Keys to Success for Community Banking

Jim Marous:
Hello and welcome to Banking Transfer. I'm your host, Jim Marous, founder and CEO of the Digital Banking Report and co-publisher The Financial Brand. At a time when the competitiveness in the banking industry is more intense than ever and the need for digital transformation has never been greater, is the viability of the small community organization at risk? Is there a way for community bank and credit union to stand out in a world of digital giants? To dive deeper into the viability of community banking organizations, we have Gabe Krajicek, CEO of Kasasa on the show. He discusses the benefits of local banking, as well as the risk of taking legacy relationships for granted.

Jim Marous:
Welcome to the show today, Gabe. It's been a long time since we sat down together and seen each other in person in Austin, but it's obvious that you must've been really busy with everything going on and the change in our industry. How have you been?

Gabe Krajicek:
Been fantastic. It's been 18 months of the most tumultuous months of my life to say the least. I'm sure that listeners can feel the exact same way coming out of COVID. A big shock to our system, like I'm sure it was a big shock to a lot of FIs that had closed branches. We all started working remotely with no notice and we've decided to stay that way. And it's actually worked out fantastically. People are getting to travel more while at work, have a lot more freedom. And I think it's going to be a good thing for us in our clients in the long run.

Jim Marous:
It's interesting. I've been to some of your events and worked with some of your clients, and you have a really interesting model and a very interesting business plan overall. Can you tell our audience who may not be familiar with Kasasa who exactly Kasasa is and how you help the industry right now?

Gabe Krajicek:
Her name used to be BancVue, so some people may have known us as that. In 2009, BancVue launched a product brand called Kasasa. And our idea was that, we at the time were powering a lot of rewards accounts, our clients were spending around $50 million advertising those reward accounts. And we just thought, "Man, wouldn't this work more efficiently if the institutions used a common brand, that way we could get them some scale economies on marketing buying and marketing sophistication?" Now we're doing that with a lot of data-driven marketing and selected the targeting of consumers. But the idea was, by having one collective brand that community FIs could offer their products, we would function a little bit like Procter & Gamble that sold Tide and the community FI would be a little bit like the grocery store, but they would be selling our products.

Gabe Krajicek:
And the reason that we arrived at that conclusion is, at the core of our DNA is marketing, consumer research, understanding why consumers are making the decisions that they're making. And it is loud and clear, it's been that way for more than a decade since we've been doing the data, consumers absolutely love community institutions. They love credit unions, they love community banks. It's about a two third to one third margin every time you ask the question. So our mission in life is to solve the problem, why do two thirds of people like community FIs so much, but don't bank there?

Gabe Krajicek:
And the reason they don't bank there is they don't know who they are and they don't have products. Consumers don't perceive the products as being as high quality as what they can get from the fintechs and the megas. So with Kasasa, we come in, we offer the products, we offer marketing sophistication, that gets the word out and we're able to drive a lot more primary financial institution consumer growth, not point solution, but really getting consumers to say, when you ask them where they bank, they would say the name of the community FI that we serve.

Jim Marous:
It's interesting. What do you see? Lot's happened since COVID and really ramped up the speed of digital and a lot of things that community banks in many cases weren't as proficient at, but what did you see as the biggest challenges to growth and profitability, and maybe even existence that are faced by community banking organizations today?

Gabe Krajicek:
It's a big question, and we could talk the whole time just on that one. It's a confluence of a few things. One problem the community FIs face is a structural one that it's just the way the industry works. Community FIs buy their software from vendors that sell software, then the community FI has to figure out how to cobble together this stuff they bought from multiple vendors, or maybe they bought it all from their core, but the stuff really doesn't play nicely together to create a beautiful user experience. And you're the community FI there with not nearly enough employees, very few, if any, probably non-programmers, true programmers, to build real software.

Gabe Krajicek:
So you're implementing all this stuff you've bought from vendors and trying to put together the same level of beautiful cohesion that a mega bank would have for their digital banking experience and certainly than any fintech would have, that level of polish. It's just almost impossible for a community FI to be able to pull that off by cobbling together vendors versus having a software development team that's building to be able to meet the current consumer needs. So that's one problem that's a real problem because it doesn't allow them to move at the pace of fintech.

Gabe Krajicek:
And what I mean by that is, imagine you're Chime and you want to come out with a new feature. It's not very hard, you add the new feature to your SaaS offering and all the consumers that have Chime accounts will be able to see that new feature. If you're in the bank tech space, the community banking vendor world, and you wanted to launch a new feature, well, first off, all the vendors are working with about 80 different core processors out there. There's no unified format to build anything. For example, we as a vendor, if we want to offer a new consumer to community FIs, we have to make it work in all 80 different cores. And that just necessarily, it's a headwind, it's friction that does not exist in the other model.

Gabe Krajicek:
So if you have two models, one with massive friction to create new features, another model that eliminates friction and easily adds new features, and you just say, "How will the two compete over time?" You don't need a Harvard MBA to figure probably the one that can iterate more quickly to meet consumer demands more rapidly and in a more contemporary fashion over time has a massive competitive advantage. And that's a structural problem in the way the technology works at an infrastructural level in our industry. So that's one big problem. The other big problem is what I said earlier, people just don't know who they are.

Gabe Krajicek:
We've done so many focus groups, and one of the most depressing ones that I ever saw, we were asking the consumers that we were doing the research on, can you name one community bank? And I swear, we went through about 50 people before one person knew one. And it's not because there aren't any, we were in Austin, Texas, there's dozens, but they just don't know the name. Credit unions had a little bit higher name recognition, but there's still dozens of those and the average consumer could only name one of them, maybe they've seen that billboard for that one credit union that advertises a lot. So you've got an awareness problem. And then you combine that awareness problem with just how the internet works.

Gabe Krajicek:
If you think about community FIs, the way they survived, at least as I observe it, is they were market generalists, meaning that they could do everything that you expect a community bank or credit union can do, you've got your usual suspects, checking, savings, CDs, credit cards, down the list of things that you would expect to have if they're doing small business stuff, it's the same rote stuff that everybody has. There's not a lot of differentiation there. That doesn't matter that much if you're well known in your community and if the people that you're trying to serve in that community know that you're a good place to go get those services.

Gabe Krajicek:
But where it becomes a problem is when all of the consumers are going first to the internet and they don't really look at their local community in a geographic way. When people go to the internet, geography means a lot less, convenience doesn't mean the branch that's near where I work, convenience means I can open this account in three minutes. And so that language changes when they go to the internet. And so now imagine you're a community bank, you've been in that community for 150 years, you're the pillar of your town. And you're saying, "Okay, but the problem is, more and more people, more than half of them, now more like 89% of people, go to the internet before they go to the branch."

Gabe Krajicek:
If you don't win in that internet marketplace, you just don't win. And the way to win in the internet is, it's tough. If you look at the fintechs that come in, they don't come in and say, "Day one, we're standing up a full feature bank." They come out with one cool product that really gets people's attention. Think about SoFi when they first launched, they weren't doing SoFi money and all the other stuff, all the other types of lending that they were doing, they were going after students, very focused, and they knew that those would be good people to lend to and they would have subsequent borrowing needs over time.

Gabe Krajicek:
And wow, as soon as those borrowing needs developed, they developed the products and they start rounding out everything they're doing. But they went to market as a niche provider. And that's the key thing that I think is really interesting. If you're a community FI, and you're trying to win the way the fintechs have won and you want to go to the internet, can you go as a niche provider? That's pretty tough. It's hard for a community FI that's been a market generalist forever to lift that model up into cyberspace and then be able to compete with a bunch of rifle shot niche providers that do the one thing that they do so much better than anybody else.

Gabe Krajicek:
And then of course, those rifles shot niche providers begin expanding their offering and eating the pie that community FIs have enjoyed for so long.

Jim Marous:
Community banks usually have leveraged their friendliness, their community spirit, all that. Have community banks lost that advantage or at least it's been diminished because of COVID?

Gabe Krajicek:
COVID accelerated that for sure. COVID, there's tons of statistics out there from people smarter than me that have cited the dramatic increase in digital adoption as a result of COVID, and clearly people don't adopt new, more convenient technologies and then wake up one day and say, "I'm going to go back to the hard way." Like nobody's saying, "I sure wish I could drive to Blockbuster right now so I could get some junior minutes and rent a movie," they're happy on Netflix. And so I think that what you did see as a sea change in consumer expectations and consumer comfort with digital solutions.

Gabe Krajicek:
And I've seen that a ton in our own clients where almost like their hair's on fire, realizing that, "Oh my goodness, we haven't invested the way we should have in that digital user experience." And they're rapidly trying to digitalify, if that's a word, all of their user touch points. Again, back to that same challenge though, when you go down that path, you're talking to so many multiple vendors and you're trying to put together a cohesive experience, but it's just very, very difficult to do.

Jim Marous:
So it's interesting, our research that we've done for the Digital Banking Report found that financial services responded to the pandemic, a lot of them want to transform themselves digitally. And initially, you referenced it a little bit in your preview comments, the organizations thought, "As long as I can allow somebody to open an account digitally, then I'm digital. If I can allow them to open a loan or get an application digitally, I'm digital," but the reality is, a 15-minute new account opening process or an 18-minute loan application process without even counting marketing or credit adjudication and disbursement. The reality is, these organizations are not digital. How do community banks and credit unions keep up with what the consumer's asking for? Which as you mentioned earlier, convenience now has to do with speed, simplicity, empathy. How do they do that?

Gabe Krajicek:
Candidly, I don't know that they can. I think we are at a point now where like I'm looking at... It's like I said before, the software systems that the fintechs are running on are easier to build on and costs less to create new features than it costs to create those same features for a community FI kind of architecture because of the incredible patchwork, the Frankenstein monster of different vendors that have been sewn together, and you're supposed to look at it and think it's a beautiful, handsome guy. And it's like, "No, man, there's stitches all over his face." That's not a real experience. And so when you say like, "What would it really take for an FI to be able to keep up?" They need a new type of banking platform that allows for rapid feature development.

Gabe Krajicek:
And there's a lot of people out there offering open cores, different types of core approaches that are SaaS, more digital cores. These often are standalone to the primary core and would allow an institution to launch a fintech solution on that standalone core. The challenge there is, I think that could work fantastically for a larger community FI that had a real marketing and product department and had time to do consumer segmentation, had time to do user experience development and work with consumers to see what the flow is through the different apps to make sure there's no stumbling parts and it really is a great app. If you've got the resources to do that, then working on one of those open systems to create that type of banking experience is a fantastic path.

Gabe Krajicek:
But if you look at a normal community, FI the billion-dollar institution, the $2 billion institution, certainly, my goodness, the $500 million institution, there's just no way. There's no way they're going to go and take their Fiserv core, and I'm not going to say other brand names because I don't want to single anybody out, but their online banking system that they bought from somebody else and their RDC vendor and their peer-to-peer payments and their photo bill pay, and their scan the driver's license on the way in to make the account opening process, all that stuff, being buttery smooth, where every single user experience feels cohesive like it's from a company that really managed its brand, building that on the existing infrastructure, I just don't think is possible for a community FI.

Gabe Krajicek:
And I think that even trying is akin to like if you were a third world country and you didn't have telephone wires laid across your country today, you wouldn't go trench the telephone wires, you know what I mean? You're not going to go cut up your whole country and put telephone wire all over everything, you're going to use satellites and cell towers. And I think that what we're looking at right now is, the challenge the community FIs face is they're trying to figure out how to get telephone wires cut through the ground by trying to work with their existing bank partners to try to create a user experience that, I guarantee you, Chime, SoFi, those kinds of folks, when they're comparing their user experience, they're comparing it to Apple, they're comparing it to the best, the best people out there.

Gabe Krajicek:
And they're saying, "That sets the standard for what I consider acceptable." Community FIs on the other hand are looking at functionality and saying, "With what I've got, Apple's user experience is unobtainable, so how close could I get?" Well, how close could I get doesn't cut it. Consumers today don't want the one that is almost as good as the other one when they can find the one that's the best with one click and open it in three minutes. And so it really is a challenge, I think, for certainly us at Kasasa as a vendor that serves this space and lives and dies by it, and if there are community FIs, I don't have a job. So this one matters to me a great deal, and trying to figure out how we as a vendor help them solve that problem.

Jim Marous:
So to that point, your organization helps community banks and credit unions uncover profitable strategies, niches, new product areas, and also helps them in marketing to create really operating discipline to better serve their constituencies, employees, customers, how do you help them? What are some of the ways that you help community banks and credit unions really still survive in a really hyper competitive marketplace?

Gabe Krajicek:
Well, the first, probably the flagship thing is have the products that consumers want. When we did our research on asking consumers right after, two thirds of them say, "We like community banks and credit unions better than mega banks." "Okay, great. Why don't you bank there?" That's the next question. The answer that comes up about the category, they don't say they don't know that they're there, they usually don't say that, they'll say something that's more judgemental because that's consumers, they'd rather say, "You don't have the products that I want." And that's the way it's communicated. And we actually did a study one time and we compared...

Gabe Krajicek:
This is dated data, but thematically it's accurate. This is probably three years old, so hold on to any of the actual data points, but the trend line is definitely true. What we looked at was, different features that are technology features related to the user experience and we asked a consumer, basically, "Do you think a mega bank will have that? Do you think a community FI will have that?" So it was like, yes, no, to each question. And then we compared how much more likely a consumer is to think a mega bank would have it. And the first thing that we looked at was the oldest thing around, online banking, 13% more likely to find online banking at a mega bank that is than a community FI in the eyes of a consumer.

Gabe Krajicek:
Not every single one of our 850 or so clients has online banking, so there's no way that's accurate. You go down to something a little bit newer, ask a consumer, "How likely is it do you think mega banks have mobile banking? Do you think community banks have mobile banking?" 40% more likely to find mobile banking at a mega bank. You keep going through this list and just go to newer and newer features. And finally, we got up to the newest one at the time, was photo bill pay, which consumers expected to find 200% or so more likely at mega banks than they found it at community banks. And so this idea that consumers look at the community FI and they say, "Y'all have, we're being generous. If we say fast follow."

Jim Marous:
Fast follow has to be redefined in today's environment, because fast follow is a lot quicker than fast follow was three years ago.

Gabe Krajicek:
It's not next year. And in most cases, community FIs lagged by years for major new releases of major new functionality. And so, if you lag that far and you continue to lag that far, you're basically communicating to the market, "Hey, you know how you don't bank with us because we don't have the newest products? Good idea, that's right, we don't, we always lag the market." Well, if a consumer we know is looking for products, that's an important point. When the internet got big, which is old now, but people don't notice this change, I think, when the internet got big consumer shopping behavior shifted from going to my favorite store to see what products they have to instead going to the internet to find my favorite product and finding a store that sells it. That is a major inversion.

Gabe Krajicek:
And it absolutely happened in our industry because you go back to the '80s, man, I was going to the bank near my house and I'm going to get the checking account that they offer, I'll get the best one they have, but I wasn't doing research about the best checking account in the country. And that's a very different kind of search. And then you go find the institution has it. And so the internet has put product front and center, and some of your questions were about, how do you get that? The community FIs are so good at that the consumer service, they actually really do care. It's one of the things that I love about this industry, is there is a genuine, heartfelt concern for the end consumer among community FIs.

Gabe Krajicek:
But if you don't have the products to get the attention of the consumer, they're never going to get a chance to taste what that is. So step one, have products that consumers want and know how to measure what types of consumers want those products and know what those products do to the balance sheet and the income statement before you launch them. Because having all that figured out allows you to just focus on marketing results, which brings me to the next thing we do, is the marketing. And a lot of our ability to market just comes from having done this for almost 20 years, $20 billion in deposits. We've created billions and billions of marketing impressions and millions and millions and millions and millions and millions of marketing messages going out.

Gabe Krajicek:
We score them all, we see which ones work, what messages work, what type of messages work for what type of consumer, what types of channels are the lowest cost channels to get that message across. And we're analyzing all of that in a big data oriented way, in a way that we couldn't do, even with all of our technology and our experience and sophistication on how we do this stuff, we couldn't do it if it wasn't all Kasasa branded, because there would be no way for us to go into 850 community FIs, all calling their products something different, all communicating it slightly differently with slightly different product features, and then ask us to do any type of big data analysis on the 27 million consumers that we analyze every night. It would look like garbage.

Gabe Krajicek:
But because we use a standardized approach across all of those consumers and all those marketing messages, then we can go identify best practices, not just for one FI, but for the whole network. For any FI that needs to solve that problem, once we identify that best practice, we can scale it across the entire network. And that's why I believe we have such impressive marketing performance. And then the final thing that I think that we do is going to seem like a rinky-dink one. You're going to say, "Oh, it doesn't really matter. It's not that big deal. Everything's digital now." It's not all digital, people are still walking in those branches. And the frontline is still the bottom line, and culture at the frontline matters.

Gabe Krajicek:
And we spend a lot of time doing block and tackle training of frontline staff. We have a program called Retail Optimization Program. We'll meet with FIs every single week, meeting with their frontline staff every week and holding them accountable to what they said they would do in terms of cross sales and other things like that. And we don't do that like for years on years, but it's a program that we can put in place to jumpstart a culture, get it pointed back in the right direction, having people comfortable selling, but doing it in a consultative way where they don't feel like the cheesy car salesman.

Jim Marous:
So really what you're doing is you're partnering with community banks, credit unions, local organizations, and providing them the technical support to product support, even the marketing support that a small organization, if they're lucky, has two, maybe three people involved in that, and most of them were not trained in what is today's digital analytics and data and all these things. So really, what you're doing is, you're providing outsourced services that really can make each one of these organizations better and more relevant. Correct?

Gabe Krajicek:
Yeah. That's a good way to think of it. I've often described us as a mega bank product and marketing department sold on a timeshare basis to all of our FIs. We're doing the research the way Bank of America's... I guarantee you, if you looked at our product team, look at a mega bank's product team and the way they operate, the way they go out into consumer research-

Jim Marous:
They're the same.

Gabe Krajicek:
It's very similar.

Jim Marous:
It's interesting because it's really what I'm saying with almost every meeting, every webinar, everything else, I'm going, "You can't do it alone, and the big banks can't do it alone." And the only way you keep pace is to partner with the organizations that by the way, have learned how to work with 80 different tech providers, 80 different core providers, all these specialists, and realizing that you've got to pick and choose who's going to get you to where you got to go the fastest. So if you have to pick a new account opening process, figure out how to do it, but do it. If you want to find a better product solution, if you want to find a unique lending solution, find those out there that are willing to do it and do it.

Jim Marous:
Now, when you look at what you're doing with the community banking organizations and what the big banks can do, and this is a little bit outside your realm, but I know you know what the answer pretty much is. Do we find that those mid asset regionals are really caught in a very unfortunate spot that combines the worst of both worlds. Number one, they have legacy leadership, legacy organization, all the legacy things that you mentioned about on the community side. And they don't have enough money to really go out and be the big guys that in some cases keep on building branches and other cases, throw a lot of money on modern technology and even risk cybersecurity.

Jim Marous:
But they're probably not as apt to be able to make quick decisions on partnerships. Are those regional organizations, those mid regionals, mid asset firms, are they really in a really non-competitive situation? Because they really are not either one of the small community organizations that can partner and willing to partner and not the big guys.

Gabe Krajicek:
There's clearly some out there that are kicking butt so I don't want to disparage the whole category, but I think it is a little bit of a weird, no man's land because to a consumer, those big regionals look like a mega-bank, especially, we if you don't travel much. If you're in region where that one is everywhere, you're like, "Oh, that's that big other bank, like Bank of America." And so the emotion that the consumer attaches to that is usually more negative. The bigger, the FI is the more negative the consumer sentiment is within reason.

Jim Marous:
What's is interesting is, we're now seeing regionals combining, and my concern is, it doesn't make a better bank. I'm legacy to say the least. And we have a time in our history in financial services that we had what were called savings loans. And we combined a lot of unsuccessful savings. The government combined a lot of unsuccessful savings loans thinking they'd make a better bank if they put more money behind it. That didn't work very well. In fact, it just made bigger badder banks. And actually, if you keep the same management in place, you keep the same legacy thought process in place, it doesn't change the problem, it just makes it bigger.

Gabe Krajicek:
It's just a bigger problem with fewer people trying to think about it.

Jim Marous:
Yeah. Let's take a short break here and recognize the sponsors of this podcast.

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Jim Marous:
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Jim Marous:
Welcome back to the Banking Transformed. I'm joined today by Gabe Krajicek, CEO of Kasasa, an organization that provide solutions specifically for the smaller community, financial institutions, such as banks and credit unions. Gabe, we're discussing the challenges smaller institutions are having keeping pace with both the big financial institutions, as well as those offered by big tech organizations. Despite many of the disadvantages in the marketplace, community organizations were probably the stars in the PPP loan rollout at the beginning of the pandemic. What enabled these small organizations to achieve what their bigger competitors really couldn't?

Gabe Krajicek:
From my observation, and this is largely anecdotal because it's conversations I've had with lots of bankers, us watching trying to react to their demands of us, to help them as a vendor when this thing hit, two things jumped out. One is they really are connected to the community. Community banks for real are the heroes of small business lending. And when you look at the statistics on per dollar of assets, how much more they lend out to small businesses, how many jobs they create, everybody that's in this industry knows those stories, but it's for real. And having those networks there to be able to go right back out and do the PPP servicing of that community, I think was a huge part of it.

Gabe Krajicek:
The other thing is the flip side of what you said before the break when you were mentioning that some of the regionals are so big, it's hard for them to get out of their own way. Well, when we're working with community FIs and they've got a strong leadership that says, "Hey, we're doing this, we're doing it now. We're going to put a PPP page on our website. It needs to be there tomorrow." They call us because we power the website and say, "We need a new PPP page up. We need a form on there, start accepting applications." We get it up in 24 hours and they're taking applications in 25 hours.

Gabe Krajicek:
And so to be able to say from idea to let's do this and not go through unnecessary board reviews and all the things that you could have gotten in the way of just saying, "Hey, this is like money falling from heaven right now, we should probably go scoop as much of it as we can up," having that ability to act on it, I think was the biggest difference. That and like I said, they benefit from that just incumbent relationship with so many small businesses.

Jim Marous:
One thing we've seen is that a lot of organizations look at attrition rates, traditional attrition rates. How many accounts are we gained? How many have we lost? And many of them are saying, "No, we're doing pretty good. We're not losing accounts." What we've seen in our research is while the accounts themselves may not have been lost, a lot of relationships are being fragmented. People are going to acorn for a savings account. People are going to a credit offering for a buy now, pay later solution. People are going to PayPal for transferring funds, and all these other components that may make it so that while the accounts are there, the relationships have gotten fragmented.

Jim Marous:
How do you help financial institutes solve for that? Because from our standpoint, it seems to be a blind spot. It seems to be that we like to think that we know what we're seeing, but we're not digging deep enough to realize, geez, you know what, at the end of the day, it's how active am I on the mobile phone with my account, as opposed to how much money do I have in the account. I may have the deposits, they may not have moved, but if my activity have left, if I'm taking my money out this directly deposit the day after its deposit and I move it to another organization or I move to the solution provider, I as a financial institution, don't have that relationship anymore. How do you help solve for that?

Gabe Krajicek:
Well, first is knowing that that's happening and to whom it's occurring with. And so one of the reports that we love to generate for our clients is to do an outbound payment report, to look at any payment to any third party, whether it's another lender or it's a fintech, some direct deposit that's leaving the institution going towards some other financial service. So knowing that and just seeing what the volume is, what are the types of services you're losing, gives you a good idea of, "Hey, here's the things that our consumers clearly want, is what they're going to buy from someone else, why didn't we offer that service?"

Gabe Krajicek:
But if what it is that you're losing, then you can decide what it is that you should offer, makes it a lot easier. The other thing is being in constant communication with the consumers, just because you are the PFI, you should get first dibs as the PFI. In most cases, as the PFI, you've got a solid chance at being in the consideration set for a new financial product for your consumer, but that doesn't guarantee you're going to be in the consideration set. And if they see something that they think is cool from some other provider that they don't think you have, if you haven't educated them on the fact that you have that, then they're just going to go to the other provider.

Gabe Krajicek:
And so one of the important things that we do is lifecycle marketing campaigns to constantly be evaluating what consumers would benefit from another product and how would we get them into that product using outbound marketing.

Jim Marous:
Gabe, a lot of organizations are looking to find a way to mix digital with human because obviously, community financial institutions, that's a legacy. And it was for some beer law organizations as well. So how can organizations take what they were best at and what they're recognized for as well as the community involvement, but mostly the human aspect, how can they mix that with digital to make it so it's a unique, competitive advantage in the marketplace?

Gabe Krajicek:
Well, I still believe the community matters. I think it matters a lot to consumers. And I think that the reason that they're not banking with community FIs is they don't think they have the products and they don't know that they're there. Simple, simple. Two thirds of people want to bank there. If you talk to an average person and you say, "Hey, do you realize that your paycheck is like the sweat of your brow in physical manifestation you get that?" And they're like, "Yeah, I know this, my money, I worked hard for it." Okay. When you take that money you worked hard for, you give it to a mega bank and you think about what they do with that money.

Gabe Krajicek:
It doesn't just stay in your account, it becomes investible by them to go do whatever they want. Now, when you look at what mega banks have done with your money over the last few decades, are you proud of it? Do you think you helped make the world a better place by helping mega banks calls a worldwide recession? Or do you think, "Man, wouldn't it have been cool if that money had been down at my community FI and it was buying a hydraulic lift for a small business guy that was going to expand his mechanic shop, or maybe a car for a teacher that maybe taught your kid in your community?" That absolutely matters.

Gabe Krajicek:
And so when you are able to level the playing field and make community FIs known, make sure that they have the products that consumers want, then all things being equal, the consumer suddenly cares a lot about the next thing down on their list, which is like, "Okay, my needs are being met as a consumer, is this a good place to do business with? Are they going to make a positive change in my community, in the world?" And I think that there is a need for that and desire for that in so many consumers. People can't agree on much of anything in America these days, but one thing that everybody can agree on dang near is we like our communities. I love Austin, Texas. I love the town that I'm from.

Gabe Krajicek:
That type of connection to caring about the place that you live in with the people that you interact with, that's very human. I don't think that's going away. And I don't think it gets replaced by technology. But that doesn't mean that I need to go into a branch to be reminded how friendly teller is. That might mean that I want to see that FI is doing good things in that community, so I'm proud to bank there, I'm proud to associate my money with their activities and know that I'm getting a full feature banking experience where I'm not making trade-offs. I'm not doing the good thing and getting the crappy banking experience, I'm getting the great banking experience and doing the good thing.

Jim Marous:
Given all of the priorities on the agenda for all financial institutions, from your perspective, what should be the first order of business for community banks as they rethink to position the banking ecosystem. If they just start a relationship with you, what would be the first thing you say, "You've got to fix this above everything else to start, and then we can build from there"?

Gabe Krajicek:
Well, if this is broken, then it's the thing that has to be fixed. If it's not broken, then you there's other things that could answer. But the thing that often is broken is the culture. And I am a culture fanatic. I don't believe you can create good things from bad things. If you want a good company, you've got to have a good culture with people feeling good about each other. And if you do that, then good things can come from it. And there are shining examples to the contrary of what I'm about to say, and they're amazing. When you work with those FIs, it's like such a breath of fresh air, it's like a sunshine hitting your face. You guys are awesome.

Gabe Krajicek:
But there's some out there that you go to a funeral home and you see more activity, more life than walking into the branch of that community FI. And that's not meant to be a slam, it's just like, where do you expect the energy to come from that's going to transform your institution and make it relevant to a new generation if you can't figure out how to make where your employees work relevant to them? You know what I mean? There should be pride as I'm walking into that bank and feeling like, "Man, I'm changing the community. We're the backbone this place, there should be energy and passion and a movement that they're creating to go make an impact."

Gabe Krajicek:
And I'm amazed by it because the story is so good. You take money from other people and help other people grow with that same money, you're like the fertilizer for a community. To me, you'd be walking 10 feet tall with your shoulders back, feeling like this is the most amazing job in the world, but you go to so many of them and the passion for it, the joy for it is missing. And when it's missing throughout an entire organization, there's no amount of cool checking accounts and digital marketing that we can throw at it to be able to fix that problem.

Jim Marous:
It's interesting you should say that because it gets down to leadership and culture. You mentioned leaders that are willing to embrace what's going on and say, "Let's get it done. We got... " And I've been fortunate to be at a couple of your events. And the one thing that's consistent is enthusiasm. And this isn't a marketing conference, so it's not just marketing people getting all up and amped up because we have a marketing conference and financial branding. That's great just because those people are just born that way. The reality is right now in the marketplace. I think my wife used to work in retail, the traditional retail store based retail. She was an extraordinarily high up in the organization and she loved it.

Jim Marous:
She then went to the digital side of the business and realized that immediately she became the enemy, because the people in the store said, "You're taking business away from me." And the reality was, she said, "No, the consumer's making decisions. My job is to make it so that consumers still want to come visit you in the stores, but I'm not the enemy. It's more important for you to understand what you need to do in the physical space to support digital, and is to push people where they don't want to go." And I think the biggest challenge we have right now is we have not, as an industry, make tellers and people in branches feel like they're going to survive the digital future.

Jim Marous:
We have not made product managers and people that work in the back office believe they'll survive. The reality is, I can tell you right now, I'd like to take every person in my community bank, that sit idly for hours waiting for a customer to come in, hoping they can make that good impression, that one person that comes in or tend to come in or 12 to come in, whatever the number is. And I like to give them the data would make them able to call up the people that I'm marketing to and say, "By the way, we haven't seen you for a while, but I just wanted to tell you, we really appreciate your business," and do onboarding, do cross sell, do opportunity analysis and do perspectives and give them recommendations based on their history.

Jim Marous:
And your organization creates this data, and if it's not spread across the entire organization so everybody has the 360 degree view of the consumer to be able to provide that, then those people are going to feel like they're expendable because they are. If all they can do is transactions, that is going to go away. Consumers will very soon realize that unless they need change, which by the way, a lot of places aren't even providing change anymore, so the money bags, the small bits that comes in, transfer funds, it's going to go away. So transactions overall are going to go away, engagement won't. And this gives you the opportunity to have an expanded call center as opposed to a strong brand system.

Jim Marous:
And it's funny because we talk culture a lot and your organization lives in it, I think what's important is you provide the tools to let them move forward. And I'm going to keep on saying this, that if it's Kasasa, that's fine, there's a lot of other organizations that have bits and pieces of business found on what you need to do. You can't go forward alone, it doesn't matter what's the size organization, you've got to move quickly and be agile. You got to be flexible. We talked about it in something I was at last night where we said, "You've got to be able to make iterative changes as opposed to thinking, you've got to do big, big, huge things.

Jim Marous:
Bankroll does two things, they love the big change and they love the ability to say we did something without even thinking, if it helped the consumer. They don't look at the consumer first. From a perspective of where we go in the industry, what is the recommendation, not what's the first thing, but what's the recommendation beyond legacy, culture and leadership that you really give to financial institutions? If you walk in their door and you walk in for the first time and you say, "Here's how we can help you," be it us or somebody else, "Here's really what we'd like you to do. You seem to have a culture, here's the next step"?

Gabe Krajicek:
Yeah. It sounds so simple, but it's a formula of two things. Have the products and make sure consumers know about them. If you can do those two things, you can do the job, but have the products is deceptively easy to say and very difficult to do because there's a ton of complexity that goes into that. And I think that when we look at community FIs, you're right, they like to do big new things. And it's like, there's not a culture in community banking. And in general, that's pervasive where there's like a test and learn kind of environment where you do iterative experiments and see what happen, and then you learn from that, and then you do a little bit more. And I would encourage that very strongly.

Gabe Krajicek:
One of the things that I've been a little bit... I've been not so sure that some of our clients were making the right calls, there's been a huge cush to redo all of the digital environment, which I led off with saying, if you don't fix it, it's going to be a huge problem. But fixing it inside of the existing banking ecosystem is a lot like running those telephone lines I was talking about before. And whenever you do that, and you're talking about potential core migration, online banking, bill pay changes, mobile banking changes, all these different vendor changes, all these notices to consumers, and the truth is, that about 85%, this is a Gabe Krajicek statistics, I made it up, but I bet you I'm pretty close, about 85% of consumers at community FIs are 100% satisfied with the digital banking experience.

Gabe Krajicek:
About 15% of them were looking for something better and they're going to be out the door real soon, so you better get them something. But the challenge is, do you really want to disrupt everything for 15% of the market? And so what we're working on at Kasasa is identifying solutions that community FIs can offer that meet the needs of the 15% and attract the consumers who no way Jose, they weren't ever going to Google for a community bank. They were going straight to Google to find an app or to find the metaphorical Chime, SoFi products.

Gabe Krajicek:
So we want to create products that attract consumers to the Kasasa brand that are more in that fintech channel, or can provide a niche add on without having to really completely read digitally do your entire user experience for all of your customers or members, because that's a disruptive lift. And if instead of trenching the telephone wire, we can just prop up a cell tower and say, "Look, new feature that works for anybody that wants it, it's on this separate system, it's over here, it works beautifully. It provides that niche service that consumers are looking for, but it did not disrupt the apple cart inside of the FIs existing banking infrastructure."

Gabe Krajicek:
That's more the direction where I believe things are going to go because again, I don't believe it's possible for the existing bank tech infrastructure to ever keep pace with the fintech infrastructure. It's not the same infrastructure [inaudible 00:41:25]same with what was there.

Jim Marous:
There's different purposes for different things. I agree totally. Gabe, thank you so much to be on the show again today. And I wanted to tell you that as soon as we start traveling more, I want to get down to Austin and have some barbecue and beers with you and keep talking about the financial services industry. It's a greatest time of opportunity we've ever seen and just hope that organizations take advantage of it.

Gabe Krajicek:
Amen. We'll do our best to fight the good fight for all those community banks and credit unions out there. I appreciate the time, Jim.

Jim Marous:
Thank you very much.

Jim Marous:
It's always inspiring for a banker like me, legacy banker like me to talk to someone like Gabe, who really believes in the ability for organizations to survive and thrive. Unfortunately, not everybody's going to do it, not everybody's going to listen. There's going to be a lot of organizations that go, "We're not broken." Suffice it to say that every organization today is broken in some way, and we've got to fix it, because the consumer has options. Let's hope everybody listens.

Jim Marous:
Thanks for listening to Banking Transformed, rated a top-five banking podcast. If you enjoy today's interview, please be sure to follow the show on your favorite podcast app. And don't forget to give our show a five-star rating. Also, be sure to catch my recent articles on the financial brand, and check out the research we're doing on digital transformation, retail banking innovation, the digital customer experience and financial marketing for the digital banking report. This has been a production of Evergreen Podcasts.

Jim Marous:
A special thanks to our producer, Leah Longbrake, audio engineer, Sean Rule-Hoffman, Viewer producer, Will Pritts. I'm your host, Jim Marous. Until next time, embrace change, take risks and disrupt yourself.