Craft Bank is the first de novo inside the Atlanta perimeter in over a decade. The bank offers a fully digital experience including faster payments and lending in addition to personal relationships. Craft launched in October of 2020 and I caught up with Ross Mynatt, president and CEO of Craft Bank, to talk about his firm’s process developing tools and experiences for today’s customers.
Also joining us on the podcast is Stacey Zengel, senior vice president of Jack Henry & Associates and president of Jack Henry Banking. 42% of de novos opening for business over the past four years were Jack Henry clients and Stacey shares his views on what it takes to build a modern bank from scratch and launch effectively.
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The following excerpts were edited for clarity.
The idea for a new bank
Ross Mynatt, Craft Bank: Craft Bank was born out of the the realization that the number of community banks operating and headquartered in and around the metro Atlanta area had significantly dwindled over the last 10 years. We identified a real opportunity in the marketplace for a new startup bank that was going to leverage technology, and not be entirely technologically-driven where it replaces customer service, but enhances the customer experience. Despite the pandemic, social unrest and political discourse, we think, from an economic standpoint, now was a spectacular time for us to open.
Starting a de novo
Ross Mynatt, Craft Bank: By looking at zip codes, when community banks compete head to head against large nationals and large regionals in and around the Atlanta area, we found in several cases that those community banks could compete and compete effectively for market share.
The challenges in launching a de novo were multiple: it had been 13 years since a new bank had opened its doors inside the perimeter, a circle that runs around the Atlanta highway system. Secondly, the pandemic hit. I think, for all of us, the realization of what was going on occurred in March of last year. That was right around the time we were starting our capital raise. It caused us to have to adjust how we were going to open, what our business plan was, and to be very nimble and adaptive.
De novo activity
Stacey Zengel, Jack Henry: I think the key thing is, as you work with a customer, any customer that's converting, including de novo, that executive interaction is certainly a good thing to have. And Ross and I chatted a few times just as as his bank got up and running. It's not my first rodeo with a de novo at all. Over the last three or four years, we've captured about 42% of the market for de novos.
De novos usually have only a few people in the beginning, so you have to keep that in the back of your mind because you can't overwhelm the team that's there. Craft wanted to offer a lot of services to their customers so that they could compete with the other banks in the Atlanta area. That's certainly something that we're pretty good at, but every customer is a little different. And Ross's bank was too and we just work carefully with them.
I think that what's happened during the pandemic is that you've seen the community banks, including Ross's bank, work with their customers extremely well. And that's really made a difference. I think we'll see a bit of a renewal in community banking for that reason as well.
Creating a community bank in the age of digital
Ross Mynatt, Craft Bank: If you ask any bank, whether they're a startup or they've been around for 100 years, what do you want to deliver, it's going to be two things. It's going to be great customer service and a current state of the art digital experience. The reason why we've been thrilled to partner with Stacey and Jack Henry has been that we've been able to identify key slices of our early product [to accelerate our launch].
I'll be specific here: it was real important for us to have a current state of the art commercial loan platform. We're not exclusively a commercial bank, but that is a heavy portion of our focus and emphasis. And so in working with jack Henry, we set up the product that they offer, called LoanVantage. And they took the time to work with us and say, okay, what parts of LoanVantage are important to you? What do you want, specifically, in terms of the approval process, credit underwriting interaction with the client, the ability to upload documents from the client, which pieces are the most important to you relative to the flow from the second you get a phone call to when that loan closes?
I would encourage banks and bankers to think about not just relying on the easy answer of oh, we want to be digitally current. Be very intentional and very specific about what that means. I think the other thing that we've come to realize is, while I'd love to tell you that, yes, we want to have a current CRM system, we want to have great reporting systems, we want to have an integrative platform that all systems talk to each other -- all of those are great, but you just can't do it all. So you almost have to stack rank what you want to do with excellence -- be specific and intentional. And then go from there.
Stacey Zengel, Jack Henry: I absolutely agree. De novos really want to offer every service they can, but you have to prioritize what you're doing for your customers and grow from there. That said, a de novo that starts today offers far more services than one that opened 10 years ago because that digital aspect is just so critical to serve your customers.
Target demographics
Ross Mynatt, Craft Bank: It was really important for us to attract and appeal to not just millennials, but one of our checking products is geared and designed towards college students. As the father of a current college student, I think the phone is surgically attached to her ear, her hip, her hand. So it was important for us to partner with Jack Henry and be able to offer a simple and easy payment flow system, the ability to to look at what's going on in your account with a quick swipe. We are in the process of thinking carefully about adding a budget feature. I think that's really important. We're not there yet, but that's going to be important for us. Also, we want to give our customers whatever data that they might look for on their laptop or desktop to be available on the phone.
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The evolving consumer
Stacey Zengel, Jack Henry: I think consumer behavior has really evolved. Bankers' mentality was that their customers would come into the bank for a lot of years and digital was something you had on the PC, but when all of a sudden, it became critical, it really was. Look at college kids -- it's all they use. My kids are also in college, and all they use is their phone -- that's their lifeline. I'm not even sure they know where their banks are. The thought process is anything that you really could do in the bank, you want to be able to do on the phone and digitally.
Competition to community banks
Ross Mynatt, Craft Bank: If you think about your competition in terms of rings, it's easy to say, well, we're competing against other community banks that are geographically located within a five to 10 mile radius of where we sit. That's true. And then the second ring might be the larger regionals. And, on a limited basis, some of the national banks that pursue some of the same lines of business that we want to do business with, whether it's a medical practice, a builder, developer, law firm, distributor, manufacturer, operating company, what have you.
What's interesting in the space right now is our competition are actually companies that are one-off banks and non-banks (like Intuit which offers banking services as part of its accounting software) that aren't even located in Georgia now. Are we competing head to head with them today? The answer is probably not. But I see the day coming in the next few years where, just as as intently as we want to compete against our local community banks, we're also committed against those other companies that aren't even in Georgia, much less in the southeast.
Acquiring first customers
Ross Mynatt, Craft Bank: Fortunately, the management team each averages about 25 to 30 years banking experience in the Atlanta market. We have a pretty good history and customer base. That's number one. Number two, I've got a spectacular board of directors that loves to refer business to us. They're proud to be affiliated with Craft -- they invested a healthy amount of money collectively. So that's a great source. And then we've got almost 200 shareholders to date that love referring business to us, as well. Those are the immediate funnels. And then fortunately, we've been blessed with being able to get the word out. We've received some favorable publicity, and that's been helpful as well.
What channels we will market in is probably a question for us six to nine month down the road. Right now, we're working through the pipeline of all of those channels that I just described. That said, we don't want to just rest on the nice success that we're enjoying today. We've got a great PR firm that we've partnered with. We've got a great branding company that we've partnered with. Our website will never ever be static. That would be a nugget I would pass along: whether you're involved in fintech or banking, don't ever be comfortable with your website. We're going to look into targeted email, marketing and distribution here in the next six to nine months.
Serving community banks
Stacey Zengel, Jack Henry: We published what we call our top 10 for our banking customers. It's where we reinvest our dollars in banking. The priority right now is digital: trade, treasury management, payments. In payments, you've got these initiatives going on right now and the Clearing House initiative with faster payments. That's very key for us, as well.
Another thing that's happening in banking right now is the evolution of platform. This kind of goes back to what we were talking about with digital where, instead of coming to the bank to open an account, customers want to be able to do it over the internet or over the phone, as well as over their iPad.
Unfortunately, with all the new technologies come things like fraud. So we have focused there, too, which really helped protect our customers, as well. That's probably our top four or five initiatives. And, and of course, we continue to listen to our customers as well for ideas.