Banking on Digital Growth
Banking on Digital Growth

Episode · 1 year ago

111) #InsideDigitalGrowth: Niche Is the New Local - A Fireside Chat

ABOUT THIS EPISODE

The old model for financial brands was always based around geography — find your local market and serve it.

These days, there are no local markets…

Only niches.

In this very special episode, I join Mary Wisniewski and Jeffery Kendall  to discuss how to harness the power of niche in your financial brand.

We cover:

- Why niche is the new local

- How to build a portfolio of niches

- How to find a niche to target

You can find this interview and many more by subscribing to Banking on Digital Growth on Apple Podcasts, on Spotify, or here.

Listening on a desktop & can’t see the links? Just search for Banking on Digital Growth in your favorite podcast player.
 

Hey, it's James robert. Thanks so much for joining me for a special Inside Digital Growth episode where I'm going to be sharing insights from a conversation that I recently had with Mary Wischnewski, banking Editor at Bankrate, along with Jeffrey Kindle Ceo of Nimbus about the opportunities four financial brands to create and capture capitalize on when it comes to niche banking because I truly do believe niche is the new local and new starts. Now. Mhm You're listening to banking on digital growth. With James robert lay a podcast that empowers financial brand marketing sales and leadership teams to maximize their digital growth potential by generating 10 times more loans and deposits. Today's episode is part of the Inside Digital Growth series where James robert shares, answers to some of the biggest digital marketing and sales questions he gets from the digital growth community. Have a question you want to get answers to on a future episode, visit www dot go ask jr dot com to submit your question today. Now let's go Inside digital growth greetings and hello I am James robert, ley and welcome to the 111th episode of the Banking on Digital growth podcast. Today's episode is part of the Inside Digital Growth series and it's a special episode because I'm going to unlock access to a fireside chat that was recently hosted by the financial brand, where I was a guest joining mary Wisniewski, Banking editor at bankrate, along with Jeffrey Kindle Ceo of Nimbus, who has also been a previous guest of the banking on digital growth podcast, going back to episode # 71. During this fireside chat conversation, mary Jeffrey and I, we really focused the discussion around three key areas Number one while leveraging speed is necessary for banks and creditors to move ahead instead of just catching up to the digital curve. Number two, we talked about how to avoid the take out menu of features and services and instead provide real customer real member value and the number three, we talked through the risk versus reward perspective, what that looks like for banks and credit and striving to achieve meaningful digital growth, meaningful digital transformation. Now, to be really fair with you, I want to give you a heads up that this episode runs a bit longer than the normal 30 minutes or so that we normally take here as part of the inside digital growth series, but the extra 30 minutes on the back end are so worth it. And because this is a special episode, I also want to do something very special. Something extra special for you that stick around after the fireside chat conversation. Normally, I answer a question from the digital growth community as part of the Inside Digital Growth series. But today I'm going to turn the tables on you. I'm going to ask you the most important question that you can ever ask yourself, That you can ever ask your team, that you can ever ask your financial brand. And it's a question that can massively maximize your financial brands future digital growth potential, let's get into it, you know, before we get into the heavy of it, I just thought we'd set up a little bit of the back story, you know, digital transformation, something we've been talking about for years and so it's hard to, you know, feel like it's just as important as it was a decade ago. But a lot has changed, you know, decade has happened, we are in this moment in time where we've been in a pandemic for more than a year. Digital banking has been accelerating and also the numbers for community banks has been positive by F. D. I. C. S. Counts. So almost, you know, paints a positive picture, but we're in this industry, we know there are cracks, we know there are problems, we know there are challenges for the consumer experience, but we also know there are more opportunities. So instead of like talking about doom and gloom, we're gonna be talking about possibilities how to grow your customer base markets that you might not think about. That could be really helpful for growing your customer base and with that kind of as the landscape, I wanted to kick it to Jeffrey to just sort of not only tell us what's at stake here, but also what's what are the possibilities here? Well, thank you mary and and James roberts. Great to be uh another webinar with you guys always morning. And these are always really really fun conversations, lots of good different perspectives here. So, so excited about it. But one of the things that you know, when I, when I think about where banks and credit unions are today with regard to growth, I think one of the challenges is there's really two large amounts of pressure that are coming on banks and credit unions. One is the...

...competitive angle from large money center style banks that really have unlimited amounts of money when it comes to budgets to putting together really, really robust digital transformation programs. And so I think there's an advantage there with the large banks that the tier two and tier three banks don't necessarily enjoy to that extent. And then on the flip side, there's a lot of new challenger banks and neo banks that are coming up and even non traditional financial institutions that are creating financial services for people that may take away from the need to have all your money tied up with a community bank or credit union or regional bank. And so if you're if you're in the middle and you're sort of getting squeezed or compressed by both sides of that equation, you have to look for new opportunities to grow your customer base as well as grow the number of products that you can distribute to those customers, those channels. And so that's one area that that we as a company have been really, really focused on, which is saying there are more opportunities for new customers and new product opportunities for banks and credit unions than may meet the eye. And we think that some of those possibilities are enabled through digital banks and digital products and digital brands. And so we are big advocates of thinking about market segmentation and going to market and creating new digital channels so that you can serve new new customers and new products and so we think there's a tremendous amount of opportunities and I know we'll get into some of those details through this dialogue. You kind of just made me want to get right into it. Now, I've heard the phrase, well I guess I created this more of the term of the hobby bank that I know from Nimbus standpoint, it's the niche bank and you're seeing this from the syntax side of things, you know, as you mentioned, challenger banks or they're getting more competitive, but now you're also seeing them go after very niche markets. You're seeing like daylight going after the L. G. B. T. Q. Community Purple is the new bank that's helping people with disabilities. And it's getting more precise but also Nimbus has been doing this as well. You have some brands here that have been very niche. Let's let's talk about them just so the audience has an idea of what we mean exactly by market segment. I know that James will have a lot to contribute to this topic. But I think, you know, great companies, even outside of financial services, great companies focus and start with the customer and they start with the customer needs. And that's that's really where where I think the whole concept of niche really, really plays out. So the idea is for decades and maybe even centuries now banks have traditionally gone to market and thought about their customers with relation to a geography. It was, you know, abc community bank that's downtown on Main Street. It was first Interstate Bank in Idaho or or things that were very, very focused about going to market in a geographic way. But the challenge with that is that as consumers are financial needs don't emanate from our geography. Our financial needs emanate from our personalities and from our lifestyles and from the things that we value and care about as consumers. And so the opportunity for niche bank marketing is to say, how do you connect with a group of customers based on that next level of deep financial need that comes from the fact that maybe they're a lawyer and need access to a bank that provides specialist products that serve law firms. One of my favorite examples of banks that we've launched and support is Bank NV, which is a bank that's focused on recently graduated medical students. Those are our niches and qualities and personality characteristics of people that you can see needs for their financial services and financial products generate from that peace, Not just the fact that they live in central texas or something like that. So I think that's that's what we mean by niche. And I can't help but say I can't help as you're going through. You talked about the legacy way of a go to market strategy, Jeffrey. It was traditionally and we can go back to the industrial revolution with this because it was always product centric, we're gonna build a product and then we're gonna go to market and we're gonna try to find people that identify with that product. But now we've heard terms of human centered design or what I call even human centered growth to where geography ease. We see this with covid borders have fallen by the wayside, zip codes have blended together and niche has become the new local and that niche really is in the mind of the consumer, their questions, their concerns, their hopes, their dreams, and when you take a human centred growth approach, you put people at the center of all of your thinking and doing and then bring a product to bear wrapped around as the prescription and the cures to those people's pain points 100%. And that's where banks and credit unions have the opportunity is to start with the market...

...because the art of the possible with products is pretty broad. And once you understand the mindset of a customer, that's when you can create great profitable, high growth products, very hard to go to market. As you know, James you have talked about this a million times, which is if you're trying to be everything to everyone, you end up being very little to everyone. I can't help but think of a book from Seth Godin written, I think it was back in 2011 called we are all weird and Seth Godin was tapping in to the differences that we all bring. There are common patterns across market segments, demographics even. But then the deeper that you can go in is where you really find the formulaic approach to growth framed around a unique persons group or group of people, those specific opportunities right there completely agree. Do you guys think I've heard this in a previous interview that um uh executive had mentioned, he knew this is sort of like a renaissance of the credit union model that for digital banking brands. I wondered, you know, if you think it's sort of a throwback with a little twist here, I'll let you go James but definitely have a point of view on that too. You know, it's it's interesting if you go back to the credit union model, it was started traditionally with a segue, a select employee group and there was a built in affinity tied to that. But then what happened is credit unions went community credit unions went regional and they got further and further away from that select employee group where there was a built in affinity. So it's almost like the old proverbs, there's nothing new under the sun or what is old is now new again to where, where the affinity is not necessarily with an employer, but lifestyle choices, belief systems, the very pieces that make human beings what human beings are absolutely. And and it can be something that what I think is interesting about niches is that you as as individuals our needs and what affinity we belong to might change over time. Sometimes we belong to a niche for a very short amount of time. And sometimes it's for an extended period bank that we just launched this week at the announcement. The pre sign up for the bank is called Hitched and Hitched as a bank for newlyweds. And to help people who are coming together in a relationship sort of understand how that affects their financial product needs and and the dynamics of finances with the newly a newly wed couple. And so that's one of those ones. They say, okay well you're not a newlywed forever. Right eventually the honeymoon's over and into the long term side of these things. But it's even interesting for banks to say I might develop a relationship with a person at this point at this stage in their life with very targeted products and marketing. But then I need a strategy to help them migrate through the rest of their life journey. And what I love about that, that approach is it starts with the customer. It's this doesn't start with we need more deposits, we need more, you know better, you know non interest income and things like that. It starts with what's the real need and how can we as a financial institution help someone at this point in their in their life journey. And that opens up so many more opportunities when you start with that humid centered growth approach to solving a person's problems. Take the newlywed model. It also allows deep level expertise to be your part or part of your go to market strategy to complement the banking component as well. And then it also allows for alignment with others who are now serving that newlywed market as complementary to their services as well. And I you know, I can't help but just think about what my wife and I we do pre marriage counseling for couples that are getting married and finances. And there's a program called prepare and Rich and it's a it's a diagnostic of sorts to where you can identify where there might be some pain points with a couple finances is traditionally one of the very top pain points that we see. So I see even alignment opportunities with like brands serving that similar market segment. Absolutely. I I remember back to when I was first period, there's a difference in how you look at money. You know, we're all as individuals. Our relationship with money is can be very different and trying to combine two people with different points of view on on money can be a challenge so that you're definitely spot on. You guys are bringing me to a small aside. I remember I went to like a christian lobaton chat and he was like referencing his wife was hiding them her purchases of lobaton from her husband. That he said something like she just said that was like for her gynecologist, like, you know, they're...

...just like different ways you're communicating um when you're in a relationship but you're not. So I think it's just so curious of what what tools are beneficial and what tools are non beneficial, but also with this, when you, when you really know your market, I mean of course your bank, your idea in your customer and you get a bunch of data about them. But there seems to be like another data opportunity here where you're learning even more which can help with product development but also like marketing and I'm curious what do, what you two think are some of the data advantages? Well there is there is definitely a there are advantages once you understand the spending patterns and the financial patterns of a very specific market or consumer group. And one of the things that that I'm seeing is the amount of interest and the amount of large consumer brands who are understanding now, if they get more deeply embedded into the financial side of their customers lives, that that creates an opportunity to have a lot more data about their customers. So even large retailers who traditionally have had no financial services products or maybe at best a co branded credit card with loyalty points or something like that, they're starting to say if I could have half of my customers use banking products that I could understand, the data from the road map of somebody's financial life that I could see and understand from understanding their transaction history or their banking patterns. Consumer brands who traditionally are very, very aware of market segmentation and understanding consumer are looking to get into financial services because they see the huge advantage of what they can get from the data about financial services for their customers. So that's it's a little bit different if your if your bank or credit union today, you should be thinking that that is going to be a competitive pressure coming into the market. But it's also a testament that, you know, people, even outside of our industry are lathered up and very, very ready to get into that data when given the opportunity and it's coming. And you bring up an interesting point because as you started your thoughts previously, you mentioned the big bank who has just, you know, an unlimited budget to tap into. You have the Fintech space, but now you're introducing a new villain, if we may, which is which is a consumer brand. And I think that's a it's something that a lot of us have never really thought about before as a potential threat. But it makes a lot of sense. Another area that I'm seeing as well is really on the accounting side. The HR side brands that are coming into the space that are now offering financial products as well. Because it all comes back to this point, as you mentioned, mary it's the data and it's like we know more about the lives of our account holders, we have the potential to know more about the lives of our account holders. Then they probably even know themselves because as you mentioned, Jeffrey, this is all about pattern matching. Pattern matching can then fall back into habits and when you can identify the habits it really begets the next level of that human centered growth approach to make those products even that much better because they're framed around what people are actually doing and not just what they're saying because what someone says is one thing, but what someone does, that's the actual truth of the matter, completely agree. Yeah, I know it's interesting because people always ask me like, well what happens when we run out of niches to go after? And I kind of say like that's a that's a big hypothetical because I can't see the end of you know, they're being an end to the niches. Some of the things that we hear every single day are so creative, but I do but I do tell people that not every niche is a good niche to go after either. And so, you know, we could all come up with very radical crazy ideas. I think part of what you have to think through, as you're thinking about whether a niche opportunities, number one, what's the tam? Can you actually put a number around how many people are in that group? Because If you create a niche and there's only 50,000 people in the us who match that pattern that may not give you the volume and the lift and the capability to go there. So understanding what's the sort of minimum size that you could define a group of people from, I think it's really important. And then the second thing is what's going to be the hook? We talk every day, hours day at nervous about what the hook is and for us, the hook is what's the compelling feature product or capability that's going to make it worthwhile for someone to switch their account from, say Wells Fargo over to the niche bank. What's that piece of it? And sometimes that's a financial product. Sometimes that's access to expertise as James robert was mentioning earlier. Sometimes it could just be an incentive. Like, you know, maybe it's free red sox season tickets or something like that. But it's got to be strong enough and tied into the...

...thesis of the bank that it did, it really connects and makes sense. And so one of my favorite niches is the gig economy, you know, with the growth in this country and globally about people who choose a career now that it's gig focused, either, you know, transportation or sharing assets like your house or delivery or you know, Covid has really brought this concept front and center even and it was even prior to Covid. So I like the idea of focusing on people who have differentiate financial needs in the gig economy. And some of those things might be when you choose the gig economy as your career. It's a big issue because you're an independent contractor. Managing your long term savings and retirement is an issue because they don't have the concept of a four oh one K. Program that may be enjoying a traditional career health benefits. All these things come in and you start understanding the mindset of somebody who drives an Uber for a living and now you can create these really interesting products that are meaningful to them. So that's one of my favorite niches that's out there for years. Yeah it mine revolves around like sports because there's such a built in affinity. Like right now it's we've got the N. C. Double A. Tournament, March Madness. Anything that drives emotion like an emotional pool sports very closely aligned with that is dogs and cats pet lovers. Because there's something about the emotion that drives so much buying behavior. If you think about dogs and cats, you have chewy dot com, you could go and buy the same products off of amazon, but the question is is why do people choose and it's a choice to shop it chewy? And a lot of it comes down to affinity. A lot of sometimes it comes down to expertise as well. Another example of this is our ai because it's a built in community of like, minds who are all journeying towards literally with our ai this outdoor lifestyle. So I think when I think about niche, I think about strong emotional tie that really helps to move the needle for someone emotionally. I love that. So now, yeah, so attendees, you've got some ideas now to to riff on to again drop it and drop it in the chat. And I do, I want to dial up for the for the gig as well, because also like that kind of individual won't even know how much they're making on any given day necessarily. Or like the income volatility is wild. So like that is such a ripe opportunity to innovative and I I can only think of a few examples I think PNC was building new. No, I don't know where that stands right now, but it's definitely a right barrier as our emotional anything. Well, as you, as you mentioned, kind of the up and down of, you know, I can't help but think of like, you know, a spot me integration to, to wear, hey, I need to get to bridge this gap in the short term. I know that I'm going to make it up. Can you, can you just spot me this and emotionally that's going to take some pressure off of someone because when those emotions start to rise, we don't necessarily make the best of choices. But when we have that sense of calm and peace that someone's going to take care of me and watch, that reinforces, you know what they took care of me, That increases brand loyalty and oh, by the way, I'm gonna go tell all of my other gig economy friends and my gig workers that, hey, this is what this brand did for me. I think you should maybe consider them. That's the most powerful marketing channel in and of itself, even in this digital world that we're living in right now. The referral. Yeah. And you can see that, you know, being very vibrant from like chime borrow and again, these are broader challenger banks, but I know there are getting crazy referrals just from like either really stimulus or, you know, being able to get like that spot me or the early pay day. It seems to be the hook as you were talking about Jeffrey to bring in a wider audience. But I think it's just so important, you know, checking account is very much commodity products, you need to like learn someone um you know, who are solving one of their problems, one of their serious problems. I think that's a great, well you bring up some, that's really interesting, which is, let's just take varro and chime is to, you know, challenger banks that have emerged as digital only players and they got there because there were special features or capabilities or hooks to draw them in like the hourly wage access. One of the things that we do, a lot of thinking about is how long can that last? So when you, if the differentiating is an easy product to emulate or to copy, then you've got to keep ahead of the curve. And I think some of the early digital banks that were founded as just digital brands were so broad and their hook was really around convenience, like simple for example, they were the pioneers in digital banking, but five years after they were founded, the traditional banks and credit unions had woken up and really gotten their digital capabilities and self service tools into a point where it wasn't really that different. You know, I I had a chase checking account and a simple checking account and frankly I couldn't tell the difference between the two from a product of an offer perspective...

...at one point. And so I think what happens in these banks is if you just have a week hook or one that you're just completely dependent on like early wage access, you have a threat of being disintermediation because then people just add that product into their banks and looking not very different. And so I wonder if chime and borrow just over time if their brand and their approach is so broad that they'll end up just being just a normal bank, you know, that just doesn't happen to have branches and that sort of thing. I've got two thoughts to that one is on the simple side because we were studying simple, right as they were coming out of the gate and studied them for probably about five years even at the point to where about 100,000, you know, of those accounts, it wasn't, it was all through referral acquisition I mean, but the niche market one could argue it was maybe more of the techie people, the early adopters the first mover, so, but then it kind of went a little bit more broad, varro chime one that we're following now is aspiration and you mentioned Wells Fargo from, you know, how do you get people to move their money from Wells Fargo? Well, aspiration is leaning into the pain points and it's, you know, a lot of people don't know where their money is being invested and so aspiration is being very bold by saying we're not going to invest, you know, in oil and we're not gonna invest in guns and you know, very hot political topics, but aspiration is, you know, put their flag in the ground to where now they're literally wrapping their whole product even around, you know, plant you swipe your card, plant a tree. So it's a very purpose driven and I think that's kind of where this conversation goes, at least in my mind, coming back to your point mary about about, you know, is this like the results of the crediting and model niche markets? We're having to re examine why we're doing what we're doing in the first place, number one and number two, Who are we doing this for? It's like the why the who then the what than the how? Well, it's funny, it all comes back to basics, doesn't it? It's sort of this is why I love talking with you James robert because you understand marketing and you understand that this is this marketing is sort of universal. And we talked about this uh prior but it's like it was interesting like five or six years ago, people start saying, well banks are technology companies. All they really are technology companies that are providing assets to people. And I actually have a different perspective now. I think banks are marketing companies and if I if I already asked, you know, 10 ceos of banks whether they're a marketing company, I bet I'd hear zero yeses. But it's almost like well you need to be a marketing company. That's why chime and borrow have done such a great job is because they've really over indexed on understanding how to go to market and do customer acquisition things like that. So I think for people on this call I just you know sort of say I think that banking is going less about being tacked. That's an enabler, that's a tool. But you have to really understand your consumer of your product and the basics of marketing. 101 tech is just a multiplier. It gives you leverage. But it all comes back to this idea of of marketing which I would even frame from the sense of of of growth acquisition positioning uniqueness in the marketplace. And what is that if we're gonna keep simplifying this and coming down to like the zero sum, it's understanding human behavior, people, what drives them getting even more basic masses, hierarchy of needs, what do people want? They want to, you know, feel healthy, they want to feel wealthy and that's not being a Brazilian air. It's just, I don't have to worry about money and they want to feel happy. But money is the thread that connects all of those different points together. Because an unhealthy wallet leads to and this has been proven multiple studies. Unhealthy wallet leads to unhealthy like physical fitness. Unhealthy wallet leads to, you know, mental challenges. And so it's almost like if we can transform a person's truly transform their wallet, we can really have the potential to transform their lives. I wanted to zoom in back when you were talking. I think my dog was sparking to underscore your message. But um, and then I, I put the further on to make him go run in my closet. That's what he does. But yeah, yeah, but it's that cut and paste that always comes up in this industry, you know, like you do something edgy then the big bank with all that money is just going to do the same thing. You know, even when I log in to chase now, I see a lot. But it's like, you know, you can link in your other bank accounts, you can do auto save in a more interesting way. You know, it's, it's hard. I used to think there should be a segment you stole my look, but it would be fintech versus bank or bank versus vintage because it's such a yahoo weren't that I could be a judge, but it's just such a problem that seems almost inevitable. But as you know, as bankers are going after a more specific audience, it seems like sort of a loophole to this. And I'm curious if that's how you think about it too or you know, how do you think focus on a very specific audience might help with...

...this ongoing dilemma. It definitely, it comes back to getting that product offer right, and understanding it. I mean, that's that's why I really encourage people. It's like if you don't have a strong marketing team right now and you're ceo of the bank like today, go start figuring out how to make a super strong marketing team because exactly the question that you just asked would only be really able to be answered by a professional and sharp marketing team, which is how do we get ahead? How do we make a differentiated offer and how do we identify the target that we're going to go drop that onto? And that's where the advantages and there is a speed to market And the time to market component of that. And that's one of our things is so important to us in our value system is getting banks launched quickly. That's why we focus on getting it done in 90 days because we believe that's the speed that the market is moving at. And if you really want to go own a segment, you want to own a niche, you've got to start now or it will be gone. You know, one of the things I see right now is there's a ton of offerings for of new digital banks that are serving the black community. It's like, okay, well how are you gonna do? You know, and and there's like four or five in the wings waiting right now who haven't launched? They've announced they're launching their coming to market and I'm sitting there with sort of popcorn waiting on, who's going to come out with the real hook that's going to matter. It gets them, launches them into success because it's not going to be all of them. Right. I tell people all the time I said that, you know, the road of digital banking is littered with failed banks. Right, Simple. You know, they're they're now basically defunct and it's really sad, but there's a reason that these things sort of come up and and shut down and we'll do that and it will continue to do that in volume. So technology has transformed our world and digital has changed the way consumers shop for and buy financial services forever. Now, consumers make purchase decisions long before they walk into a branch, if they walk into a branch at all, but your financial brand still wants to grow loans and deposits, we get it. Digital growth can feel confusing, frustrating and overwhelming for any financial brand, marketing and sales leader, but it doesn't have to because James robert wrote the book that guides you every step of the way along your digital growth journey, visit www dot digital growth dot com to get a preview of his best selling book banking on digital growth or order a copy right now for you and your team from amazon Inside, you'll find a strategic marketing manifesto that was written to transform financial brands and it is packed full of practical and proven insights you can start using today to confidently generate 10 times more loans and deposits now back to the show. Well, it comes back to something that I've seen, you know, doing this almost 20 years now that I diagnosed as R&D. And that's not research and development. That's rip off and duplicate. Uh, someone said something and they want to bring that in. I was so appreciated that one James Robert. I love that. I was so inspired. I was, I was a freshman in high school. It was Miss bungalows ap english class and she had a, a poster on the wall and it was the old poem. Two roads diverged in a wood and I took the one less traveled and, and that has made all the difference. But I always looked at that poster and I didn't want to go down either path. I've always wondered like, well what if, you know, we rewrote that and said two roads diverged in a wood and I blaze my own trail down the middle. And I think this idea, that's, that's where it's like let's go down the middle of the woods and see what's there. Do some exploratory work first to see if there's a market opportunity. It comes back to like asking, getting really good at asking people just good questions is really kind of the foundation of all of this and then let let their answers. People will tell you what they want And what they don't want and then launch 90 days and then come back learn optimized iterate making even that much better. But this whole idea is a very different way of approaching the market of just approaching growth for that matter. Because if you think about building a branch right, you build a branch, it's done. You can't really optimize the branch. Maybe you can change the colours. But this is just continuous learning evolution and that's what leads to exponential future growth, I believe. Absolutely. And it starts with the interesting thing, so I'm new to Nimbus, I became the ceo of starting in october and when I came here, one of the first things that did was invested in building out a world class internal digital agency is what we call them. And we gave it a name called Nimbus Labs and we just did a press release on it this week, but we've been working with them to slaps for for the past couple of months. And one of the things that we have majored on and the reason...

...it was the challenges, I'm ceo of a software company. And when you start doing things like building out digital agencies, investors and people look at you with sort of the R. C. A dog, you know, tilted head like what are you doing? What? I don't understand that what I told him is like even though we're a software company, what we're trying to do is drive outcomes and outcomes have to be measured and outcomes start with data. And if we don't have a great capability of understanding market data ourselves from our customers customer side then we're not gonna be able to help our customers as much. So we majored on investing in a team that all they do now is look at data and demographic data and different things to support with data. Some of these niche concepts that come up. So if somebody says, hey, you know, I think we should start a bank for truck drivers, we can go, hey okay intuitively we get that. Let's go spend a week and a half really researching that segment of the market and figure out how big is it. Can we actually go to market? Is there a route to talk to that specific segment and start there And then really help when we walk in with our bank and credit and customers, we don't have all the answers because we're not the only smart people in the world, but we can at least start with something because this is a data driven decision about how we're going to do something new and different in innovation versus just come up with uh oh here's another wild idea. It's got to be back with data, right? So and I've seen I'm sorry mary, I've seen that work, I've seen that work that that team is doing Jeffrey and it is it all starts with the people and it it starts big and then it gets smaller and they get smaller and then it gets smaller. And I think I'm curious and maybe mary you're you're gonna go here as well because we are talking about this the other day, this isn't what is the ideal optimal size? Because that's how I think, I think like let's start with the end in mind and then let's back into that. And you had shared something that that I thought was really, really important because you go truck drivers, okay, what's the market segment look like? 2 to 3 million. One of about 2 to 3 million. How many people do we actually have to acquire to say, you know what, this is a worthwhile strategy to continue to explore and invest in? Yeah. And it's interesting, I think it's a moving target, but it's you know, when we go in and we talk about a new niche, whether it's consumer focused or whether it's small, business focused or corporate focus obviously makes a difference in the quantity that you need to be to really sort of say, how many, how many customers do we have to have at a minimum to be successful with the digital bank. And what we found is that on the consumer side it's really about 10,000 is the threshold 10,000 customers if you have. And and again, what products you offer, the profitability that can matter. But if you just took sort of what we think of as the traditional banking products, you can make a successful digital bank. If you can acquire 10,000 users Chime has 12 million. So, you know, 10,000 is pretty, pretty tiny to do this and make it successful. And the reason it's a moving target is that that number actually gets smaller as technology brings the cost of launching a digital bank down. And I talked to people about this all the time, two years ago, even a year and a half ago, if somebody was in the in the market and said, you know what, I want to start a digital bank, this great idea, how much is it going to cost me? It was a minimum of $20-$30 million dollars just to launch the bank. And it takes about it takes about two years to really build it out and integrate everything that you need. And so what we've done and what we've really focused on is we've got to continue to bring that price down from there. You know, and now we're, you know, ours is in the million dollar range to go launch a digital bank Since we've changed the economics and cut the cost of investing down by 20th. It also then reduces the amount of customers in a niche that you need to make it profitable or get a good R. O. I. On it. And so that's where we focus a lot of our time on is how do we control that cost? How do we get really, really efficient through scale that we've built internally for our tools and products to make it affordable so that it becomes easy to get an R. O. I. Off of a niche. So I've got $1 million, I can go put it in the physical world and maybe staff a branch for that, you know, operations or whatever you want to call it. Or I can open up a completely new market opportunity, a million potential. Just because Math is easy, A million potential account holders, I need to get 10,000 of that. So then I can go, you know, by access to audience and you know, influence or marketing align myself with other people who are in and serving that market segment that it just makes a lot of sense to focus in on the few to create the greatest value. But that's a very just different way I think you know when we think about growth and banking than it has been over the last 100 years. Absolutely. And I think that introduces another wrinkle like that. 10,000. Do you want...

...them the primary? Do they need to be the primary account? Because I know another trend that has been hopping is banks are sharing customers within text which makes it a bit more complicated there. But you know, do they need to have the whole relationship when they're going after that 10,000 or at least be the primary assuming it's a checking account for example. No in fact the assumptions are relatively low from what we've seen because there's there's one which is okay, how many account holders and then there's the assumptions behind what's the activity of those account holders that are driving the profitability on it. And really like in our models, what we use is about four debit card transactions a month in an average daily balance of about $1,000. So depending on who you are that might be your P. F. I. Or if you're maybe a little bit further up in the wealth and asset class, maybe that's that is just a side bank for you. So I think that's the way to look at it. Which is what are the underlying assumptions in terms of assets and transactions that can go in and make that work Now. What what should have been? Do they find a promising niche? They think they can get their 10,000. What's the next step? Lock and load on the 90 day rollout or you know, what how do they see this vision through? So my big they start to start with the research, go validate that the good idea that you know that you came up with in the shower was actually something that supported there. And then it becomes finding the right partner that can really help you launch with speed. And you know, it's interesting. I get this question. A lot people are like, well if your competitive advantage jeffries that you help people do this in a rapid timeframe and you're but you talked to everybody about why you're sort of get accused of being maybe a little too transparent about our business model and how we make this successful. And so when people say find a partner that can do it fast because a lot is happening right now and so there's two different approaches you can take. You could say, look, well, I'm gonna go design and architecture and a technical stack that's gonna be, I'm gonna bespoke design it and pick out every little piece in the stack and make it work and integrate it. That's a 2 to 3 year project ambassador attitude going in. You're never gonna get to market on time. If you take something that's more turnkey and start with done and then tweak it and turn it over time. That's our advocated approach. So it's get to market as fast as you can test and lose early. That's the approach that you should be thinking about. And to add to that thought that 2-3 years at what cost and it's not just a monetary costs, you know, out of the pocket, it's an opportunity cost in the marketplace. And I think that's the most important thing that we should think about. I like Particularly when we talk about this idea of of human centered growth, it's the 80% rule, I think there's so much pressure internally and I see it and I hear it at financial brands like we want like 100% before we launch this thing and I'm like but that's that's not how it works. We need 80% like we need something that's viable to the M. V. P. Minimal viable product we launched that and it comes back to let's get it in and test learn and that really requires us to rethink internally. How we view failure, right, failure is nothing more when we're thinking about this then the fertile seeds that were planting for the future growth. Now if we don't learn anything or if we don't do anything from those learnings well then that absolutely is failure. But this failure must be transformed to like, let's measure progress here that we're making And not worry about perfection. And the way that we can measure progress is every 90 days coming back to your model Every 90 days. We can measure from where we, we've come from over the previous 90 days versus getting all caught up into all the other things that we have to do back to that 2-3 year model that you were talking about before. Absolutely progress, not perfection. It's not going to happen. One challenge that may come up or I'm thinking, I've heard it said by entrepreneurs, I felt it in my own work sometimes, you know when your idea gets murdered, it's hard to like go again, you know, you're like, what did you do? I can just see the like innovative banker at the community bank, you know, feeling so sad about that. Um I'm wondering any tips there for like, you know, it's not a failure but yet for the person who spent so much time and imagination creating it, you know, any any tips to, you know, get back on your feet and go again or you know, one thing I have found, maybe it's not now, but maybe it's a green light later and later years, later months for me, the biggest thing I can always tell when, when we're working with customers, it's you know, no surprise that the concept of being, creating an environment where people are, are able to innovate and free to innovate starts with leadership, right? So you can look at the very top level leadership in a bank or credit union, you can tell whether or not they're going to be open to new ideas or not, it's just the reality of it. And I think, you know, if your...

...leadership empowers you, if your leadership encourages you to not be afraid to try new things because of failure, those people are just going to be happy. And frankly, if you're stuck in an organization where you feel like every good idea, you have hit the ceiling or a wall, that's probably an indicator of the long term viability of that bank in this market. Right? And so I tell people, I said don't don't spend a lot of time waiting years and years to figure out if you're in an environment where you can continue to try to move the needle and change and innovate. So I think that's going on in a lot in the market and I think a lot again this is it's funny, digital transformation is such a broad term, it gets thrown around a lot and we all kind of it's very ethereal, but at the end of the day it's just about people, it's about people just doing something new and using some tools to get there. But at the end of days you've got to have the permission to the ability to try a new idea. You just made me think that 90 day turnover would be really helpful, you know, because at least you get the no pretty quickly. But also I know leadership changes could happen and that should circumvent that challenge to you don't have to like keep finding the right person to pitch things too. But we're going to see Jim's mother. I thought a lot about this coming out of Covid over the last 12 months. This idea back to your point, Jeffrey digital transformation. It's it's the buzzword bingo. And I can't help but think the less that we talk about technology and the more that we focus on the human aspect human growth design perspective with this, the more value that will create internally and will create value internally by creating value externally through an empathetic lens. To that point, what I've found is all transformation of any type which transformation is really at its heart, it's just about growth. All transformation begins with two things number one telling the truth early, often always to yourself and to your team, to those that you're working with about where you've been, where you are and where you could go next on this this journey of transformation and growth and the number two getting at least some type of training, education awareness to help the unaware become aware of what the future could look like because we have to keep in mind like those that might not see what you see. It's easy for them to fall back and get and stay stuck in the cave of complacency because that's all they know. And so training education to help the unaware become aware I've found has really been transformative exercise in and of itself because even this idea of Fintech, I asked you know, have you ever opened an account at the leadership team, have you ever experienced Fintech you know about it? But have you ever opened an account and see what it feels like? No, no, no, no that's your homework. Go open an account, see what it feels like. Report back to me in a month. We have a conversation oh my gosh, this was this was so easy, this was amazing. Okay, well let's talk about how did it make you feel so I think just that idea of just awareness into opportunities, it makes the fear of the unknown. Not so scary, I love that show and tell show and tell, you know, I wanted to I thought another interesting element of this conversation is to talk about like the other growth opportunity some banks, a handful of banks are exploring, that's to partner with the fin text, like the community bank who wants to partner with the next time or perhaps google plex or you know what the case might be. You know, how would you highlight the pros and cons for doing something like that versus um launching your own digital banking brand? Well, one of the things that actually a friend of mine, dave Mayo from, from fed fist, pointed out to me and I thought was really, really relevant. He said, you know, community banks are waking up to the fact that the most valuable asset that they have is their charter. And right now, I think the question is, is basically, do you support embedded financial products or banking as a service, whatever buzzword term you want to put on top of it? But are you going to extend the capability to go to market to someone else because of your, you know, and you still manage the risk and the and the charter functions on the back end. And and I think that that is that is where what we're trying to do is encourage banks, is to say yes, you should partner, you should figure out a way to monetize those relationships and partnering within text because the Frontex can't really exist without the banks. Like there's some if you don't need a charter huge market, if you can't have charter backed products. And so to some extent, you know, if you're, if you're a forward thinking bank, you're gonna be saying, look, there's a huge growing market out there that can't exist without me. How do I put myself in the...

...middle of it now? I believe this firmly, which is out of the 10,000 plus credit unions and banks in the country, there's only a certain amount of those that are going to be able to be successful at being a Fintech partner or sponsor bank or charter bank. And up until now it's been sort of maybe a dozen banks in the country are really, really driving impressive business models off that community banks, regional banks are all interested in getting into that space, but they better do it quickly because I think the early, the early leaders here will be the market holders long term. And then, you know, if you wait 2 to 3 years to sort of figure out whether or not you should help in text by being a sponsor bank, the opportunity is probably going to be lost at that point. I think it comes down to access to eyeballs. I mean that's really that's really what this conversation is all around. Fintech wants access to eyeballs, who has access to eyeballs, its banks and credit community banks and credit specifically. And and and then it's like, okay, well then if you're going to open up this idea of whatever the buzzword banking is, a service, well that's a whole operational conversation that you have to have internally, because then it's about scalability. Like, like do you have the backend operations to be able to scale out something like this? So access to eyeballs? And it's something that it's it's it's an important conversation to have internally because it's like who do you want to be when we grow up in this digital world? Well it's funny, I I love that you brought up the whole eyeballs thing because one of my favorite pastimes on linkedin is watching bankers get salty about the valuation of time. So you sure you want to admit that? I know it's every day, you know, varro comes out with their call reports and their thing and then there's this debate against by traditional bankers like well they're not profitable, guess what? They don't care, that's the reality here. And the reason that it's so surprising to you is that your paradigm of banking in the past was all about net income and profit. The new players understand it's about eyeballs, that's what's monitored, that's the value, that's what's creating the multiple and evaluation of these banks, not whether or not they're profitable. And I always go back to when, when WhatsApp was acquired by Facebook, it was a 2014 or so. And everybody just lost their minds over how a company that was generating almost no revenue could have a $19 billion dollar valuation on it, guess what? They had hundreds of millions of users and that was what facebook wanted. That's what people are valuing on time and borrow. And the other ones are saying actually the profitability is less importantly. But can you imagine if I had access to all 12 million chime users wouldn't that be interesting with all that data with all that data that comes with it? And and and this really brings everything that you said before, you know, banking. The previous paradigm was banking, there'll be technology companies and you're saying, no, this is all about marketing, why? Because marketing drives audience marking, drives you know, building the audience, getting that access to those eyeballs and it's more important than that. I think it's it's building the emotional relationship with these people because even like with WhatsApp, it's a motive. You can you're using technology to bring two people together to form a relationship, to communicate, to stay in touch. If you said that you said this earlier, it actually ties back to exactly what you said to which is if you start with the product And then you go search for the channel on the target market. That's really hard. And so when people are thinking about valuations on things like China's, you have the market, I can figure out a product to put through a channel to make it to make money. If you give me an audience at $12 million, that's the bet. Yeah. So that's really where I think that that valuation is being driven from and the reason again, it comes back to what I love listening to the comments. I'm like dinner reading the comments is like people are missing the point and it's like you're arguing, you know, football rules against baseball, it's like having the wrong conversation. So I I was joking, but I do appreciate a salty banker or salty person. I can get on twitter too. I mean that's always a source of fun. I know we're coming up on time, so I just wanted to mention if anyone has questions, feel free to drop it, I guess in the chat and I can feel that. But you know, one thing I did want to mention and I know we talked about it prior in our prior chat, but you know, I'm just curious, you know, how people are in different places than they might have been pre pandemic. You know maybe there in Miami, maybe there in Montana, maybe they're living with their parents. Is there any special considerations for when a bank is, you know on boarding a customer who's not where they technically normally would be or it doesn't match with their idea. Is there anything that the bank should be considering regards to this bizarre little moment? More than a little...

...moment but a moment in time? Yeah I mean we definitely see with particular regard to K. Y. C. Because we were on the K. Y. C. Function for the digital banks that we support. We have definitely seen a much higher amount of hey I live with my parents now so I don't really have an established address. My my I. D. Doesn't match my address where I'm saying I'm living and where I need my debit card and that's like red flags all over the place for for fraud management and K. Y. C. So I think I'm not sure that there's a great answer for it. But there are a lot of manual things that have to be done nowadays that are making that a more expensive process. I would just say to people its automated what you can and get prepared to do a lot of manual work on that side of the of the equation as well because I think it's going to be here for at least another 6-9 months that we're going to be experiencing that in terms of on boarding. Yeah. I imagine falling back on on the ceo of four seasons. You know one of his sayings was automate the predictable so that you can humanize the the the exceptional automate what you can but you might have to humanize this from time to time. Yeah, maybe maybe give your employees present whoever's doing the manual labor there. Um I guess, you know, closing, closing thoughts on the possibilities of what a bank can become in the digital landscape. I just think it can help more people solve their problems, which I think is a beautiful thing if you realize. But I'm curious what you to think of what a digital bank can be. I'll let James robert close it out. But I think, you know what I'm really excited about is I think transformation means sort of looking at yourself differently and and really you've got to think that you're going to be different. And when you take the concept of if traditional banks now start launching niche banks and going down that route because we're starting to see our customers that maybe came to us for one niche, then they go, well, that was easy, why don't we do 10 niches? And so now they start looking like a family of brands and a family of niche banks. Versus just here's my traditional bank and here's my digital bank, that's that's sort of a becoming a quickly outdated approach. Now, it's and I've used this this analogy all the time. It's no, you're now a high end shopping complex. Your traditional brand is Nordstrom and Neiman Marcus as the anchor tenant, and you don't want to lose that brand equity. I'm not saying that, but there is this opportunity to have a food court and there's an opportunity to have a Rolex store and a Tiffany store and little mall kiosks in the middle of it. Even that might just be the analogy to, here's a specific product. It's not that we're creating a digital bank, but it's a digital product, very, very focused on on a specific audience. So that's where I think that when we look back in 5 to 10 years, these big mega main street brands, that's gonna be, we're not as consumers going to want to bank in that way anymore. Yes, it does come down to what I would call a portfolio of brands and those become assets and we might even see the trading of those assets from one F. I to another. It's almost like a sports analogy. I'll give you two and I'll take one. Or maybe it's like the lunch room, I'll take your peanut butter and jelly sandwich for for your turkey, whatever the case might be. But it is going to be more specific around solving niche market segment problems. And coming back to this idea of transformation, I see four transformations that are going to happen. Number one it all starts with the transformation of self internally the leader for example the leadership team, even marketing sells this whole idea then you transform the team. Then you can transform the organization. Why? Because an organization is made up of teams. Teams are made up of individuals. So it all starts with the transformation of the self. When you can make these three transformations then we can begin to transform the way that we position, go to market and transform the communities that we serve. Although community might no longer be bound by a border. Yeah. With this last insight I shared in mind during our fireside chat conversation and thinking about how community has really moved beyond physical borders and boundaries and how niche is the new local and new starts now with niches framed around communities of common values, likes interests, even careers for example I'd like to guide you through what I'm going to call, let's just say it's a it's a mini or it's an on demand strategic growth session. You might also find it a value to share this podcast with others that your financial brand to do this strategic thinking exercise on their own and then come together as a team as a group to compare and discuss how your answers or...

...the same or or they might be different so that you can create a plan of action because that's the most important thing of this all is is to take these insights and begin to turn them into action so that you can move forward with courage, you can move forward with confidence and then you can hold each other accountable as you move forward together. So grab a piece of paper, grab a pen And just clear out 10 15 minutes, no more than 20 minutes on your calendar to really think through to right through four simple questions that are guaranteed to empower you and your financial brand, to maximize your future digital growth potential. And if you don't have a pin or a piece of paper handing right now, maybe you're listening to this podcast on the road, Maybe you're at the gym, maybe you're gonna run. Like I normally listen to my podcast on screenshot this time stamp and then take a note, make a note or reminder in your phone to come back to listen to it and to complete this quick and simple but super powerful exercise because it really is the most important question or set of questions that you can ask yourself your team And your financial brand to guide you forward along your digital growth journey. So let's get started here with question number one framed around your own unique thinking, what were the top three insights that you gained from this fireside chat conversation framed around niche, being the new local and how new starts now. What were those? Top three incites the biggest key takeaways that you gained, write those down on a piece of paper And then let's move on here to question # two. With these top three insights in mind, what do you feel are the biggest goals for growth that your financial brand can work towards to begin to turn these insights into action as you move forward and make progress along your digital growth journey. And the best way to think about defining goals for growth here is to frame them around what I call the coffee or cocktail question, what I want you to do is I want you to imagine that you and I were having coffee or cocktails I'm buying, It's three years from now and you're in a really good place, you're in a really good place personally, you're in a really good place professionally, you've got a big smile on your face, Life is good. What has to happen for you between now until then for you to feel good about the progress that you've made along your financial brands digital growth journey and so what I want you to do is leap ahead in your mind, take a sip of your coffee or your cocktail and then look back to today, write down all of the progress that you've made on your digital growth journey over those three years, over those 36 months, thinking about the insights that you've gained through this fireside chat conversation framed around how niche is the new local. So leap ahead in your mind, Look backwards and then write down all the progress that you've made, Recalling the key insights that she wrote in question # one. To turn those insights into action. Let's move on to question number three here and so now that you have some clarity into your goals for growth, the future that you're working towards, what I want to do for this question is think and right through what roadblocks you must be aware of or what challenges you must commit to eliminate. That could stand in the way of your financial brand from moving forward towards those goals, from making progress along your digital growth journey. Finally, Let's move on to question # four together to think and write through. And the question is this what opportunities do you see that are available for your financial brand to create? To capture or to capitalize on as you break through the roadblocks and eliminate the challenges that you just noted to move forward and make progress towards those goals for growth That you noted in question # two. So what you've just done here with these four questions is really answer the most important question that you can ask yourself, your team, your organization. And that question is this, how do I want to grow or I grow? Which is an acronym for insights, goals, roadblocks and opportunities because we, we can go through life and listen to podcast and go to conferences and we can read books. But if we never take time to stop to pause to review, reflect on the insights that we gain. So it's learning to think about how we can apply those...

...insights by defining goals and then what those roadblocks that might be that sent on our way where the opportunity to break through those roadblocks, If we don't take time to stop pause, think review, reflect, learn, then we're always gonna get stuck in this continuous cycle of just doing it. Could be doing digital, it could just be doing life for that matter. And so use this exercise. How do I want to grow or I grow insights, goals, roadblocks and opportunities as a great framework going forward for any any activity that you're looking to level up that you're looking to maximize both personally and professionally and so, thinking further about the insights goals, roadblocks, opportunities that you've noted here. I just like to guide you through a little bit further thinking with three specific questions framed around the potential transformations you must make when it comes to marketing cells and leadership strategies as you look to maximize your financial brands future digital growth potential. And so here's question number one, how will you transform your marketing communications strategies to escape the complexities of competing in a commoditized and crowded marketplace? How might recalling your insights that you've documented, recalling the goals that you've noted? How might focusing on a niche market segment or niche market segments empower you to create new blue ocean marketing opportunities. Question number two, how will you transform cells and legion strategies that take a proactive stance instead of taking a reactive when a proactive stance that guides people along a digital buying journey that guides a niche market or niche market segments along their digital growth, buying journeys beyond their specific questions and concerns towards their own bigger, better and brighter future. And then question number three, how will you transform leadership strategies, leadership strategy that helps you see beyond the present moment to identify a new purpose that finally puts the transformation of people over the commoditized transaction of dollars and cents to rise above thinking so much about what you do And how you do it because that's where 95% of financial brands are stuck today. Everyone is thinking about, well this is what we do and this is how we do it. And that's exactly why almost all financial brands look and sound the same in the marketplace and for you to truly make this transformation for you to truly go all in to escape and break free from commoditization once and for all, it requires you to not just think about what you do and how you do it, but to first and foremost start thinking about why you do what you do and who you do that for, that's your purpose, that's your reason for being, because once your purpose is established along with who it is established for why you do what you do and who you do it for the who being the niche or the niche market segments that you will create the greatest value for once you know the why and the who then you can use both the why and the who to inform the, how you do what you do and so through your experiences that you bring to bear in the marketplace being the how and then the what your products when you start with your purpose and a purpose framed around creating and crowded marketplace. So as you go through the strategic growth exercise, maybe you have some further questions that you like to get answers to and that's why I'm excited to share. I'm launching a new series called clarity calls, that's going to be part of the Banking on Digital Growth podcast. And it's where we will talk through questions that you have together live and I'll answer them live. And so I'd love to hear from you and guide you along your own digital growth journey. So please do, if you have a question, what's one big question that you have? One big question about? Maybe it's digital marketing, digital sales, digital leadership. What's on your mind right now? Text your biggest question 2832 549 5792. And I look forward to talking through that question with you to provide you with some guidance to provide you with some clarity on an upcoming clarity calls episode. And remember, the only bad question is the question that goes unasked as always...

...and until next time be well. Do good and make your bed. Thank you for listening to another episode of banking on digital growth with James, robert. Ley. Like what you hear, tell a friend about the podcast and leave us a review on apple podcasts, google podcasts or Spotify and subscribe while you're there. To get even more practical improvement insights, visit www. Dot digital growth dot com to grab a preview of James roberts, best selling book banking on digital growth or order a copy right now for you and your team from amazon inside you'll find a strategic marketing and sales blueprint framed around 12 key areas of focus that empower you to confidently generate 10 times more loans and deposits. Until next time. Be well and do good.

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