From the Garden to the Branch: A Knicks Win, a Chase Misquote, and the Zillennial Investment Opportunity

00:00:15:17 - 00:00:41:15 Hello everyone, and welcome to another episode of What's Going On in Banking. This is your co-host, Stacy Bryant. And of course, guys, gals, everyone. I'm here with the esteemed Ron Shevlin.

Woohoo! And I, I had to break damn near Ron Chevron's virtual arm because I said I had to kick off today's episode. Why? Because, Ron, do you see what's happening right now?

00:00:41:15 - 00:01:10:10 You want to know how I'm doing? I'm doing phenomenal because it's been 53 years, baby, 53 years New York City. We took over. What an amazing series.

What an amazing playoff. I mean, we every single game, Ron had me to the very tip of my toes. And congratulations New York City Knicks for doing such an amazing job for going forward. 00:01:10:10 - 00:01:30:16 I am huge Ron when it comes to the story of an underdog.

And I'll tell you as a New Yorker, New York City for the past couple of weeks, everyone has been saying good morning to each other. You know, everyone is holding doors for one another. Someone said, bless you in the excuse me, someone sneeze. And four people said, bless you all.

00:01:30:17 - 00:01:53:20 I had no idea that all it took were for the Knicks to finally win, to bring up the morale. And so I just wanted to let you know I told you so. How are you doing? I doing great.

And so Stacy congratulations on your on your Knicks. You know, if we had been talking a number of years ago, we would have been on the same page of this because, you know, I grew up in New York. 00:01:53:20 - 00:02:27:14 I was a Knicks fan for a long time. I was a big Knicks fan back when they did win, when it was Willis Reed, Dave Busher, Bill Bradley, Clyde Wall, Walt Clyde Frazier, Dick Barnett.

I remember that team. That was amazing. But after 35 years of living in Boston and 35 years of I wasn't quite 35 years of suffering through the Knicks, just my my allegiances changed and I just kind of woke up one day and got a couple number of years ago going, God, I can't even name anybody on the Knicks except Isaiah Thomas, who really wasn't even on the Knicks. 00:02:27:14 - 00:02:50:02 He was just ruining the whole team with how he was running it.

And I was like, I'm not there. But, you know, it makes me your comments make me think, wow, what a great city New York would be, is if they could only win every three three years or so and keep this up. But then I guess people just get used to it and stop holding doors and stop saying good morning in the streets. 00:02:50:02 - 00:03:10:08 I don't know, but that's pretty cool.

You know, I read somewhere along the lines and thank you, Ron. You were probably one of the first people to to text me when the Knicks one. And so I appreciate your chivalry and just and just the integrity behind that. And talk about integrity again to the captain himself Jalen Brunson I mean we talk about banking.

00:03:10:08 - 00:03:32:03 We talk about numbers. He took over $100 million pay cut so that they can disperse it amongst talent. And you know, I mean is it a bit cliche of us at a, you know, banking podcast to correlated to thinking outside the box, looking at things from another lens. And so again, just looking at basketball, another lens not giving up.

00:03:32:05 - 00:03:54:08 Shout out to Jalen Brunson to the entire team and to the real team. The die hard New Yorkers baby I listen Knicks here we go. But but talking about different lenses and seeing banking in many different ways kick us off. What are we going to begin with.

Well I think let's go back to everybody's favorite debate the branch. 00:03:54:08 - 00:04:21:15 The bank branch. And what role does it play these days? And, you know, I've been very vocal.

I mean, I'm not a branch hater by any stretch of the imagination. You know, there seems to be folks go, oh, we don't need branches anymore. And then there's the other side who said, yes, we do. And then they start pointing to the numbers of the applications that come in in my argument has always been, well, that's because you're online and digital account opening is so horrible.

00:04:21:15 - 00:04:49:22 That's why you're forcing customers. But the reason I think we're bringing this up again today was some news recently, and you're probably a little bit you'll remember it better than I would, even though I wrote about it was, you know, no, no, no news noise. A little bit of that news came out about a huge investment from Chase, JPMorgan Chase around their branch investments and their branch expansion. 00:04:50:00 - 00:05:34:10 And I wanted to take that opportunity to kind of just put some clarity around this that their investments in, in expanding their branch network is not about the retail consumer market.

It is about number one, the commercial business. And equally to that maybe is the wealth management private banking side of the coin. So for all this talk that, you know, the our audience for Stacy, the folks that we're generally talking to, the community based financial institutions who, of course, you know, have a mix of retail and commercial focus as well, but especially, you know, let's say on the credit union side, some of the community banks who still have a very strong retail and consumer 00:05:34:10 - 00:06:02:14 focus, you know, focusing on the the branch expansion.

I continue to argue this is not a good use of resources and money and time to to spend on building that out. You know, good example I'd throw out there is, you know, we've done some research on the account openings over the past couple of years so far alone brought in more new accounts last year than all credit unions put together. 00:06:02:16 - 00:06:31:20 Well, community banks put together not all community banks plus credit unions, but individually. And they did it without branches.

So why do you need a branch to to do this Mr.. Or miss community Bank or community credit union executive. So I mean, I kind of wanted to put that stake in the ground to kind of make the clarification there, because I get into arguments all the time on LinkedIn with the branch of files, you know, the branch of files in the branch of folks. 00:06:31:22 - 00:06:53:03 But I'm not a branch of phobe.

It's, it's it's to me, it's about where do you spend your next dollar? And I got a really hard time believing the branch is the best place to spend your incremental dollar. Yeah, yeah. And thank you so much for writing about this.

I mean, you listen, shout out to you for putting your detective hat, as you usually do, and really getting to the root of what is it that they're saying? 00:06:53:04 - 00:07:14:05 You know, you mentioned in the Substack piece clarifying that, again, Chase's recent branch expansion has nothing to do with the increase on the retail deposit side. But again, the plot twist, the headline, which again, you do such an immaculate job of dissecting and and telling them why they're wrong or that the new branches aren't winning retail customers.

It's small business, baby. 00:07:14:06 - 00:07:39:07 You know, that's the real chess move. And I just want to extract this from the piece because I always appreciate numbers here. But you went on to say Chase's business banking primary shares climbed to 9.

7%, up 170 basis points since 2019, which is a steeper trajectory than retail. And so new branches are not just the storefronts, but they are deploying business relationship managers into local markets. 00:07:39:07 - 00:08:05:00 Having been a former business banker myself at Chase, you know, build referral relationships with accountants, attorneys and also and just to mention a few, and giving wealth advisors a home base to chase that 4 trillion in investable assets sitting outside Chase.

And so Chase increasing the number of small businesses covered I think per relationship branch by 60% since 2019. 00:08:05:00 - 00:08:30:06 And so I agree with you. That's not a branch strategy. It's more so a lot of what these community financial institutions have been comprised on, which is that relationship referral infrastructure strategy.

And I think it's just wearing a branch costume. And so, you know, I think that I like I like the reminder of chiming, scaling tens of millions of users right before everyone actually woke up and said, Holy shoot, we're our customers. 00:08:30:06 - 00:08:51:13 And so, again, just just a word of the wise to to do a better job as it relates to, you know, not not writing the headline way, but really understanding what these numbers mean. So great job there, per usual.

You know what? I hate reading from stuff, but I want to make sure I get this right. There was another thing to that that got me to write. 00:08:51:13 - 00:09:21:07 This was something I saw in another publication, and I won't mention who it is because I actually know the folks there.

And if I mentioned by name, I'm going to get major grief for this. But when I saw this, it caught my eye. And, you know, their president, Chase's president of the consumer retail banking division as a woman named Marianne Lake and the publication said, and I'm quoting, Lake said, that new branches built in expansion markets are already responsible for 40% of the bank's total retail deposits. 00:09:21:07 - 00:10:14:18 And that's the kind of statistic that makes the branch of file go see, this is what we're doing.

But the problem is, is that that statement in that publication is simply not correct. 40 basis what? It's 40 basis points of market share gains, not 40% of total retail deposits. And so there's a big difference.

Not to mention the fact that so what what Marianne Lake actually said was increasing branches is directly correlated with deposit growth, with new branches accounting for 40% of JP morgan's new posit share gains, not the not 40% of deposits, 40% of the share gain, which is a much smaller percentage of it is 40 basis points. 00:10:14:18 - 00:10:41:12 So this is the sort of the problem. And you know this because you're on LinkedIn all the time like I am. And people take these numbers and go and they run with it and they're not picking up the right numbers.

40% of deposits is very different than 40% of new deposit share gains. And that is the key point of why I, you know, went ballistic on this. 00:10:41:14 - 00:10:54:22 Yeah. No, I agree that we were like one decimal off and then it just caused an uproar.

So one that was an important decimal place. Yeah. Okay. 00:10:55:00 - 00:11:28:11 Well next we ready for the next topic.

Let's do it. You kick it off. Yeah yeah yeah. So I just wanted to pick your brain on on a recent Cornerstone Advisors white paper on the new investment opportunity was at first I'm like a Zeleny and it's essentially breaks down the cusp of millennials and Gen Z.

I believe I read and and in this white paper, you know, I'll set up the stage a little bit, but I believe just a, you know, for what it's worth, the great migration of checking and what what financial institutions can do about it. 00:11:28:11 - 00:11:50:21 Now, the checking accounts really focus on becoming the paycheck motels. That's what you mentioned. And within the research and how the Paycheck Motel is basically like a temporary place for money to stay before it moves on to bigger and better places.

And so that's not really a metric. It's really more so I considered it like a eulogy for the checking account as we know it. 00:11:50:21 - 00:12:11:20 And so the product, they used to be the metaphor or excuse me, the product they used to really be the anchor of, of a banking relationship. And it becoming pretty much instead of being a primary account now or a primary relationship has become a layover.

And so I just was fascinated with a lot of the numbers that this white paper shed light to. 00:12:11:20 - 00:12:37:14 And immediately it took me. And I want you to expound a little bit more on that, but it immediately told me that financials are really not facing a marketing problem when it comes to this. More so like a product problem.

And then immediately also took me to how can we look at the standard checking account, which Chime and Sophie has really saturated the market with because of that digital aspect primarily. 00:12:37:14 - 00:13:05:08 But how can community financial institutions relook at the way of instead of competing? Let's add to it so that we can reimagine what like a thick what the sticky product can actually look like. And so, you know, how beautiful would it be to have like an integrated, invested checking account where I'm not only receiving my money from, let's say, a direct deposit from my employer, but I have the access to go ahead and invest.

00:13:05:10 - 00:13:30:17 And so I want you to expand a little bit more because it's very intriguing, especially as we think about product redesign, which I'm hearing in a lot of conversations on the road, a lot to unpack there. Let's take a few pieces. First of all, I got really tired of writing Gen Z and millennial Gen Z and millennials. I said, fine, I'm just going to call them Zola and give a definition.

00:13:30:17 - 00:13:58:14 So I'm not trying to like, create some new term. I'm just getting lazy in the writing. Second, I've been using the term paycheck motel for more than ten years, 12, maybe even 15 years ago. It was like, that's been a long term trend that the idea that, you know, the checking account has now become a temporary home.

And it's really important, I think, for a lot of bank and credit union executive teams, not so much at the board level. 00:13:58:15 - 00:14:26:03 I shouldn't have thrown board in there, but at the executive team level to really start thinking, well, how important is direct deposit really to the relationship? And we actually did some research last year that shows among the younger consumers it's it's not as important as you think. They are considering a much fewer percentage of Gen Z than millennials, than Gen Xers, or than than baby boomers.

00:14:26:03 - 00:15:11:14 Consider the their primary checking account or payment provider to be the place where they do direct deposit. So there's a component to that. But anyway, the core of this is about the positive traction and deposit retention. And I would be the first to tell you you got to reinvent the checking account to do that.

We've been writing about that stuff for probably five years now, Stacey, but this particular piece of research was trying to expand that idea that it isn't just about reinventing redesigning the checking account, but it's about using the investment side of the relationship or the product side to attract deposits. 00:15:11:14 - 00:15:37:16 That seems somewhat counterintuitive until you look at Robinhood and realize that they didn't mean they were doing investing for a long time, then they started getting into providing the checking account or the deposit account.

It wasn't very well designed at first. It's funny, my very first Forbes article back in 2019 was about how Robinhood screwed up their checking account design, but they fixed that over time. 00:15:37:16 - 00:16:13:18 And now it's they are literally in double digit billions of dollars in deposits. Why?

Because they have a superior checking account? No, it's actually because they've got that integrated checking account investment product. And that has always been a challenge from the traditional Fi perspective, because the way the products have been built have been so stovepipe. But now there are providers in the market who are enabling that, that that challenge to be overcome and really kind of think about not a checking account and a payment account and a an investment account.

00:16:13:18 - 00:16:36:01 But hey, let's just do the investing right from the main account, the deposit account. And we did some research last year and this year expanded on that a bit. So I think focus on a couple of key points. Stacey, sorry to drag this out, but a couple of key points is that, you know, this isn't simply about crypto and that is a huge draw for the younger consumers.

00:16:36:01 - 00:17:10:09 But one of the key points that came out of this was that they don't just want an account that only does crypto, they want to do traditional investing with the crypto investing. They don't want to think about these things separately. That's a challenge with some of the crypto providers that all you can do is crypto investing. And so it's funny, you know, while we talk a lot about how today's younger consumers have 40, 50 different financial relationships, it's not because they necessarily want to.

00:17:10:10 - 00:17:41:16 It's because nobody's really offering the right product that integrates a lot of these capabilities. And the capabilities are there today from a third party vendor perspective. And I, we really wanted to just, you know, hit some of the financial institutions upside the head on this to say, the deposit retention and deposit attraction challenges you're facing don't just have to come from redesigning the checking account, it can come from offering a better investment alternative as well.

00:17:41:20 - 00:18:06:05 Yeah. And you know, you just mentioned as far as and listen, I think this is a very chunky piece, which is why it's a white paper where we can just make so many different arguments. But I think the overall consensus is basically, again, you know, rethinking on what you said on, you know, rethinking ways to really boost up and prevent churn, rather, and boost that relationship with your particular customer. 00:18:06:05 - 00:18:34:05 Beyond direct deposit.

There aren't any accounts that offer everything across the board yet. I know within the and I know even within another Substack, you kept saying, yeah, there aren't these products yet. There isn't. This isn't available yet.

I want to just make a clarification for for our listeners and and even for folks who actually start reviewing this particular white paper, which we can go ahead and send to anyone who reaches us. 00:18:34:05 - 00:18:55:18 But I think it's really you mentioned the competitors being Robin Hood and even Coinbase. And so when we think about the big dogs of investment investing, I just want to make clear for at least for me, the way I look at it is the competition. The competition isn't Merrill Lynch and Vanguard.

It's back to the players that you said, because and I'll pull this here. 00:18:55:19 - 00:19:22:05 Robin has systematically removed every barrier, keeping younger consumers out of investing. So that's there was a mention of fractional shares for as little as a dollar, a mobile first interface, an IRA match for 3% for subscribers, and turn the platform into a retirement savings destination. On the other end, with Coinbase, Coinbase, Learn and Earn program solves the education barrier and the cold start problem simultaneously.

00:19:22:05 - 00:19:50:16 So again, you're talking free learning, free crypto and account opening minutes. And so oftentimes and this is the point that I really want to clarify is we're not telling folks with this particular research, okay. Now you have to become as nimble and ready readily available as Robinhood or Coinbase. But let's extract the frictionless and grab that onto the trust that a lot of these community financial institutions have already spent years in earning.

00:19:50:16 - 00:20:15:14 And I think that's what it is. And I can tell you, I think I speak for both of us when we're at these board retreats or conversations with the executive team. Again, that cultural mindset and understanding how instrumental, frictionless, frictionless is to be one of the components of being that smarter financial institution into 2030. Yeah, a couple reactions, Stacey.

00:20:15:14 - 00:20:54:08 One, have I never told you before how much I absolutely detest the term white paper? I've never told you that before. Know anybody at cornerstone? Call them white papers, their research reports.

And here you are. White paper. This white paper. That so?

But okay, second thing I wanted to share just real quickly I was sitting I had done a board presentation for a bank last year and then was sitting through the presentation that came after mine, and the speaker was going on about the topic was attracting younger consumers, and the core of their message was you have to speak their language. 00:20:54:09 - 00:21:20:05 And I just was it was killing me to not speak up and go. That is the biggest bunch of BS I've ever heard. You got to stop it.

It isn't about speaking their language, it is about having a product that is designed to meet their needs and wants and desires and and even taking that down a level two, because it's too simplistic to think Gen Z is a addressable segment. 00:21:20:05 - 00:21:46:04 That's that's crazy too. But there are some very strong trends from an age difference. So that does help to to make a difference from a differentiation and segmentation perspective.

But this is the key thing is that you can't let marketing run this sorry marketing folks because they get they look at this from a messaging perspective. This is a product problem and a product issue. 00:21:46:04 - 00:22:07:20 And you know, we are still dealing in a banking environment, Stacy, where most of our clients on the bank and credit union side do not have chief product officer. You know, you generally find that in the technology firms, there's a CPO, which you've product officer.

I do see some change of that and some banks and credit unions that that title is creeping in. 00:22:07:20 - 00:22:26:08 But somebody really got to take the the lead on what is the product design and development and lifecycle look like. And that's something that's been missing in a lot of banks and credit unions know. First of all, thank you for correcting me.

It would be a pleasure to call this a research paper and continuously called it that. Number one. 00:22:26:09 - 00:22:52:20 You know, I always appreciate your advice. And number two, though, you know, I was smiling and smirking when you were mentioning that this is a product problem.

And and here's the thing. Even our what's going on in banking data shows this. You know, fintechs and these challenger banks, they're winning because they're relooking and reimagining what banking means for specific segments, specific types of peoples in this case. 00:22:52:22 - 00:23:20:12 And so again, like I just I'm really intrigued and delighted.

And I think that we need to provide a constant light and different messaging to convey. Let's look at this differently. I mentioned this on on several other podcast episodes in the past, but I can tell you, like, you know, it makes me think about Chime and how Chime has saturated the checking account market for the most part, or a good fraction of it at that. 00:23:20:12 - 00:23:43:11 And so, you know, they have something called Spot me and spot me is just another word that basically translates to overdraft protection.

And so that's another way that they're looking at it so that they can be relevant, you know. So if I was, you know, during the NBA finals watching some commercials and I saw SoFi commercial and they mentioned and I think the Bron James may be on it. 00:23:43:11 - 00:24:01:01 I'm not sure about that. I have to double check.

But I think what I really want to kind of mention from that is SoFi are now calling their customers, and I'm not sure if that's always been the case, but members and so there's something that's working, something there are a lot of things that are working within community banking. 00:24:01:01 - 00:24:44:20 How do we're design based on behavior and based on trends. And that's obviously the common denominator here. So I don't know if you know this or not, but we have a white paper coming out recently.

I'm just kidding a research report coming out soon. And we specifically looked at SoFi. We surveyed 1200 SoFi members to understand why they're doing business with SoFi, what the arc of their relationship, what was the product that got them into it, what other products have they acquired and applied for and are using and to really understand what is SoFi doing to win? 00:24:44:20 - 00:25:03:18 So I'm looking forward to getting that out.

The client who commissioned that is kind of holding off on releasing that. So it may not be the we may not get a chance to talk about this in the very next episode of what's going on in banking, but I'll put the stake in the ground that says, if it's not the next one, it'll be the one after that. 00:25:03:18 - 00:25:25:00 And I'm looking at the clock here, too. And there was one other topic we wanted to talk about the, the, the the the clearinghouse tokenized deposit network.

But you know what? Looking at the time, this is a big topic. I'm going to say, let's put the stake in the ground for today. We'll push that one off for for the next one.

00:25:25:00 - 00:25:44:13 And Stacey, thanks a lot for, as always, co-hosting this and being a provocateur and all of this. And you want to close this out today. Yeah yeah yeah. Well that, that that other that last one we had definitely going to go back to that one I have, I have a lot to say there, but all I have to say is two things.

00:25:44:13 - 00:26:06:08 I saw Ron on the road in the streets of Boston with your industry colleague and friend, Emmanuel Daniel. So I just wanted you to know that I've been spying on you, my friend. And number two, long live the New York City Knicks. Thank you Ron.

Thanks. Thanks everybody for joining. Hope you join us on another episode of What's Going on in Banking. 00:26:06:12 - 00:26:18:01 If you enjoyed today's episode, please follow us on Spotify, YouTube, Apple, wherever.

Please do it because this is the eighth time I've had to do this thing, so let's get it done with people. Follow us. Come on man.