When Larry Brown, the chief executive at Bank of Little Rock, first heard the name Kasasa, a new checking product offered through third-party vendor BancVue, he thought the conversation had turned from rewards checking to what's for dinner.
"First impression: I wanted to know if it came with chips," says Brown, jokingly.
Still, funny name or not, Brown liked what BancVue officials were pitching: a high-interest, free checking account that would help small banks like the $168 million-asset Bank of Little Rock better compete for deposits against larger banks. His was among the first banks to sign up for Kasasa - and Brown says he couldn't be happier with the results. In the two months after it rolled out Kasasa's checking product - called Kasasa Cash - on May 1, total deposits increased more than 10 percent. Kasasa customers are also generating more interchange income for the bank because they use debit cards, on average, for 25 purchases per month, compared to about 17 debit purchases per month for the bank's regular customers.
"It's proven to be a very effective product in terms of attracting interest," Brown says.
The word "Kasasa" won't be found in the dictionary; it's a made up name that BancVue came up with after conducting a series of market tests.
But BancVue CEO Gabriel Krajicek is hoping that the odd-sounding word will become a household name among customers of community banks and credit unions. Krajicek says that BancVue, of Austin, Tex., created Kasasa Cash and three other affiliated products because it was looking for "a game-changer" to help small institutions regain some of the market share they have been losing to larger banks. In 1994, community banks with less than $1 billion of assets held 31 percent of total deposits in the U.S., according to FDIC data. Today, their share of the market stands at just 14 percent.
"What Kasasa does is it puts everybody's dog into the hunt," Krajicek says.
Bob Meara, senior analyst at the Boston research firm Celent, agrees - to a point. He doubts that Kasasa will help community banks win back much market share, but says that products like it can help them make more money on retail accounts by encouraging online banking and debit-card use.
"Products like this are likely to proliferate as banks are increasingly challenged to manage customer profitability," he says. Kasasa "is clever and will move the needle a little bit...but more in terms of customer profitability than in raw market share."
Here's how Kasasa works. Banks pay BancVue a fee to set up, manage and market the Kasasa line of products, then use the cost savings to offer higher-than-average rates on the accounts. The account comes with no minimum balance, free online bill pay, and reimbursement of ATM fees, up to about $30 per month, as long as customers make a minimum amount of debit card purchases per month, have at least one automatic bill payment or direct-deposit transfer, and receive bank statements online.
Ten banks and one credit union had begun offering Kasasa Cash through the end of August, and BancVue is hoping to recruit more through group seminars it will be hosting for many of its 620 bank and credit union clients.
Of the 11 participating institutions, nine couple the product with one of the other Kasasa offerings: Kasasa Saver, a high-interest savings account; Kasasa Giving, a component of the Cash account that directs a portion of the interest earned, as well as a cut of debit purchases of $10 or more, to a charity; and Kasasa Tunes, where users can earn up to 10 free iTunes downloads a month.
Banks that sign on to the Kasasa program can share the marketing costs with BancVue and other participating banks. Bank of Little Rock, for example, has teamed up with First Arkansas Bank & Trust to market Kasasa in Arkansas.
Susan Sierota, BancVue's chief marketing officer, said that BancVue will consult with each bank "and do a deep dive into their local market, by branch, and create an individualized, local marketing plan for them."
In the spring Bank of Idaho in Idaho Falls gave away $1 bills with Kasasa stickers on them to fans at a home game of the local minor league baseball team. It was a smashing success. Park Price, the bank's president, said the campaign raised the bank's profile and credited it with helping to roughly double its rewards checking deposits, to $32 million, since early May.
"It was certainly a lot better than handing out a T-shirt or a pen or something like that," he says. "I thought that was very innovative."