Community banks tap national program

Kasasa isn’t a bank. Bankers say Kasasa is ammunition in the ongoing battle between community banks and their larger counterparts.

With roughly 450 financial institutions on board, if Kasasa was a bank, it would be the sixth largest bank in the United States, representing about 1.4 million accounts.

“That’s the power of Kasasa, the power of scale,” said Jody McCrary, vice president of B2B marketing and sales strategy for the Austin, Texas-based company. “It’s a challenge for small banks to compete with the big guys like Bank of America and Chase because they have all the resources in the world. Kasasa helps level that playing field.”

At its core, Kasasa is a collection of banking products – such as savings and checking accounts – geared toward rewarding customers and saving banks’ and credit unions’ money on the bottom line. But local bankers say it offers more than just a free checking account – it offers a way to fight back through pooled resources.

Of the 5,401 community banks tracked by the Federal Deposit Insurance Corp., a handful around the Ozarks take part in Kasasa. While a complete list isn’t available, Springfield Business Journal identified Mercy Credit Union, Mid-Missouri Bank, OakStar Bank, Old Missouri Bank and Southern Bank in the area.

Springfield-based OakStar Bank joined about 18 months ago to help boost accounts.

“We’re striving to gather deposit share,” said Chief Operating Officer Rob Buchanan, of the bank’s roughly 1,300 accounts. “Our loan growth has been phenomenal, but we needed a way to attract and retain new accounts. We heard about Kasasa though the (Independent Community Bankers Association) and we sent a group to Austin to learn more.”

The 12-year-old bank currently is the ninth largest in southwest Missouri based on its total market deposits of $360.1 million, according to FDIC data as of June 30, 2016.

Across the south side of town, Bank of Sullivan launched Kasasa a few weeks ago with a similar goal.

“We’re newer to the Springfield market, we need to grow that base,” said Jeff Brown, executive regional manager for the bank’s western territory. “As of today, we have 183 Kasasa accounts, about half of which are new to the bank. That’s a good bump.”

Win, win?
So, what exactly is Kasasa? For consumers, Kasasa is cash back – either in the form of rewards or high-interest yields, with more than $100 million in rewards paid out to date. The program offers multiple free checking account types, depending on need: one rewards users with a high annual percentage yield – 3.01 percent at OakStar – the other rewards users with 4 percent cash back on up to $200 in purchases a month.

“For most people, $200 is easy to spend out of the account each month. That’s automatically $8 back,” said Buchanan. “For others, who might keep a larger balance in their account, that interest is key. It can really add up.”

Kasasa also offers a savings account and refunds ATM fees nationwide.

But all of those perks don’t come with a few stipulations. Users must make 12 debit card transactions a month, sign up for e-statements and process one automated clearing house payment a month. ACH payments include direct payroll deposit and automatic bill pay.

“We are rewarding people for things they do already,” said Brown, at Bank of Sullivan. “But they are also things that are good for the bank. Each of those actions costs us less money and makes us more money.”

Take e-statements for example, not only does it cost the bank employee time, paper and postage to send the statement, Brown said studies have shown about 87 percent of customers don’t even open the statements.

“It’s a waste of money all around,” he said. “Plus, e-statements are more secure. Your bank account information isn’t just sitting there in your mailbox.”

Other elements, such as debit card transactions, earn banks and credit unions money each time they’re swiped.

“Banks get a certain percentage of that transaction as paid by the merchant,” OakStar’s Buchanan said, noting percentages vary based on a complex matrix tracking everything from if the customers signed or used a PIN number. “That literally costs us nothing, but it helps our bottom line.”

Banks don’t get off free. Kasasa charges a variable fee to be part of its network.

“The fee varies based on the institution,” Kasasa’s McCrary said, declining to disclose specifics. “There generally is a fee for setup and training. The ongoing fee is based on the number of accounts the institution opens, among other factors.

“It’s kind of a pay for success model.”

Local bankers declined to disclose details, but say that fee is augmented by the services the banks get in return.

“They take the cost of things like marketing and spread it out across the network,” Buchanan said. “It’s helping us combat the big banks because we get that increased presence, but we aren’t fighting it alone.”

Going forward
Over the past two years, McCrary said Kasasa has grown its network by 100 banks a year, and she expects that rate to continue, if not increase.

Brown said the problem is systemic nationwide, noting 20 years ago only about 30 percent of all deposits were controlled by big banks. Today, it’s roughly 70 percent.

“The whole reason we exist is to work with local banks,” McCrary said. “Community banks can’t do it on their own.”

According to the FDIC, community banks are somewhat holding their own. Net income for the 5,401 community banks in first quarter 2017 totaled $5.6 billion, an increase of $522.9 million – about 10.4 percent – from the first quarter of 2016.

New accounts and new deposits primarily come from millennials, Kasasa’s target market because of its heavy reliance on technology to bank. However, local bankers say it’s not exclusive to that generation.

“Think about the high interest rate accounts,” Brown said. “Those primarily aren’t for millennials. They can benefit that older customer who maintains a higher balance month-to-month.

“But it’s all relative really. My mom is 75 and she uses her smartphone to bank.”


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