The case for coopetition

Show notes:

• 0:00 Introduction, discussing the importance of a national brand and the fintech vendor landscape the community financial institutions face.
• 2:08 Craig talks about his role at Kasasa over the last eight years. He works in new business development, interacting directly with community financial institutions to mutually vet if Kasasa is a good fit.
• 3:34 Explaining that even though Craig is essentially in a sales role, this episode is focused on sharing the things we’ve learned by partnering with hundreds of financial institutions over the years. It’s not a sales pitch, it’s a knowledge sharing session.
• 4:20 Craig talks about his experience with how community financial institutions approach the partnering process.The process of evaluation has become more streamlined over the years. Leaders have to be more strategic in their approach. There is much more longterm thinking involved. The process has definitely evolved.
• 6:00 Who is it that community financial institutions trust? Why do they place so much faith in the regional and national associations, such as CUNA and ICBA? The sense of peer support is important, as well as knowing that somebody is advocating for their institution and listening to their challenges.
• 7:50 What is coopetition? Why is that an important concept for Kasasa and community financial institutions? 30 years ago, 70% of the deposits sat with community financial institutions. And out of every 10 accounts opened, 7 of them were opened at community financial institutions. 70% of deposits in 2019 are sitting at a top-10 bank. And 8 out of every 10 accounts opened happen at a mega bank. This means that many community financial institutions fighting over the 20% of accounts that megabanks haven’t captured. In reality, if community financial institutions could move from fighting each other over the 20% to recapturing the 80% from the top 10 banks, it would allow everyone to accomplish more.
• 11:00 When you consider how competitive your financial institution really is with megabanks, you have to look harder at your technology and consumer experience.
• 11:35 Describing a situation in the greater Nashville area where multiple institutions were vetting a partnership with Kasasa, but felt hesitation about offering a product that was also being promoted by nearby institutions.2 of the institutions were in the $200-300 million asset size, and the third was in the $1.3 billion asset size. The large institution was concerned about it diminishing their brand to be seen as offering something that smaller institutions also had. They also worried that it would hurt overall performance.The smaller institutions were worried that the larger institution would overshadow them.
• 14:35 Ultimately, they were all trying to figure out how to share the remaining 20% instead of seeing that the national brand could help them capture accounts from the megabanks.
• 15:20 The institutions saw exponential growth, even beyond what they would have expected to see launching Kasasa individually. This stemmed from the “rising tide lifts all boats” phenomenon.
• 16:45 Talking about the Shared Branch Co-op network and how Zac uses it to access his primary credit union in Texas all the way from Colorado. A good product is a good product, no matter where, or who is offering it.
• 18:00 Consumers know that community financial institutions will offer them better service, but they believe that megabanks will offer better technology and products. The truth is that many community financial institutions offer products and technology that are competitive with megabanks. A nationally branded product lets you take advantage of the social validation that comes from hundreds of thousands or millions of consumers already using it.
• 20:40 Promotional break for Kasasa Exchange.
• 22:08 Zac tells a story about how his wife missed a particular brand of mayonnaise when they moved to Colorado from Texas. And then he found it at a grocery store he doesn’t usually shop at.
• 23:05 It isn’t about one particular national brand. It’s about the idea that any national brand with a widespread following can draw in consumers who wouldn’t have otherwise chosen your institution.
• 23:45 Taking about the importance of partnering with vendors who can help your institution scale. Kasasa has seen the principle bear out in dozens of markets, from large urban markets, to more sparsely populated rural markets.
• 24:35 What are some pitfalls of the partnering process? If you’re partnering with a vendor who is bringing a well-rounded solution to the table, a consultative solution, there are a few things that need to be in place.You need have executive buy-in at the C-level. The front-line staff will mirror the enthusiasm shown by management.You also need to place a high degree of confidence and trust in the partner and implement their suggestions. It’s like going to a gym and asking the personal trainer “how much weight am I going to lose?” and they ask you “How many pizzas are you going to eat?” Essentially you need to be committed to the process. The key to experiencing “typical” or above-average results is committing to follow the recommendations of the vendor and ensuring executive buy-in.
• 29:50 There are institutions who might consider developing certain products in house. How do institutions decide which products to outsource to a vendor or to develop in-house? It’s important to make sure that you understand all the components of a product or service before you bring it in house. Usually vendors have developed multi-faceted solutions and you need to replicate those in order see comparable performance. Kasasa brings a consultative aspect to every partnership that can’t be replicated in a DIY scenario. Automated marketing is another thing Kasasa helps with. Some institutions can handle this, others can’t. Kasasa brings training for front-line staff. These are all things an institution could decide to do in-house, but the complexity is high, and the results may not be comparable.
• 36:28 There’s two different ways you can innovate: 1) By bringing something different and unique to the table and changing the direction of the industry, but that’s easy to copy once the patent wears off, 2) By making lots of micro-innovations you can build up a competitive edge that is cumulative and very difficult to replicate.
• 38:20 It’s a big challenge to lead a bank or credit union and decide which vendor decisions will pay off for 5, 10, or 20 years.
• 39:15 Episode wrap up. Craig recommends two books: 1. Love is the Killer App 2. Radical Candor