According to a recent Kasasa/Harris Poll study1, more than half of Americans (55%) would be most likely to consider opening a new checking account at a local community bank or credit union, while only about three in ten (29%) would consider opening with a national megabank. Still, megabanks maintain a larger market share than community financial institutions with 45 percent of Americans having accounts with national megabanks and 43 percent of Americans having accounts with local community banks/credit unions, according to Kasasa’s study.

Why doesn’t this add up?

In general, more Americans may associate megabanks with a wider selection of products compared to local institutions, as just over half of Americans (51%) believe local financial institutions do not have the resources to offer the level of innovative, user-friendly products that national megabanks or online-only banks do. Additionally, nearly four in five Americans (79 percent) would prefer to conduct their banking with an institution that offers a broad range of financial services, according to the same study. Few (8%) believe local institutions are more likely than megabanks to offer innovative products and services.

One of the most pressing issues holding local institutions back is the consumer misconception that they cannot offer these differentiated products and services without it costing them a fortune. But they can – and there is proof that it works.

By offering free, rewards-based accounts, community banks can increase non-interest income, reduce overall expenses, and deliver greater rewards and value to the customer, allowing them to ultimately better compete with megabanks. These accounts create deeper relationships with consumers, increase lifetime value, drive operational savings and non-interest income, improve metrics that help banks lower their cost of funds and meet their unique business goals through customizable account behaviors.

Here’s why.

Drive Deeper Relationships

Kasasa motivates consumers to engage more deeply and meaningfully with their community financial institution. In fact, 93 percent of Kasasa account holders say they like or love their Kasasa accounts, and two out of three are likely to recommend them to family or friends. Additionally, these accounts command a higher adoption of debit cards, greater usage of online banking and more communication via digital channels than traditional accounts.

Consumers also indicated that one of the most important influencers of their decision to choose a checking account is the rewards. This means community banks must provide compelling rewards in order to meet this demand and drive deeper relationships, but it needs to go beyond cash back or interest. Issuing rewards by way of Amazon®, iTunes® and Google Play® credits, or value-added services such as AD&D, Identity Fraud, or even cell phone insurance, can deepen the relationship between a community bank and its customer because it actually offers them something they want or may need. This is a key component of earning customer loyalty.

  1. Deliver Increased Customer Lifetime Value

Clearly, driving deeper relationships helps community banks increase their customer lifetime value (LTV). In a constantly changing industry, organic growth is difficult to achieve, so focusing on retaining customers is crucial for community banks trying to grow.

Customer lifetime value measures the profit a bank makes from any given customer across the average length of time that they maintain an account. It is used to make important business decisions about sales and marketing, product development and customer support.

Traditionally banks might have been tempted to estimate LTV based on Cost of Funds (COF) and perhaps compare it against asset-driven products such as loans. However, this approach either underestimates or obscures the revenue streams associated with demand deposit accounts. Because rewards-based accounts encourage customers to engage in behaviors that lower costs and increase income, they increase LTV in two key ways: 1) increasing the profit associated with each account and 2) increasing the length of time consumers are likely to maintain the account.

  1. Drive Operational Savings and Non-Interest Income and Lower Cost of Funds

Kasasa accounts reduce financial institutions’ expenses by motivating consumers to engage in less costly behaviors, such as choosing e-statements over paper statements, and incentivizing consumer behavior that can generate 45 percent higher non-interest income than free checking accounts. The marginal non-interest income subsidizes and often exceeds non-interest and interest expenses associated with offering the account, frequently resulting in a negative “cost of deposits” for the bank.

As a result, many Kasasa banks turn a profit on each account even before funds are reinvested. These advantages, along with higher average balances, mean that Kasasa Cash accounts average double the annual profit of standard free checking accounts.

Kasasa accounts are affordable for the institution while preserving strong value for the consumer. These accounts are multiple-tier checking accounts, in which a high annual percentage yield (APY) is offered up to a certain threshold (“cap”) and a lower APY is offered on balances above that threshold.


Qualification criteria motivate consumer behaviors that are profitable for the Kasasa financial institution, but also create “breakage,” where consumers who failed to qualify don’t earn the premium rewards for the cycle in question. This results in a COF that is typically lower than alternative funding sources such as CDs and borrowings. This comparison is even more striking when you consider the additional revenue streams (as mentioned earlier).

  1. Meet Their Business Goals


Kasasa’s rewards-based accounts comprise a suite of features that allow each community bank to offer a product design that drives toward their goals and optimizes their balance sheet. For example, a deposit-rich bank could design for accounts with lower balances and higher debit card transactions, whereas a loan-heavy bank could reduce their reliance on traditional funding, while gaining active consumers with high balances. These accounts are also highly resilient against changes in competitive deposit rates, while providing the kind of eye-catching benefits that bank marketers wish for.


Known for reinventing checking, Kasasa is committed to helping community financial institutions meet consumer needs through innovative products that deliver disruptively good value. Its free, rewards-based checking and savings accounts enable community banks to increase non-interest income, reduce overall expenses and compete with megabanks. Compared to standard free checking, Kasasa accounts deliver 50 percent more accounts in the first year, up to two times annual profit per account and 45 percent more non-interest income. Ultimately, Kasasa is helping community financial institutions shout more loudly than any one of them could individually.

Greg Wempe is Chief Client Officer, Kasasa







[1] Survey Method:

This survey was conducted online within the United States by The Harris Poll on behalf of Kasasa from December 18-20, 2018 among 2,018 U.S. adults ages 18 and older, among whom 588 are Millennials ages 24-38. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Mary York, VP, William Mills Agency, at


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