NBKC, a community bank based in Kansas City, Mo., was the focus of a recent Financial Brand article titled: "Is this Community Bank's Bold Digital Play the Model of the Future?"
The article featured CEO Brian Unruh's explanations of the bank's innovative approach and how NBKC has managed to carve out a niche locally, while also growing some of its digital products nationally.
We felt the lessons Unruh imparted were applicable to banks of all sizes, and were worth exploring in depth in this episode of The Purposeful Banker.
Is This Community Bank's Bold Digital Play the Model of the Future?
Rethinking What Banks Measure
Innovating to Win: Putting Customers First
Jim Young: Hi, and welcome to the Purposeful Banker, the podcast brought to you by Precision Lender, where we discuss the big topics in the minds of today's best bankers. I'm your host, Jim Young, Director of Communications at Precision Lender, and I'm joined today by Dallas Wells, our EVP of Strategic Initiatives.
Today, we're going to talk about a bank, NBKC, that was recently spotlighted in an article on The Financial Brand, titled Is This Community Bank's Bold Digital Play The Model Of The Future? We're going to be a little less ambitious in what we attempt to answer in this podcast. Rather, we're just going to take from this article, which is really highly recommended, and of course, will be linked in our show notes, but we're going to take from that article some lessons that they mentioned, and lessons that you might be able to apply at your bank.
But Dallas, having said that, since our podcast listenership spans the gamut from small community banks to SIFIs, I want to make sure we're continually, throughout this, trying to identify which lessons apply across vertical and which ones might be more community bank-specific, okay? Fair enough?
And final disclaimer here, from what I can tell, we're going to say the last name of NBKC's CEO as Unruh. His full name is Brian Unruh, and if we are off on that, apologies in advance.
Dallas Wells: Yeah. We've put our stake in the ground and we're just going to own it from here.
Jim Young: Absolutely.
Dallas Wells: So sorry, Brian, if we got that off.
Jim Young: Absolutely. And one other thing I should mention also, Precision Lender client.
Dallas Wells: Yes.
Jim Young: Yes. Absolutely. You could make an argument that I should know how to pronounce the CEO [crosstalk].
Dallas Wells: We will learn.
Jim Young: Kind of, but yes, we will. So all right. Anyways. All right Dallas, first big lesson I found in this piece was pick a few things and do them very well. Can you explain how NBKC applies this? And also, again, is this a lesson that makes sense for all banks are just some?
Dallas Wells: Yeah, so NBKC is about, I think between 600 and 700 million in total assets, and so what we find with a lot of banks of that size this that they feel like they specialize in a geography, so they're a bank in their hometown, but they are then all things to all people in that particular market. NBKC does have a fairly classic retail branch structure, but they also have a nationwide, online mortgage program. They originate two, three billion dollars a year worth of mortgages on that nationwide platform.
They have taken this mortgage business that they do really, really well, and they've scaled that way beyond the bounds of their home, local market. We've talked about that a few times here, of find a niche, whatever that niche may be, and it could be an industry that you specialize in. In this case, it is home loans, and not only home loans, mortgages, but also online, right, which is a whole different animal than doing them through the branch or through loan production offices or whatever the case may be.
I think this is something that universally applies. They're proof of that. They're running a nationwide program as a relatively small bank, and doing it really well, so it's not just the Wells Fargos and JP Morgans that can do things coast to coast, if you find something that you can scale because you're good at it.
Jim Young: I also thought that was interesting within that is that within those things, it's not just focusing on this, but they had one type of checking account, which I thought was really interesting approach as well.
Dallas Wells: Yeah, so it's part of their mantra, is to ... I think it's part of some of their core values. They call it striving for simplicity. They actually live that out in their product set, which very few banks are willing to do. There's not a lot of fine print. There's one type of account, there's one type of business checking account, and there's not crazy fees or gotcha fees. It's just very straightforward, simple products, which I really like.
Jim Young: Another sort of area where they strived for simplicity was in Lesson Two of this, which was "Maintain a single point of contact." They're talking about this during the ... And again, just to clarify here, we're talking mostly in their case, retail mortgages. But why does that matter, to have that single point of contact?
Dallas Wells: Yeah, once you get beyond a single point of contact, you're asking your customer to learn how to navigate your org chart, like it's their job now to understand who should be handling which kind of problem. There's nothing more frustrating than calling an 800 number that's on the back of your debit card, for example, and saying, "Hey, I think there's some fraud on my card," and well they're like, "Well, you have to call the fraud department or the customer service department," and they can't even transfer you, right?
Jim Young: Right.
Dallas Wells: Which those sorts of things happen all the time. I used to field a lot of vendors in my banking days, and one young guy's sales pitch actually still kind of sticks with me. He said, "We're a big company, we can do lots of things, but I will always be your point of contact. You'll have one throat to choke," which is when you have a problem, come to me and I will get it fixed. So it's a little hokey, a little salesy, but I think the concept is really sound. And actually as you move up the size scale, that actually becomes even more true, so as you get into larger commercial transactions, it's actually the more typical structure, which is that you have a relationship manager whose job it is to be all things at the bank to you, to make sure that you get the resources you need.
As banks strive for efficiency as they move down in size, and many of them handle all consumer loans and mortgage loans this way, it is you're going to deal with the specialist. You don't have one access point. So again, it's something that they figured out a way to keep up and keep up profitably, and their results are really strong because of it.
Jim Young: But yeah, I think it is one of those things where you, and even Unruh kind of conceded, that there's some parts that you're not going to be able to get someone if you call in at 11:00 PM on a Saturday night to ask about some particular thing. There's some products in which you would have somebody, but some in which you wouldn't, right?
Dallas Wells: Yeah, there's a trade-off, where what happens if Jim's your guy, and Jim went home at 4:30, where do you get your answer, right? And so somewhat that's a structure and a process thing. They also say that some of their checking accounts they can't have that one, right?
Jim Young: Right, right, exactly.
Dallas Wells: They can't have one person who handles those. And I think that's fair to have, as long as you have a clearly defined line, and I think they have just put that line further down that chain than a lot of other banks do.
Jim Young: So Lesson Three is certainly one that's an eye-catcher, "Regularly fire your executive team."
Dallas Wells: Yeah.
Jim Young: To be clear, this is not an actual thing, but more of a thought exercise. What is NBKC trying to do with this?
Dallas Wells: Yeah, so they use this as part of their planning exercises, and it is basically a way to get a fresh perspective on things. So it is not just that we are fired, but imagine you are a brand new executive team that's been brought into this bank.
That's one of the things that I think the banking industry struggles with a little bit is that management teams tend to stick around for a while. There are a lot of benefits to that continuity, and to the experience and the institutional knowledge that goes along with that, but there's also some negative things.
This is what he's trying to get around, which is that we've had the same person running the loan department for the last decade and a half, right, and so what new perspective can they really bring? This is their way of trying to manage that, and it is pretend like we're brand new, the other team got fired, what would we change, what would we do different?
I think that's a good exercise, and this is one that again can be universal. It can apply everywhere, and this doesn't just have to be your executive team. I think if you're a market president and you're running a market, pretend that you're the new guy, and that you now have to come in and fix the performance, so whatever the performance was last year, consider that it has to be fixed. There has to be a meaningful change to it. What sorts of things might you try, and maybe it'll just yield some ideas that you were otherwise not considering.
Jim Young: Yeah. It automatically eliminates that because this is the way we've always done it, right?
Dallas Wells: Exactly, yeah.
Jim Young: Because you can ever answer that if you're going to [crosstalk].
Dallas Wells: Can't use that correction. Right.
Jim Young: Next lesson, "Don't try to make a crappy thing better." I really like the sound of this one. But then I stopped and I thought, okay, how do you know when something's just crappy versus when it could be great but it's being crappily executed?
Dallas Wells: Yeah, and this is a really tricky one, because that's a tough thing to define, which is, "Hey, we failed on that. That's an easy thing to measure, but why did we fail? Was it because the idea itself is bad, or did we just trip all over ourselves?" But I think being willing to challenge it that way is a great starting point, which is, "Hey, did we just get it wrong from the beginning?"
We actually just got out of a conversation about this where we were talking about how do we measure that we're doing the right things with our product at Precision Lender? How do we measure that and the failures? It's kind of either we made a bad choice and we designed something that no one wants, right, or we just didn't execute it very well. It could be either that it's a bad idea or it was a good idea we built the wrong way. First identifying that it is crappy is, I think, the first step that not very many banks actually take.
We actually find a lot of ... I'll tell you where we get examples of this. Banks can get pretty creative sometimes in how they measure themselves against peer groups, because they're not willing to say, "You know what? We just don't grow loans as well as our peer group does." The temptation is to say, "Well let's pick a different peer group." And so from the top, take a very different approach to that and say let's be honest with ourselves when there's a crappy thing, and for it to be okay to have a crappy thing, right? Like to be able to take some misses and to be able to then honestly appraise which part of it broke down and which part do we throw overboard? Those are tough things.
Jim Young: Yeah, and I think also with this one too, and this comes into some of the conversations that we have with banks is part of that is is maybe take a look and see if there's something ... A lot of times when we [inaudible] banks, is they're trying to make a crappy thing better, because they think that's the only thing, right?
Dallas Wells: Yeah.
Jim Young: So I know I hate this pricing model, but this is what we got, we got to keep tweaking it, et cetera, because what else are we going to do? If you get any of this mindset of stop trying to do that, it again forces you to say, "Well what else could we do," or, "what else can we do?"
Dallas Wells: Yeah, it's always the temptation to make incremental progress, so it's things like, hey, international wires take five steps for approval and a week to actually execute. Well let's make it four steps and six days instead of seven. Bam, awesome progress. Well that's still a crappy thing, right?
Jim Young: Yeah.
Dallas Wells: And so that's what you have to get to is real fixes, not just marginal gains. There's nothing wrong with marginal gains.
Jim Young: Yeah, I was going to say, we like marginal gains.
Dallas Wells: Yeah, there's nothing wrong with that, but you have to know where you're headed with it, and you can't just be satisfied with making a crappy thing slightly yes crappy.
Jim Young: Yep. Absolutely. Next lesson on here, "Keep humans involved." I mean, this is one that really seems to jive with our philosophy about having computers do what they do well so humans can do what they do well, but kind of you can talk a little bit about what NBKC's saying in this?
Dallas Wells: Yeah, so if again, you go back to their business model, they're talking about doing a lot of online account opening, and they've expanded from mortgages into deposit accounts, and there's a whole product set now that they're doing online. The temptation is to do that really efficiently, which means you start automating things. And you have to, to some degree, but they keep a lot of human touch involved, all the way back to again, if you're doing a mortgage, there is a person that's on the other end of that technology that's shepherding you through the process.
And so they are very intentional about keeping humans involved in that loop. They feel like it's a different [inaudible] factor for what they do. They actually think of this in terms of customer experience rather than just in terms of efficiency. You're right, and that ties very closely with our philosophy, which is there are parts of banking transactions that humans do uniquely well.
I heard this put pretty well the other day, which is that computers and software can be really good at interpolation, they can find the optimal point between two things. Humans are really good at extrapolating, right, at taking something they learn from one situation and applying it to another one. They're really good at using their experience to make hard judgments, right, and building trust and building human relationships, understanding that the person on the other end of this transaction is making one of the biggest commitments they'll make in their life and helping them through that transaction. A computer can't do some of those things that a human can, and so the technology should not ... The intent should not be to replace the humans, the intent should be to augment the humans, give them tools to make them really good, make it so that the things they're good at can scale, and scale by just meaning they can touch more people. That's the key to it.
Jim Young: All right, final lesson here is one that actually got a little bit not as [inaudible], at least in my view. As I'm reading through this, I'm going, "Yeah, that's something we preach," or, "That's something we believe in." Last lesson on here, "Make your own breaks." I'm going to read this quote from Brian Unruh, and to me, my initial thought was as well as a vendor to a bank, I don't know that this is necessarily [crosstalk]. He says, "There's a lot of reliance by banks on their core processor or other outsiders to come up with solutions, too much thinking that somebody needs to solve this problem for us, and then give it to us at a monthly fee. I just don't think that's going to get solved like that."
Dallas Wells: I actually really like this philosophy.
Jim Young: Okay.
Dallas Wells: And here's why, because again we do sit on the other side of this, but we have some clients who think of it that way, which is they're like, "Hey, you guys have the software solution here, so I paid you money, why don't I have results?" They literally handed it off to us, and basically the cheapest possible employee, lowest cost employee that they could set aside to help us manage this thing. There is no silver bullet magic technology for the really hard problems in banking. Again, we're talking about tools that augment what the humans do. The humans are still the high-value part of these value chains. We have some clients that treat it like that, and you can guess at how their performance goes. They do okay. Again, the tool has some value to it. We feel like we earn the monthly fee there.
But to get the really powerful returns on things, whether it's our technology or someone else's, you have to be involved in the process. When we sell our solution, there's technology, but there's also process change, there's also culture changes, there's touches to other systems that are around us. There's a lot going on there that goes way beyond what you're paying the vendor the monthly fee for, and the bank has to be involved. They have to be committed to it at a management level, at a resource level, and be willing to do what it takes to make these things actually work. You're responsible for your own outcomes, not the vendor. The vendor's just a partner.
Jim Young: Gotcha. Okay. Well that makes me feel a little bit better. Thanks.
Dallas Wells: You bet.
Yeah. That'll do it for this week's show. And now for a few friendly reminders. If you want to listen to more podcasts or check out more of our content, you can visit our resources page
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