Upping Your Bank’s Retail Game with Ryan Harbry

Intro: Helping community bankers grow themselves, their team and their profits, this is the Community Bank Podcast.

Erik Bagwell: Welcome to the community bank podcast, I’m Eric Bagwell director of sales and marketing for the correspondent division of South State Bank and joining me, Caleb Stevens, Caleb a Business Development Officer at the bank and also helps us out on the podcast, Caleb, what’s going on?

Caleb Stevens: Oh man I’m excited for this interview today with Ryan Harbry, from our friends over at Strategy Core, really cool company they help banks with their retail strategy and that’s something that’s kind of been on the back burner for a lot of CEOs; I think lately when we’re talking about liquidity and NIM compression and loan demand Ryan makes the case that you shouldn’t get away from having a really clear retail strategy so good discussion.

Erik Bagwell: That’s very timely, I was at in some banks last week and we actually talked about everything, but the retail side. So this is exactly, this is good and we also want to do this, we want to promote and let you guys know about, and we talk about this and we get a lot of folks reaching out, Tom Fitzgerald who’s with us on a lot of the podcasts, has it bond accounting report. We actually have a new one that’s out this week, Caleb talk about that and how folks can get a copy of that if they want it.

Caleb Stevens: Yeah so we do bond accounting for about 130 banks all over the country and it’s a great way if folks want to get just a quick snapshot of you know, what’s the other guy doing, I mean, with the yield curve right now, where we sit, I guess it’s October 12th so hey, the door to bulldog’s number one, by the way this week, which can’t make any guarantees when this comes out, that it’ll still be that way when we play Kentucky, not to get side tracked with the football here, but we do bond county for 130 banks and it’s a great way for folks to get a snapshot of what did those portfolios look like on an aggregate basis and Tom does a great job of putting that together and giving our customers and anybody who wants to see that info an easy way to get that and get some insight into the bond portfolio we’ve got a lot of CFOs who use it for their board packages as well so to get that, you can go to southstatecorrespondent.com/bondreport, southstatecorrespondent.com/bondreport.

Erik Bagwell: Guys, listen, we really appreciate you tuning in and listening and a lot of you guys are reaching out to us and let us know you enjoy the podcast. We greatly appreciate and enjoy doing this and hope that a hope that you will enjoy this interview as well on this one so let’s go to it right now.

Caleb Stevens: Oh Ryan is going to be talking with you today on the podcast, thanks for joining us in the studio. How are you?

Ryan Harbry: I’m doing great, Caleb, thank you so much for having me, good to see you.

Caleb Stevens: You and I, did we meet on LinkedIn? I feel like we did and you’re not the first person who’s been on this show actually, who I initially met on LinkedIn so I guess that’s banking in 2021 for you.

Ryan Harbry: Exactly actually you and I, we have a mutual client and I saw you promoting him I have a personal friendship with this gentleman, I reached out to you in a private message and then we decided to get lunch and we’ve been friends ever since.

Caleb Stevens: Shout out to Dan Duchnowski at Planters First Bank down in core deal.

Ryan Harbry: Shout out to Dan.

Caleb Stevens: I guess I’m allowed to say that so Dan, if you’re listening and I know you are; because I know you listen to the show shout out you all are doing some great things. Tell us Ryan about Strategy Corp and everything you guys do a little bit of your background, how you got into the retail side of banking.

Ryan Harbry: Yes, so Strategy Core, we’re headquartered in Nashville, Tennessee we’ve been around for 20 years, we help community banks with their retail strategy, really in order to achieve a few objectives we help them grow non-interest income in a customer friendly way. We help them enhance mobile engagement and we help them deepen unengaged relationships so community banks have a large percentage of their customer base that are cheating on them with a bank down the street. These customers are very shallow non-primary and so we help deepen those unengaged relationships that are part of what we do. I’ve been working with community banks for 16 years, I’ve been a strategy Corp for six years I’m a Regional Director of Sales and Consulting. I live here in Atlanta in a suburb called Roswell prior to working at Strategy Corp; I worked at Fiserv bank intelligence.

Ryan Harbry: So Bank Intelligence was a company that Fiserv purchased and then prior to that, I was at deluxe banker’s dashboard. Banker’s dashboard was a company that Deluxe purchased and then prior to that I worked at Equifax and I had a book of business made up made of community banks. I oversaw a very strategic product for them it was called credit marketing solutions basically it helps community banks with pre-approved marketing lists, as well as portfolio reviews to help determine how much to set aside for like loan loss reserves and things of that nature, so been working with community banks for 16 years.

Caleb Stevens: Yea, a lot of different capacities and it sounds like you’ve gotten to kind of see it from different angles, which probably adds up to a lot of a holistic experience where you can then go into a bank and say, all right let’s kind of look at all your problems and see how we can help.

Ryan Harbry: Amen brother yeah, so my whole background and experience has been helping with community banks with technology and analytics for the sake of increased profitability and better decision-making; so I love community banks. I really feel like I’m an advocate for the industry and its great giving them weapons to compete with the big boys.

Caleb Stevens: Absolutely so let’s dive into that a little bit when it comes to retail, I right now, you know, all the talk in banking is about liquidity, net interest margin, loan growth being a little bit sluggish, CFOs are scratching their heads, saying I’ve got all this cash do I keep it on my balance sheet? Do I put it into the bond portfolio? Do I wait to see if interest rates rise and put it into loans? I mean, there’s a lot that CEOs and CFOs are stressed about right now and honestly, I don’t know if retail per se is high up on that list right now because of all the big challenges that are right in front of their faces, but you really advocate that it is critical to have an effective strategic retail strategy, despite all the distractions and I wouldn’t say they’re distractions, but despite all the things that are grabbing our attention right now as bank executives maybe is on the back burner, what would you say to that CEO or CFO or just bank leaders who are caught up with a lot of things right now that are, that are top of mind and very important, and maybe haven’t put a lot of time and thought into their retail strategy.

Ryan Harbry: Yeah, well commercial is certainly the main area of focus for community banks, right? And in particular commercial lending is the main horse and, but a really smart retail strategy can help the bank be financially strong and as it relates to, a retail strategy banking is so competitive and it’s so commoditized and banks do need that healthy and robust bottom line and like I said earlier, they can have a large percentage of unprofitable relationships. Those who are creating a reoccurring drag on earnings to their bottom line. And so for all the reasons that you mentioned you know, while retail might be on the back burner, in some cases which is very much what is very much on the forefront is a, is a need for non-interest income.

Caleb Stevens:
It’s a big topic right now too, is man net interest margin is getting squeezed. We’ve got to have sources of non-interest income, so yeah spot on.

Ryan Harbry:
Yeah I mean, you’re exactly right we’ve been in such prolonged low rate environments, right? We’re flushed with deposits via PPP and stimulus money, which has been pumped into the market, rising compliance costs, rising technology costs, massive income decreases rather and NSF and OD, so it creates this need for an increased non-interest income and a retail strategy that’s smart can certainly help banks grow non-interest income; and what I really feel like is that community banks need to transcend their legacy model. They need to transcend their legacy model we need to go beyond traditional banking benefits and find things that compliment so that we can grow non-interest income, specifically fee income, and a customer friendly way. There there’s an over-reliance on punitive fees like OD and NSF, and those are going to be, those are going to have increased pressure via the CFPB and also industry pressure, because there’s a lot of institutions who are beginning to completely eliminate OD as, as a source of a charge. A lot of big credit unions, digital banks in particular are doing this; so I really feel like that smart retail strategy really needs to transcend its legacy model and if you think about it, lots of industries in lots of industries have transcended their legacy model. I mean just think about the automotive industry in cars; cars were designed to take us places, but now they have such sophisticated computing systems where they can now tell us where we need to go via the GPS.

Caleb Stevens: My dad just bought a car recently and you can be like cruising through a parking lot, a busy parking lot, and it will locate an empty parking space for you and at a click of the button, the car will park itself into that empty space. It’s freaky because it’s like the wheels turn it on its own and the break, and it’s just like, man, you got to really get used to it but anyways, a bit of a side story there.

Ryan Harbry: But also very cool, another industry that I think that we would do well to keep an eye on is actually like the gas stations. So I’m 40 years old, if you want to just dial back, you know, 20, 25 years ago, I remember gas stations and like Exxon, basically there were just places where you went up to fill you went to fill your gas and maybe you bought a candy bar, but that’s what they did they dispense gas and that’s what you went there for. But now if you look at companies like Quick Trip and Racetrack in the Southeast, and if you look at companies like Sheets and Wawa in the Northeast, they have gone beyond petrol and they’ve become basically convenience centers, they’ve quadrupled their gas pumps.

Caleb Stevens: You heard of a Bucky’s, I think it’s big out in Texas, they just opened one up 75 here in Georgia and I think it’s blowing up.

Ryan Harbry: It is blowing up, I have heard of Buc-ee’s, very recently actually, and people are wild about Buc-ee’s and actually the people are wild about like Sheets. I have a whole bunch of family in Pittsburgh, Pennsylvania, and all of them like are super loyal to Sheets, the Gas Company, right? So they’ve gone beyond petrol they’ve quadrupled their gas pumps, you can go buy pizzas and subs and ice cream, it’s this whole convenience center, right? So they’ve transcended their legacy business model; I think the community banks need to transcend their business model as well, because, you know, when it comes to the traditional banking benefits like transactions, everybody expects to do those in the modern way, right? So back when it was just bill and coin, people wanted to transact their money and bill and coin, then fast forward a little bit later when cheques and debit cards started coming out, there was a market expectation that, hey you know, banks, you need to provide this. This is the way that, that the society is going and then now that things are so digital in nature, people expect to do their transactions and to move their money and check their balances on the phone and on the computer at home. So community banks are pouring in all this resources to great mobile experiences, which is necessary, however, it’s only necessary to compete, right? It is an expectation and that’s exactly why you can’t monetize these things, you can’t really monetize.

Caleb Stevens: It’s the minimum viable place you need to be from a competitive standpoint.

Ryan Harbry: Exactly, exactly and so in order to monetize your products you would really do have to go beyond and transcend your legacy business model. Let me relate this to it, to another industry. I love Mexican food, do you like Mexican food?

Caleb Stevens: I do, my wife and I went to a Mexican place last night.

Ryan Harbry: Okay, I go weekly with my wife as well, so basically we’ve all been conditioned to expect that chips and salsa should be free, right.

Caleb Stevens: That’s true.

Ryan Harbry: And so, if you happen to find a two or three, two or $3 charge on your bill for chips and salsa, you’re probably going to tell your waiter, excuse me take this off.

Caleb Stevens: Right, it’s like ordering an ice water, why would you charge for a nice walk?

Ryan Harbry: Exactly, right but while we’re not willing to pay for chips and salsa, we are willing to pay for cheese dip, we are willing to pay for guacamole right and so community banks have been giving their products away for so long. And there are specific reasons for that, that we can get into, so in order to recapture this loss revenue stream, because we’ve been giving away our products for so long, you got to go beyond and find ways to compliment everything that banks have always traditionally done. And so I think a great way is helping people save money in unique and exciting and creative ways, in addition to helping them make money, like interest on balances, as well as providing great technological experiences.

Caleb Stevens: Yeah and we’ll get into that in a minute, but I think what you’re saying is it all kind of ties back to something I’ve heard you say before, which is you really want to make sure you’re becoming the primary banking relationship for your customers. As you mentioned, you may be the third or fourth financial institution down on the rung for a lot of consumers, because you know, they’ve got there, you know, their high yield savings account with maybe an online bank, they’ve got their you know, investment account with a Vanguard or Fidelity; and how do you become the go-to primary home base for that consumer? Is that kind of what you’re sort of hinting at here?

Ryan Harbry: Well a smart retail strategy is going to be able to garner a higher percentage of primary relationships and it’s really important that community banks, set their sights and aim all of their efforts to create those primary relationships because non-primary relationships can be expensive. They can create a massive drag on earnings month after month, costing more than they’re bringing in. So you have to have primary and engaged customers and people can be primary in different ways, or excuse me, people can be profitable in different ways I’ll say some people are unprofitable by the balances that they maintain via deposits and loans. Some people are profitable because they overdraft a lot, most people are profitable because they have some balances and deposits and loans they swipe their debit card a lot maybe they overdraft from time to time but, a smart retail strategy will have smart products that are designed in a way to create engagement, to create skin in the game and when you create engagement and have some skin in the game, then you are more likely to keep those non-profitable non-primary relationships. You are creating that drag on earnings at bay and so a smart retail strategy will have good people and what I love about community banks, they have great people that care about their customers.

Caleb Stevens: Yeah, that’s their super power as Lee Wetherington, one of our recent guests said, that with all the arms race for technology and getting scale one thing that the community banks have a leg up on the bigger banks is that personalized service is there super power.

Ryan Harbry: It is their super power and I have spent so much time in the branches with so many community banks and they have amazing people. But you know, having great people isn’t enough in such a commoditized industry. You have to have great people and you have to have great products and when you have great people and great products that really does serve as the one-two punch to help you go out there and compete, win in the marketplace, and also create those deep and engaged relationships that are profitable at the end of the day, community banks serve a for-profit business and we got to make sure that our relationships are profitable and a smart retail strategy will do that, and I think that it’s really important that we do create that new revenue stream, that customer friendly fee income revenue stream that helps us helps us transition away from an over-reliance on those punitive fees.

Caleb Stevens: And that probably ties into culture a little bit too, if you’re several lineup, punitive fees, you kind of become known as the bank that dings you every time you are out of line, you overdraft your account, non-sufficient funds, the punitive fees that you’re talking about you can flip the script, find some new ways to add value to customers while still having a profitable relationship with them probably can kind of flip the script and the narrative on your, your bank there as well I would think huh?

Ryan Harbry: Yes and it is important to flip that script because people regularly do experience our non-interest income and community banks, as what I refer to as a mosquito bite, service charges for products that people expect to be free or overdrafts when they go beyond balance.

Caleb Stevens: A slap on the wrist.

Ryan Harbry: Right, exactly and so, do you know do you remember that company Blockbuster?

Caleb Stevens: I do remember that company shout out to eight year old Caleb going into finding, you know, star wars episode one, getting pumped

Ryan Harbry: Yes for me, it was like back to the future.

Caleb Stevens: Love that.

Ryan Harbry: All of the eighties movies.

Caleb Stevens: Have you seen that Netflix documentary? “The last Blockbuster?”

Ryan Harbry: I have not, but I do hear there’s one blockbuster left.

Caleb Stevens: There is one blockbuster left in the entire United States, it’s in bend Oregon and I watched it the other night. It’s very interesting, it’s this community that just loves blockbuster and believes in it and wants to keep it alive and anyways yeah, there’s one left.

Ryan Harbry: Yes, so blockbuster their business model was very much one of punitive fees, right? Let’s say you ordered, or you rented rather a VHS of Star Wars; God forbid you didn’t rewind that thing back to the very beginning and if you didn’t, you get dinged with a fee, God forbid you’re a day or two or three late, you’re going to get dinged with other fees. Right, so that’s very much an example of a business model that structured on punitive fees; then along comes Netflix and they have no punitive fees within their experience, it’s all about great digital engagement and value added services, and because Netflix came around and they had this type of philosophy, this type of business model, this type of experience they put blockbuster out of business minus one branch, right or minus one location. And so it really is important that a community banks transition away from these punitive fees create that customer friendly fee income revenue stream. The only way that you’re going to do that is by transcending your legacy model, find products, find benefits and perks that compliment everything that banks have done historically so banks historically have helped people make money on their balances why not help people save money on relative things, help people save money on various services that are a part of their monthly budgets.

Caleb Stevens: So I mean let’s dive into that a little bit I mean, I don’t want to make this just a commercial for Strategy Core here, because there’s probably other, you know, options out there as well. But talk about some of those services that are part of a consumer’s every day monthly budget that maybe you move away from the punitive fees and you find ways that maybe it’s still a profitable relationship, but the customer is getting a lot more value, talk about some of those things and let’s get practical here.

Ryan Harbry: Yeah so have you ever heard of the cornerstone advisors?

Caleb Stevens:
I have, yeah.

Ryan Harbry:
All right so the cornerstone advisors some of the best researchers in our industry, and they have done a lot of research in this regard to determine what people value in terms of benefits and some of the things that came very high in the list were stuff like cell phone protection, right? We, we all have cell phones and so protecting the cell phones is something that has a high currency in terms of what people value roadside assistance; AAA has like 80 million subscribers to their service ID theft protection benefits so those are some examples of some non-traditional banking benefits that if you can find them and mix them into your products, help you go beyond traditional banking benefits that you will create that value added strategy will create that customer friendly fee income revenue stream, I think another thing that I have.

Caleb Stevens: So maybe you’re still charging me a minimum balance or something to that effect, but hey, if I’m broken down on the side of the road, I’m taken care of, or I’m protected from a cell phone standpoint, cell phone protection sounds like it’s, you know, maybe I’m okay with having that fee in place, if I feel like my banks taking care of me in other respects.

Ryan Harbry: Yes well, you know, you can actually use these types of benefits in a couple of different ways if you’re smart number one, you can use them as a way to reward big relationships. So you can say like, hey, we’re going to give these things to you for free on us as long as you can maintain X balance, right. Or you can structure it in such a way that says like hey, you can have all these benefits for five, $6 a month, right? And so you can have it as a flat subscription based fee, or you can have it structured as a reward for a bigger relationship and if you have that one, two punch, that’s an example of a smart retail strategy that can create engaged customers and also customer friendly fee income.

Caleb Stevens: So I mean, how does this tie into mobile? Because that’s a huge topic right now is, I mean, we just rolled out a new app at Center State or at South State I should say, not too long ago. And you and I were talking before we recorded this, what’s cool about the new South State banking app is it aggregates all of your accounts into one place inside this house that app. So my Fidelity retirement account, if I have a savings account with another bank, anywhere that I’ve got money and accounts, it’ll all pop up into one nice, easy home base inside the South State app and I mean, that’s a huge discussion point right now is how do we make our app, you know, the primary relationship to use your term for consumers go to financial hub, and so how does sort of what you’re talking about in terms of retail play into that.

Ryan Harbry: Mobile is king and it’s really important to have great mobile engagement with your customers because people have been making their way into the branches, less and less for obvious reasons. Number one we’ve been extending great mobile and online technology for a long time now so people can do all their banking and all their transactions on their couch at home, there’s no need to come into the branch and now because of COVID, people are coming into the branches even less and so you got to go to where the people are, right? People are on their mobile phones we’re all addicted to our cell phones, I know I sure am. And so you got to create a great mobile experience as it relates to these value added strategies, that’s what I would say. So there are a lot of great companies out there who are providing great mobile experiences, they can create for your custom apps, that’s just one example. But you got to have, it’s got to be mobile and it’s got to be easy to use.

Caleb Stevens: Yeah, for sure.

Ryan Harbry: I’m speaking to you as a self-confessed lazy American consumer, if you don’t make things easy on me, I ain’t gonna use them.

Caleb Stevens: It’s what Donald Miller says, if you confuse you lose, not sure if you ever followed him he’s a marketing guy up in Nashville and we modeled a lot of what we do marketing wise after him. And I think that’s just so true, he makes the case that people don’t always buy the best product, they buy the one that they can understand the fastest, because we’re, our brains are designed to save calories so the less calories you can burn the better.

Ryan Harbry: Yes and you know it’s really important that you structure your products in a way that’s simple, right? Because there really is such a thing out there called choice overload, right? So if you present people too many options, they’re just gonna tune out.

Caleb Stevens: Just tune out, get overwhelmed.

Ryan Harbry: Get overwhelmed, and they’re gonna choose the cheapest one and oftentimes the cheapest one isn’t the best one for them. So you have to design a simple yet sophisticated line up. I’m a big fan of the, the good, better, best strategy and if you think about the good, better, best strategies as it relates to not only retail banking, but retail throughout industries of all kinds, I mean go buy a car, go buy a cable TV package, go buy a gallon of gas or an airline ticket or carwash you’ll get the good, better, best strategy. So I really recommend the good, better, best strategy for community banks, because it creates that simple line up that facilitates a conversation in which it’s easy to buy and easy to sell.

Caleb Stevens:
And if you’re always competing on price, I mean, what are you really saying about the product you’re offering beyond, just besides the fact that you know, all you have to compete on is price, it’s like what I don’t know if you follow Seth Godin, he’s kind of a marketing guru in New York and he says, it’s a race to the bottom for many companies and the problem with the race to the bottom is you might win.

Ryan Harbry: Well I would actually disagree a little bit and I would say that community banks haven’t been competing on price, they’ve been competing on free. They’ve been trying out free one another come to us, we’re more free than they are free and so you know, and specifically free checking, it came into our industry decades ago at a time when people were making way more and interest income and so they could afford to give away their products for free, and so really what the thinking was there is that, Hey, we’re not going to make the service charges, but in place of the service charges, we’re going to get some more NSF and it’s going to give us some more opportunity to cross sell to our customers. Fast forward a couple of decades later, when the interest income isn’t as lucrative, you now have an abundance of non-profitable on primary relationships that the bank is subsidizing month after month, after month.

Caleb Stevens: Especially with all of the liquidity, in times where liquidity is tight and you need to pause, it’s maybe you can make those justifications, but right now, particularly it’s like, you got probably a lot of unprofitable accounts, I would think.

Ryan Harbry: Oh, yes between a third and a half of most banks that I work with have a non-primary relationship that is what makes up their customer base one third to one half all fall in this non-profitable designation. So I’m trying to help banks transition away from a free strategy oftentimes to a value added strategy; so they’re not necessarily competing with free, they’re competing with value in a way that truly is helpful.

Caleb Stevens: Yeah so I mean for the CEOs listening to this, and they’re saying, huh, maybe I need to look into that more. Are there any webinars, or free resources, or things that you guys put out that could, that maybe can help them sort of think through that a little bit further as we wrap up here?

Ryan Harbry: Yes, our company we have an abundance of webinar we just did a really great, great one yesterday, it was called our overdrafts over and that’s just one of a series, and so you can find all that stuff if you go to strategy corps, it’s patterned after like the Peace Corps, so strategies.

Caleb Stevens: So the S is silent.

Ryan Harbry: The S is silent, so strategy corps.

Caleb Stevens: And the P is silent too huh?

Ryan Harbry: Strategy then corps.com, and then if you go to forward slash stuff, so strategycorps/stuff, you’ll find a whole bunch of resources from a white papers that we’ve done with the cornerstone advisors from webinars that we’ve done very recently, like are overdrafts over that’s one we just did, which was that the highest one highest in terms of people who attended that we’ve ever done, so lots of stuff there.

Caleb Stevens: Forward slash stuff, easy enough to remember so thanks for that, Ryan appreciate your time and look forward to seeing you in the future.

Ryan Harbry: Thank you, Caleb.