Credit Unions and Community Banks Win By Innovating to Add Product Value, Not Flashy UX

• Many small financial institutions are losing out to digital-first banks and fintechs because of product value, not a superior app experience.
• To catch up, traditional players need to focus more on success drivers such as increasing non-interest income and realized loan terms, says one industry insider.
• Armed with the right innovative products, small bankers can increase market share, deposits, and cross-selling opportunities.

Moving out of the post-pandemic period and into a new era of promise in 2025, community banks and credit unions need to increase non-deposit income and realized loan terms, among other goals, to compete with larger financial institutions. But they’re losing in a big way to more creative and nimble digital banks and financial technology companies with the resources and insights to meet customers where they are.

There’s much need. But small institutions should reconsider if they believe the gulf between smaller institutions and digital-first competitors is about app fit and finish. Instead, it’s about the value those apps create.

We talked to Gabe Krajicek (rhymes with magic), the CEO of Kasasa, which provides branded financial products, including rewards checking accounts and loan solutions to small institutions.

He pointed to a January 2025 article by Ron Shevlin, Chief Research Officer at the financial consulting firm Cornerstone Advisors, that showed digital banks and fintechs with a 44% share of new checking account openings in 2024.

Credit unions and community banks with less than $100 billion in assets, on the other hand, held 5% and 4% shares, respectively.

“What Cornerstone found was that people were picking the products,” Krajicek said. “That’s a point that small bankers miss — you just aren’t going to be able to go out with vanilla free checking like you’ve been doing since the 1980s and ‘90s and expect to have the same results.”

And that means taking a hard look at the numbers. Krajicek said every smaller institution “worth its salt” is looking to use the data at its disposal to manage and cross-sell its member/customer base more effectively.

They need a system to segment cohorts that are at risk of leaving, or that would likely respond to a cross-sell offer. But most community banks and credit don’t have the resources to compete effectively with the big banks.

Hence Kasasa’s existence. “When I’ve talked to those vendors and asked them what they’re really running into, the feedback is that they could really make some hay with a system like that,” Krajicek said.

He said the number of institutions that can do that at the level that matches what their sales pitches promise is small.

Krajicek said community banks and credit unions need a partner to compete with bigger institutions.

“You have to define the cohort, the data that establishes that cohort, the journey you want to kick off, and how you call that journey into action,” he said. “You need brain power for your analysts and the folks who create, manage, and A/B test the marketing messages.”

Not to mention workers on the front lines who need up-to-the-minute insights to help customers and members make the choices that work best for them. Many small financial institutions struggle with turnover in those front-line positions — turnover that causes institutional knowledge to deteriorate.

Customers also overlook options they should take advantage of. Kasasa-fueled text messages at the point of sale are one way to draw the customer or member’s attention to products that bring added value to the institution, such as reward-checking products.

“Clicking a link brings your customer or member into an authenticated session of online banking where we know who you are, and you select your reward,” Krajicek said. “And then we say, well, you should also get a savings account.”

Krajicek said increasing non-interest income is easy for smaller institutions, provided they’re willing to put up with customer/member attrition. Given the need for deposits, that’s not a trade-off any rational community bank or credit union manager would accept.

“You’re not going to risk eroding your deposit base because you’re trying to maximize your per-account profit,” Krajicek said.

A rare win-win-win is possible through products designed to entice consumers with tangible results. Create a fee-carrying premium account, for example, with extra features consumers want but with a transparent way to opt out if the value just isn’t there.

In that scenario, the institution maintains or extends deposits and increases income while the consumer gains functionality and savings. Krajicek said it’s a simple “cake and eat it too” strategy to make sure every account that can tolerate an additional fee gets one.

A loan with a “take-back” emergency savings feature can help win customer or member loyalty.

Or, consider an innovative loan product such as the Kasasa Take-Back® Loan, which includes what Krajicek called a “secret power” — setting people up with more savings while empowering them to a more sustainable financial future.

Customers and members see emergency savings accrue when they pay extra on a Kasasa Take-Back Loan. To be sure, those additional funds go toward the loan payoff. But they’re also available to redeposit back into the user’s checking account to handle emergency expenses (or anything else that might come up).

That certainty helps even customers and members with liquidity challenges bordering on extreme to sustain their commitments to pay off the loans.

“It allows them to rip down their debt as fast and as hard as they can while using the takeback essentially as a rainy day fund,” Krajicek said. “And if they don’t need to withdraw from that rainy day fund, they’re going to be out of debt earlier.”

Counterintuitively, the product drives a 25% longer realized loan term on average, Krajicek said. Proving Shevlin’s point in the article we cited above, the takeback feature results in users sticking around and using the “equity” in the loan to their advantage.

“The consumer doesn’t want to refinance once they build a takeback,” Krajicek said. “So they become way less rate sensitive.”