Back to Kasasa…Where does this fit into reality?

Since we launched Kasasa at First National Bank on May 9, 2011, we’ve had a great response from the community. Many of our existing clients are giving it a try and finding out this product is fantastic. We’re also seeing a good number of new faces coming through the doors at all of our branches to see what the buzz is all about.

I’ve also had a good number of friends, colleagues, and acquaintances say something like this in response to Kasasa: “Kasasa, yes, I’m still trying to figure that one out…”
Kasasa (i.e. rewards deposit accounts) does seem to fly in the face of everything a bank normally holds dear: we pay a modest rate of interest, don’t get too crazy with promotions and gimmicks, and don’t do anything that will make people wonder whether or not we really know how to take care of their money. In contrast, Kasasa pays a rate of interest most people would jump to have right now on a certificate of deposit, and we’re willing to pay it on a checking account. Kasasa is a word that sounds crazy and maybe a little gimmicky. And with the rates and the name, people may be wondering if we really know what we’re doing at First National.

The reality of the situation is that banking is changing. We are a small business, and we have to adapt to challenges just like any organization; lately it seems like we see a new challenge every time we turn around. For example, we are VERY heavily regulated, and the rules aren’t going to be loosening any time soon. Competition is also fierce as non-banks are starting to offer products we’ve offered for years. And, technology is changing the way everyone conducts business—including banking. We have more accounts and customers than we’ve ever had before at First National, but we have fewer and fewer people coming into our branches on a regular basis. As online banking, direct deposit, and smartphones become more and more prevalent, we are realizing we have to adapt in order to be successful and provide a relevant service you value.

Circling back to the original question, the reasons we offer Kasasa center around the ways we’re trying to adapt to our environment. If a customer meets three behavioral criteria on a regular basis he or she is rewarded with the high rate of interest and/or other rewards. These criteria are:

1) Debit cards – We earn money—interchange—whenever someone swipes a debit or check card. In addition, it costs us more money to process a paper check than it does to handle electronic transactions. If a client swipes her card a certain number of times (10) in a qualification cycle, then she meets this criterion.

2) estatements – It costs us money every time we generate and mail paper statements. It costs a LOT of money over time. Some estimates are that it costs more than $2/Statement mailed. In order to qualify for the account rewards, a client has to agree to receive statements electronically. The great thing is that this not only cuts costs, but also provides a couple significant benefits to our clients. First, estatements are environmentally friendly because they can be viewed online without having to be printed. Second, instead of having to wait on your statement in the mail, our estatements are accessible immediately after being generated through our online banking. In addition, the online banking site provides instant access to old statements so in essence you have an archive of statements at your fingertips.

3) The final qualification is to have one direct deposit or one automatic ACH (electronic) debit in a qualification period. One of our main goals in offering these new accounts is to develop clients who use us as their primary bank. We’d love to be the primary bank for all of our clients. Clients who have direct deposit or set up automatic ACH debits are more likely to use the account as their primary account. We’re trying to encourage that relationship.

Ultimately, in order for us to be a successful bank we need to adapt. Adapting in this case means embracing technology (debit cards/estatements/electronic transactions), cutting costs (estatements/debit cards), and growing relationships with clients so they use us as their primary bank (Direct deposit/ACH debits). This is a mutually beneficial development because we’re accomplishing our goals by offering superior products and meeting the financial needs of our local communities.
Hopefully, this helps a few of our Kasasa skeptics understand both the benefits and the reasoning behind the products we’ve introduced. It is possible for both sides to benefit in a situation like this.

I’d welcome your comments and feedback on any of this, and if you have questions about Kasasa and rewards accounts, feel free to respond.

Member FDIC Equal Housing Lender

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