coming from.

Gabe Krajicek (24:29):

I mean, I would look at what was the total CD balances at the end of 2022 and what were the total CD balances at the end of 2023 and how much did the institution actually grow? And what I think most institutions will find when they compare all those numbers is that virtually all of that CD growth went to replace erosions and other lower cost deposit sources. And that's why their cost of funds has exploded.

Gabe Krajicek (24:58):

And if you go back and say, what if those CDs had instead gone into an account with an all in cost of 2.5%? And the delta on it is about 2 to 3% for most institutions on that reprice, then you apply it to $10 million, $20 million, $30 million, you start to talk about huge fractions of these FIs, ROA. So, I think that's the assessment I would look at is just if you could have done those CDs differently looking back, wouldn't you want to?

Gabe Krajicek (25:30):

And going forward next year will be another version of that. Even if rates do come down a little bit, which we all expect them to, the great thing is that a 6% promoted rate, you're still at an all-in cost of 2.5. So, institutions, a lot of our clients are going to ride it out and they're just going to stay top of market and dominate for a lot longer and suck up more deposits while they can knowing that their cost is tolerable.

Gabe Krajicek (25:53):

And then when they have all the deposits that they want stolen from all their competition, then what they know is that the consumers are very attracted to high rate on the income, on the acquisition side. But there's very little deposit bleed whenever you make adjustments to the account as long as they're within range.

Gabe Krajicek (26:11):

So, if you go from 6% down to 3.5% or 4%, you're going to bleed virtually no deposits. And the reason why is because people don't change checking accounts to go get three or four bucks more in interest or $8,000 balance.

Gabe Krajicek (26:23):

But they will, when they're thinking about getting a checking account, they'll do their research to get the best one and 6% is the best. And so, you'd go into that, but you wouldn't leave it if it came down to four because you'd be like, "Four's still pretty awesome. And I'm not changing checking accounts."

Jim Marous (26:37):

Right, because you're still going to be higher than the market. So, where do you see the biggest missed product opportunity in the future? What do you see down the line?

Gabe Krajicek (26:48):

That's a good one. Well, what I'm excited about for us down the line is two products that I'm just over the moon for. The first one is take back loans, which you've probably heard us talk about Jim, forever. Way long time ago we won Finovate best to show for the Kasasa loan.

Gabe Krajicek (27:06):

And it was this really cool loan that had a user interface that looks like a loan calculator and the user interface would be like the actual representation for the payment engine of the loan for the consumer. So, they could go in and if they had a $500 minimum payment, they could model what if I paid 700 and they would see the payoff date accelerate and they would save interest so they could see how much, they could set that as their actual payment.

Gabe Krajicek (27:29):

But what made the loan really, really cool is those additional payments. So, like in that example, if they really did pay 700 on a 500 minimum, that 200 extra, those would be accumulated in a takeback balance that the consumer could access anytime and get that liquidity back.

Gabe Krajicek (27:46):

So, if over 12 months they were putting 200 extra in every month, they'd have $2,400 in the takeback balance that they could access anytime. And we launched that product and sold it to about a hundred institutions and it was the biggest flop we have ever had ever as a product.

Gabe Krajicek (28:00):

Here's what happened. We got up to about 200 million in total loan balances. So, it was statistically significant. We got up to a lot of consumers, a lot of loans flowed through it so we could see how those loans were performing. The consumers loved it.

Gabe Krajicek (28:16):

It was a 70% net promoter score. The charge off-rate was 30% lower. The auto pay adoption was 85% without any incentive. More than 50% of the consumers were using takeback. So, they were paying ahead and taken back actively. On average consumers logged in about 50% each month.

Gabe Krajicek (28:36):

And when they logged in, they stayed for about three minutes. So, they were playing around with that graph highly engaged. Their balances were bigger because they liked getting bigger loans once they saw how flexible the system was. So, in every way, off the charts, consumer success.

Gabe Krajicek (28:50):

Operationally it was a disaster because we had kind of gotten on the fintech wave of building these separate core processors from the primary core. So, if an institution was like Jack Henry Symitar, we built the Kasasa loan system on its own core processor and it would communicate back with the primary core through batch files and all kinds of complicated syncing systems.

Gabe Krajicek (29:13):

And it worked. But if you were on the front line and somebody came in and asked a simple question like what's my loan balance? It's not immediately obvious how to go answer that question and you want it to be real time and all these kind of sinking issues were a problem.

Gabe Krajicek (29:26):

So, because we weren't on core and because that was operationally a disaster, the product darn near died. And we had an employee, Justin Schafer, who right when we were telling him we're killing funding for this product, he says, "I have an idea, I think I can make it work on the core processor."

Gabe Krajicek (29:42):

And he asked for a little bit of time and a skunkworks project. Two weeks later he came back with, "I can make this work on Symitar." We've since figured out how to make it work on Fiserv and really any core, we're just kind of marching our way through all the different cores.

Gabe Krajicek (29:56):

So, now that product, which was a consumer success, but an operational challenge is operational butter. I got to go out and help sell some of these early institutions that adopted it, and we showed them their core processor screens with it integrated and it-

Jim Marous (30:12):

That takes the problem off their shoulders. Yeah.

Gabe Krajicek (30:14):

It was like the operations person in the room was actually helping me sell the room. This never happens. It's never the ops person that's on my team in a sale. So that was really exciting. So, I'm stoked about that. I think it's going to be a huge product.

Gabe Krajicek (30:25):

And then with all of those real-time interface capabilities that we developed, we're modifying the new version of Kasasa checking will be where the consumer doesn't have to come in and select, do I want that high yield account or do I want cash back or do I want discounts at my grocery store and Uber Eats, or do I want my Netflix or Spotify paid for whatever the different types of rewards.

Gabe Krajicek (30:46):

They can just choose Kasasa checking, and it seems like a simple little thing, but it's a breakthrough. And then as soon as they open the account, we'll text message the consumer and say, now choose your reward.

Gabe Krajicek (30:57):

And the reason that's powerful is one of the biggest bottlenecks that we run into trying to enable the full success of our clients is getting the message consistently articulated by the frontline staff and we train them, and we mystery shop them and we have e-learning and we'll send out training for free over and over and over and over again.

Gabe Krajicek (31:14):

But the FIs are facing 25% frontline employee turnover. Those FIs have a ton of products to remember and memorizing how four or five different rewards accounts works is complicated. And so, what's great about the new thing that we can do is the frontline just has to have a basic understanding kind of what's in the bucket.

Gabe Krajicek (31:30):

And then we can text the consumer and say, "Click this link." It takes them right into online banking where we can then articulate how each product works and let the consumer choose which one's right for them, knowing that we've nailed the compliance, nailed the messaging, and we can also do additional cross sales in that context and make sure that we nail that as well.

Jim Marous (31:47):

That's interesting because both those instances and the failure had is all human nature. Because I remember working in the branches, God just like it was yesterday, and knowing that if anybody in the main office brought something down that was cumbersome, that was hard to explain that the consumer made my life more miserable because of it. Guess what, I didn't sell anymore.

Jim Marous (32:10):

And it is one of these things, your best organizations don't have that problem because they build a culture that says buy into what I'm doing, it's going to be really good. And it makes sense, and they'll do that extra work. But it's those other 600 institutions that go, number one, I don't understand it. Number two, the consumer doesn't understand. Number three, if I have to answer a question, you've made it more difficult than my normal way. I don't need any more problems in my life. And it's the beauty of technology,

Gabe Krajicek (32:40):

It's embarrassing if you're a frontline person, you don't know the answer. It's like, I don't want to ever feel that I don't know the answer. I mean a human wants to feel competent. And if we give them any risk at possibly looking incompetent, then it's very hard to engage them in wanting to take that chance.

Gabe Krajicek (32:55):

And so, I'm glad to provide those. It's kind of an easy way out. But we'll still continue to do training. I don't want to give the impression we're giving up on that, but I just want to have some belt and suspenders on this because I know too often failure points you ask what can go wrong?

Gabe Krajicek (33:10):

One of the things that goes wrong is we can't get in there to train the frontline staff, or they've got so much turnover, we can't keep the blades sharp. And this would be a way to mitigate all that risk. So, an FI that was a little weaker on the front line wouldn't worry that our products wouldn't work.

Jim Marous (33:24):

So, when it comes to actually taking advantage of what you have in the marketplace, and as I said, I love the way you do business. I love the way you work with financial institutions and the offerings you give to the communities that they serve. If people want to learn more about how they can optimize growth and get rid of some of that phantom growth, who do they talk to or how they take the next step.

Gabe Krajicek (33:47):

You know what, I don't know the answer to that question. I would say go to kasasa.com.

Jim Marous (33:51):

There you go. That's what I would've done. And yeah, it's interesting because-

Gabe Krajicek (33:56):

I was about to give my cell phone number, Jim.

Jim Marous (33:59):

And you know what that is totally you because you're going, "Hey, I'll figure this out afterwards." And the problem for me, I will very often say, “If you need help, write me an email, text me, do anything and I'll help you. I promise I'll help you,” because not many people do.

Jim Marous (34:16):

It's one of those things you go, if I offer something that nobody's going to take advantage of, I'll offer it forever. But in this case, I think people, they'd reach out to you.

Jim Marous (34:24):

But I think kasasa.com makes sense and it's interesting because your website is very easy to navigate. It's also a website that explains what you do. What you do while the equations may be a little bit — they take some time to figure it out. The way you present what you're out to serve and how you will take care of it, it's pretty doggone clear.

Jim Marous (34:45):

And again, I talk about it often with other third-party solution providers. I challenge every organization that helps financial institutions to go the final mile to help organizations implement what you're selling. Because if you don't, you're not optimizing the investment in your organization or the financial institutions you're serving.

[Music Playing]

Jim Marous (35:07):

Gabe, it is always a pleasure to get together with you, you’re a wealth of knowledge. You're not resting on your laurels. You benefited a bit from the market rate jump. But at the same time, organizations may have hesitated investing in your solution, now's the time to take action. I know for a fact it doesn't take forever to implement. You can get the results very quickly. So, again, Gabe, thanks so much for being on Banking Transformed.

Gabe Krajicek (35:35):

Thank you so much. Pleasure to be here.

Jim Marous (35:38):

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoy what we're doing, please take some time to show some love in the form of a review.

Jim Marous (35:48):

Finally, be sure to catch my recent articles on the Financial Brand and check out the research we're doing for the Digital Banking Report.

Jim Marous (35:54):

This has been a production of Evergreen Podcasts. A special thank you to our senior producer Leah Haslage, and our audio engineer and video producer Will Pritts.

Jim Marous (36:02):

I'm your host, Jim Marous. Remember, the key to success in banking is building long-term relationships as opposed to short-term transactions.