In This Episode
Join us for Episode 30 where host Rory Holland sits down with Jason Henrichs, CEO at Alloy Labs and co-host of the #1 global fintech podcast, Breaking Banks. They dive into Jason’s journey, from co-founding Perk Street, an early concept of Banking as a Service (BaaS), to leading community bank innovation at Alloy Labs.
They explore the critical role of trust in building financial brands, especially in today’s environment. Jason offers frank insights on why many community banks are facing a crisis of identity and brand, as well as how collaboration—like Abraham Lincoln’s “Team of Rivals” approach—is key to making the pie bigger. This is a must-listen for anyone curious about the human motivations shaping the future of financial services.
Key Takeaways
- The BaaS Origin Story: The early Banking as a Service model (like Perk Street) was driven by a deposit arbitrage to help community banks gather deposits, not just a Dodd-Frank interchange arbitrage.
- Trust as a Deliverable: Building trust requires real value and delivering on promises. Customers will choose you if you put “meat on the bone” of their expectations.
- The Anti-Wall Street Brand: In the wake of the 2008 financial crisis, brands could be built on an “anti Wall Street” sentiment, resonating with consumers looking to “take back Main Street”.
- The Community Bank Challenge: Many community banks and credit unions will likely “die” if they don’t find a real problem to solve and a unique selling proposition that customers truly value.
- Deposit Erosion: The consumer deposit base for community banks is aging, and the money of younger consumers is already fragmented across various platforms (like Amazon or pre-funded deposit intermediators).
- Competing with Scale: Smaller banks struggle to compete with large banks that are now tech-driven (like Chase) and startups (like Chime) that have raised billions in capital.
- A Portfolio of Bets: Alloy Labs helps banks thrive by focusing on a portfolio of strategic bets—ranging from high-flying problems (like payments via Rebolt) to more mundane necessities (like AI adoption via the AI Action Center).
- Beyond the Center of Money: Innovation should focus on the “edge of money,” recognizing that money is a means to an end (e.g., getting a loan to open a new business location, not for the sake of the loan itself).
- The Power of Cooperation: The cooperative model (like Land O’Lakes in the dairy industry) can serve as a blueprint for how community banks can collaborate to survive and thrive.
- Lincoln’s Leadership Lesson: Leaders should follow the “Team of Rivals” philosophy to bring forward diverse thought and solve big problems together, rather than protecting their existing “share of the pie”.
- From Desperation to Inspiration: Jason’s decision to found Alloy Labs was motivated by the frustration of seeing bankers who were “so f***ed” if they didn’t take ownership of their future, leading to the creation of what he jokes is a “giant therapy session” for bank CEOs
Transcript
Introduction to Alloy Labs and Jason Henrichs
Jason Henrichs (00:00)
So like it was tough to have gone from like this. Hey, everyone’s looking at going new, interesting model, the rise of fintech. You guys are doing great to Dan and I used to joke. And this became a series we’ve been running on Breaking Banks now called Killing It. It’s really like, how’s it going? We’re like, it’s great. We’re killing it. And you’ll be like, oh, you’re killing it. That’s great. And then, you know, they’d walk away and Dan and I kind of mutter under breath. It’s like, we’re sticking a knife in it
Rory Holland (00:37)
Hi, I’m Rory Holland, CEO of CSTMR and the host of Mighty Finsights. Every year, I have the privilege of talking with hundreds of fintech entrepreneurs and innovators. For this episode, I’ve invited one of these leaders to talk about the heart behind their brand and the deep motivation they have to make a positive impact. In this episode, my guest is Jason Henrichs and he’s the CEO at Alloy Labs and the co-host of Breaking Banks, the number one global fintech podcast.
Together, we’ll be exploring the origin story of banking as a service, creating a financial brand that consumers can trust, and what Abraham Lincoln can teach us about making the pie bigger. This show will help you look past the headlines and the sales pitches to the human side of fintech and financial services. We’re getting curious about the courageous choices and deeply human stories that shape how we engage with money. Join me as we dive beneath the brands to learn what’s really happening.
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Interview Starts – Upbringing, a Gift, and Running
Hey Jason, welcome to the show.
Jason Henrichs (01:59)
Thanks for having me.
Rory Holland (02:01)
Oh man, so excited to have you. So to get us started, where’s home for you?
Jason Henrichs (02:09)
I am in the twin cities of Minneapolis and St. Paul. I am not in an airport for once.
Rory Holland (02:15)
I know no kidding, right? I know you spend a lot of time traveling. But you, where were you? Were you born in Chicago?
Jason Henrichs (02:22)
I am a central Illinois farm country boy to southern Wisconsin. My dad worked for Ralston Perina, the feed agriculture supplier in a town of about 9000. Go Fighting Cheese Makers. We moved to the Twin Cities when I was in high school, but then I spent since basically 92 New York, Boston, worked in London for a while, to Boston, spent a ton of time in Southern California, back to Boston, met and married my lovely wife who’s also from Illinois. So like everyone from Illinois, you have to move to Chicago because we both said we’re from Chicago and they were nowhere near Chicago. The greater WGN area for everyone who is familiar. And then we moved to the Twin Cities ironically for her job, but there is no one happier than my mother that her baby moved back 27 years later and the grandkids are here.
Rory Holland (03:20)
God, bet mom’s thrilled. Yeah.
Jason Henrichs (03:23)
Mom is thrilled.
Rory Holland (03:24)
Yeah, I’m a southeastern Michigan person who grew up just north of Detroit and I have family in Chicago.
Jason Henrichs (03:34)
Yeah, rough weekend for all Michigan fans. You guys had if you could lose it, you all lost it last week.
Rory Holland (03:41)
Yeah, yeah, was was tough to watch, but we keep cheering. So, well, awesome. So a little surprise for you. And we got a box for you. So wanted you to reach into that box. There’s a couple of things in there that I want you to pull out.
Jason Henrichs (04:02)
There are two big lumps of bubble wrap in here.
Rory Holland (04:08)
Go for the biggest lump. Is there a box in there that’s heavy?
Jason Henrichs (04:17)
Peace. Glad my wife warned that I would need a knife for this.
Rory Holland (04:34)
Didn’t want to make it easy on you.
Jason Henrichs (04:39)
Alright, I have a box.
Rory Holland (04:42)
There you go. Okay. So if you rip that open, there should be a handful of your favorite some of your new favorite things you had you had told me that you’re a big fan of hot sauce. And I wanted to send you some Texas born hot sauce not BORN but B-O-E-R-N-E which is Texas Hill Country hot sauce and some different flavors. Thought we could shotgun it on the show, although we’re not going to do that. But yeah, that’s good stuff, man. A little bit of Austin, Texas, your way.
Jason Henrichs (05:21)
Love this and I actually smoked a pork butt last weekend that I will put this on because there’s one serving left and so my children will not get any leftover pork butt now is mine.
Rory Holland (05:37)
Awesome. Well, I hope you enjoy it. Thanks again for being on the show.
Jason Henrichs (05:41)
My pleasure.
Rory Holland (05:42)
Yeah, and there’s one other thing in there, but I’m going to come back to it. OK. Want you to want we can cover later as we get there. So last time I saw you, it’s been a bit since we’ve seen each other in person. Super glad to see you on video today. Your feet were bothering you pretty good last time. So you weren’t able to do what I understand is one of your favorite things to do that’s therapeutic, and that’s running.
Jason Henrichs (06:06)
Yeah. It’s always on the run. Two and a half years without running. was miserable. Yeah.
Rory Holland (06:12)
Wow, was it that long? Goodness. Are you training for something? Do you just love to run?
Jason Henrichs (06:20)
Just love to run. mean, I occasionally run like races, not to go fast, but I’m like, I need a new t-shirt. So I’ll go run something or, you know, one of my favorites, when we lived in Chicago, there was always a race. You’re like, could go run, you know, 13 miles by myself, or I could go run something and, know, get a free beer at the end of it. And so I guess I’ll go do that. It’s technically not free paid to enter, but yeah. More than one half marathon or marathon has been run on a whim, but just like to run.
Rory Holland (06:54)
That’s awesome. Do you just run around town? got any particular places you’d like to go?
Jason Henrichs (06:58)
So we live on the Mississippi river. So I’m pretty fortunate that I can go out and I could go 35 miles either way on the river and be on a trail. I’ll run. I love when we travel or when I travel to work to run in various places. I am not a huge fan of going to Las Vegas. just too far away and there’s a little redeeming. Staying out late is no longer all that appealing, but I love running down the strip in the morning and just like seeing the leftover carnage. I also love to run at Red Rocks. Not the Col… I like the Colorado Red Rocks, but there’s also a Red Rocks park outside of Vegas that is an amazing trail run. My favorite run in the world is Torrey Pines just north of the famous golf course, Torrey Pines that it’s the only part of the US where you can find the Torrey pine. It’s a very interesting little subclimate, microclimate if you will, that is a fantastic run. I like to run in foreign cities, Berlin, Paris, you name it, I’ve been lost there.
Rory Holland (08:11)
Oh, beautiful. Yeah. I can’t say I’m a huge runner, but I definitely see the value of it. And, you know, there’s a lot of things I know about you being a super competitive guy. So I almost feel like your competitive nature is maybe a metaphor for all the work you’ve done in the fintech space and being crazy enough to not only found your own fintechs, but supporting others and financial brands too. I think we’ve got that in common. Well, let’s shift gears a bit. Want to talk a little bit, maybe roll the clock back some. And so back in 2008, you were part of founding a company and instrumental on what I think now is called BaaS Maybe it wasn’t BaaS back then, but.
Jason Henrichs (09:01)
BaaS did not exist in 2008.
Founding Perk Street and the Birth of Banking as a Service
Rory Holland (09:04)
Yeah, I didn’t think so. So what was it? What was that circumstance? And Perk Street was what we’re talking about, know, founding that brand in business and building it up. you know, it took a lot to do that. What was the genesis of that and what inspired you to jump in?
Jason Henrichs (09:25)
Well, I had post working for Michael Porter, the strategy consultant got the startup bug. You do what you know, and I had done a lot within financial services. started a couple of companies that had served financial services, was recruited to a venture capital firm. You do what you know. Early 2000s, it wasn’t called fintech. It was just software. And it happened to be things that either sold to banks or enabled things like payments and lending in new ways.
Then was recruited to First Marblehead, the big private student loan company where I learned because part of my job was to set up a bank as the head of strategic implementation, which meant if it was on strategy and we didn’t do it, it was part of my team’s job. And we had set up a digital only bank in 2007, which was very novel, right? It was ING, Wingspan, TIAA-CREF and us. And what I learned the hard way is the FDIC does not let you pay consumers, whatever interest rate you want, because it turns out most banks gather deposits based on branches. You had to physically go into the branch. And so if you are paying higher rates than anyone else, you suck all of the deposits out of the system, causing financial instability, not for the consumer, but for the institution. So they limit your ability to do that.
And I had gone through this process and realized that first marble head is like, well, I loved the company, loved the mission of, you know, empowering the educational dreams of America’s tomorrow. We’re really doing was peddling debt. And for the most students, it’d be more debt than they’d be able to pay back. And with Dan O’Malley, who was running the debit card business for Capital One, we had this idea of like, can you create a new kind of financial service where the incentive of the customer, in this case a consumer, is aligned with the institution that isn’t about getting them to take on more debt. Dan was very much in this camp being early to debit card, which was digitizing both cash and check for many consumers who didn’t want to pay on credit plastic. They wanted to pay on plastic, but they didn’t want to take on credit. Me coming from the other side of this idea, and I were way too effective at selling credit and said,
Hey, if we could put the kind of rewards that you get on a credit card on a debit card, that would be good for the customer and debit was growing dramatically. How could you fund that? What we knew from the First Marblehead experience was, hey, there are a bunch of community banks that are really bad at gap during deposits. It’s not their core business. They’re really good at small business lending. They don’t have a national footprint. They’re not good at digital. Let’s go do that.
So we had partnered with two banks at the outset around, hey, if we structure this right, you can actually lend on our deposits and inadvertently creating this kind of banking as a service model where, hey, we’re providing a service to the customer with a bank behind us, but we’re acting as the program manager. And different than prepaid cards, which was a model we had followed was, these are actually counted as core deposits for the institution. And there’s kinds of integrations we needed to do. So when people look back at banking as a service, they want to say, it’s a Dodd-Frank interchange arbitrage. That was an accelerant to the space, but it was actually a deposit arbitrage back in the day.
Building Trust in Financial Services
Rory Holland (13:05)
Yeah, you know, back then, the markets crashed as we both lived through and that was fine. You know, at that time, I was owned a automotive finance company and transitioned to build credit dot com. And boy, that was a crazy time introducing the first ever credit report card and and all that. And what I wanted to cover on that is the notion of trust in the financial system and.
Jason Henrichs (13:10)
Fun.
Rory Holland (13:32)
I think we could go deep or wide on that, but as it relates to Perk Street and the work that you did there and then thinking about as we move into some of the work you’re doing in Alloy now, trust is in short order these days. I’d say globally. Trusting in systems and trusting in the financial system as one. How were you able to to build Perk Street the way that you did and build trust around that brand and the business and the service offerings as you were doing new things.
Jason Henrichs (14:05)
I mean, the good news, bad news was at the time, consumers were too naive to know that they couldn’t trust. Right. Like in 2008, there was a brand to be built around being a little bit of the anti Wall Street. Right. Like Wall Street’s what got people in trouble. This idea of like, hey, you know, let’s take back Main Street.
Really resonated. In fact, we did an event with Jon Stein and the Betterment crew around taking back Main Street from Wall Street and the trouble that was caused by this securitization of debt, the stripping out of risk, really privatizing profits and making public the risk associated with it. And so you didn’t have a collapse of synapse that caused things, the trouble that you’re seeing. didn’t have issues where startups had really blown up because this hadn’t been a space that you saw a large number of consumer facing applications come into. Now, the downside is people in 2008, 2009 were also not used to opening a checking account online and there were some struggles around that. The trust piece of it, provided you could deliver on the promises you made, the goods and services, you’d get there.
Rory Holland Commentary
Rory Holland (15:39)
Bankers are no strangers to the principle of trust. It’s the bedrock of community banking in America. For fintech companies, building a foundation of trust can be much harder. Everything is about speed and convenience until something goes wrong and trust gets broken. At the end of the day, whatever your business, trust comes from keeping the promises you make.
Resume Interview
Jason Henrichs (16:03)
One of the problems we encountered though is if people expected instant, even today, 17 years later, instant it doesn’t always happen and show there would be people who would immediately be on our Facebook page or the Twitter feed and would be complaining because they had requested something and it didn’t happen immediately. And I think that’s a problem that’s gotten worse, not better. And you were in an era where scams still happen and people, you know, I think have gotten wiser to the fact not everyone has your best interest in.
How Financial Brands Are Dealing with Consumer Distrust
Rory Holland (16:42)
Yeah, and how are you seeing some of the financial brands? I want to get to Alloy Labs in just a sec, but how are you seeing financial brands transitioning to this new environment they’re in, where there’s a general lack of trust? There is that type of concern about, I trust them?
Are they going to follow through on their promises, like you said? It seems normal, like of course as a business, whether you’re a financial institution, a fintech, or in any business for that matter, you would expect people to follow through on their promises and what they say they’re going to deliver. But that’s not always the case. And so when you add that layer of a lack of trust and then some bad players, how are you seeing brands overcome that now?
Jason Henrichs (17:31)
Well, I want to push back on even just the bad players because we experienced this ourselves with some of our VCs that push back on, know, cash back was the product. And, you know, two of our VCs in particular were: “How do you minimize the actual amount of cash back you give?” They wanted it like the perception to be high and the actual value to be low. That’s how you manage the cost side of it.
And Dan and I had a different view on that, which is if we’re not delivering real value and delivering on the promise, how can they trust us? And given that referral was our number one source of good customer, you don’t scale if you don’t actually put meat on the bone of what people expect. And I would say, so it’s not just about bad actors being part of this. It is really around how do we really across the industry and across all industries, make sure that there is real value being.
Alloy Labs: Innovating for Community Banks
Rory Holland (18:41)
Yeah, and your work at Alloy, I want to kind of transition to that. So for those that might not know Alloy Labs, you guys are doing a lot of really interesting things. There’s more to Alloy than just Alloy Labs. You’ve got your other groups involved. Give us an elevator pitch for Alloy Labs and your other entities.
Jason Henrichs (19:03)
Well, Alloy really is kind of at the heart and soul. It’s like I only really do three things in life. Live and breathe how banks are going to community banks in particular are going to not just survive, but thrive in the coming era. Do the Breaking Banks podcast, which is really kind of what started as a hobby post-Perk Street became inadvertently a big job pre Alloy Labs and you know, is still, you know, alive thriving is the number one financial service podcast in the world. Right. So it went from a hobby to actually a job accidentally and then take care of kids like that’s all I do. And I guess I run in between. Alloy itself does several things, however, and so post-Perk Street started getting lots of calls from banks saying, you know, can you help us with fill in your buzzword? Digital transformation, innovation, and this is everything from some of the biggest banks in the world that already were winning awards for being innovative. I’m like, what do you need from us? Like, what are we going to do for you? Can’t do already. And they’re like, well, it turns out operationalizing things is really hard. And then we were also getting banks from, you know, that were smaller, including like the second oldest charter in the country. Right. Still a small bank, by the way, or smallish bank. But these community banks, I’m like, how are you going to actually survive relative to the big banks have all pivoted to being tech driven in what they do? Right. And as much as you even in this weird era where most banks are shuttering branches, Chase is building more branches. They’re really tech forward still, right? They use technology to fill in all of the gaps and their branches become service centers.
Then you throw in the fact that you’ve got all of these startups, right? Like Chime raising over $3 billion in its lifetime, right? Not uncommon to see these startups that are like raising, you know, we did this modest series B at 800 million, by the way, at Perk Street, we got to 100,000 customers doing a billion dollars in payments on $16 million. And there was no Synctera Treasury Prime unit there. Galileo was still only doing prepaid.
Right. Like there was no infrastructure for this. But so how are you going to compete with? There’s now infrastructure and a lot of people going after it. No, by the way, Amazon and Wal-Mart are all providing banking services related to this. How do you compete? And interestingly enough, back to my roots, like found a model within the dairy industry on how family dairies responded to the advent of commercial dairy and that.
Most people know the brand today as Land O’Lakes, which is a cooperative that is owned by family dairy farmers. But back in the 1920s, it was them rolling up their sleeves and doing the work together. And so that’s what Alloy Labs is. We’re one of the top 10 banks, if you look at us, by combined assets. And it is banks working together, doing everything from how do we use AI? How do we partner with the Microsofts of the world to how do we partner with startups that, hey, we have customers and those customers trust us. Let’s leverage that trust to do more good things for us that reinforces our business model. And so within that scope, we have seven centers of excellence. We do partnerships with big players. We’ve got the Concept Lab, which is our version of a shared venture studio. It’s focused not on just creating new things, but really going and finding things that are bank adjacent. And how do we partner with them to say, use the bank and our trust with customers to deliver new value to them and what’s the value for the customer was the value for us is the institution what’s the value. Or the startup partner.
How Alloy Labs Evaluates Fintech Partners
Rory Holland (22:59)
Yeah, on the notion of inviting fintechs into your group and connecting them to your consortium at Alloy Labs, I met with David over at US Bank, David Ness, and we were just chatting about it. The notion of thousands of fintechs being launched every year and they’re out there and they’re all vying for a place to be able to pilot with financial institutions. And I think he was telling me 600 or 700 different fintechs in any given time are in their queue and they’re evaluating them for potential pilots and what a huge undertaking. So when it comes to Alloy Labs and selecting those fintechs that become part of your concept lab and your other groups, how do you even go about one, evaluating them, two, but selecting those that get to the benefit of being part of the group?
Jason Henrichs (23:52)
Yeah. So one of the things that sets us apart from another sets of, call it venture firms that have banks as LPs, because yes, we will make investments out of our strategic fund, but it’s different. And that’s the last thing we do. First and foremost, our focus is we start with the banks and the relationships we have and these deep dives we do called Co-Labs.
You know, we love our Alloy Labs branding, but Co-Labs being collaborations, but also a co-lab meeting. Everyone’s in the lab together to generate insights. So we’re very thesis driven on the problems we’re looking to solve. And we leverage our length of time, you know, 30 plus years now since my first angel investment, I’ve been both a VC, a corporate VC. Now we have, you know, what we call a multi-tenant CVC. Samer leads the Ventures team, having been both an investor with Techstars, having done a startup, having gone through the Barclays Accelerator, right? We can go to the market and say, we’re looking for startups that solve problems that look like this. And by the way, if they don’t sell the banks, that’s fine. In fact, it’s better. We’re looking for those things that are bank adjacent or what we like to call the edge of money, right? The banks are used to being the center of the money.
We like to say for most people, the money is actually a means to some other end. You don’t wake up one day and go like, I want a mortgage. No, you wake up in the morning and you’re like, we’re moving. We’re having a child. Kids have gone off to college. You know, something you guys probably think about Rory, like is this the house we’re going to stay in? Right. Are we starting to think about a retirement house? Right. Like it is, you know, no small business owner wakes up and says, Oh, Joe, it’d be awesome. I want to go into the bank and like, figure out what lending options are available. It’s like, no, I want to open another location or I need more inventory or what would it mean to have another set of trucks in the fleet? Those are the problems they’re looking to solve. And the bank is a means to that end. So we start with that thesis and say, “Hey, we see a problem that our banks are either feeling for their customers or feeling themselves.” Go to the venture community and say, “Who do you have that solves a problem that looks like this?”
Rory Holland (26:14)
Thanks.
Jason Henrichs (26:15)
Right. And then they come into the lab and we say, Hey, let’s figure out how we make that business problem get solved together.
Rory Holland (26:24)
Are there any particular top of mind problems or more recent problems that seem to surface with your banks that are looking to solve?
Jason Henrichs (26:35)
Yeah, one that comes up all the time, in fact, came up with one of our banks this morning that we’re leading their strategic planning, right? Because we’re so intimate with a number of banks. They will bring us in to talk to their boards or work with their executive teams because we know their business. And by the way, we work with their peer set, not the bank across the street, which is a laggard. We work with the other banks that are trying to do new and innovative things. Right. And they’re comfortable with that. Right. They would they want the insight of someone who’s working with other thought leading community banks, not the bleeding edge, but the ones that are like, Hey, we can’t just do business as usual and survive. And so, you know, what did come up this morning? And this is say endemic to community banks is the majority of their business is they would describe it as comes from commercial lending. Right. In this bank’s case, 75 % of their business comes from commercial lending, which can say, Oh, you know, you’re a commercial entity, you know, that’s only where their lending margin comes from, right? So when banks speak the net interest margin, the reality is most of their business is driven by the fact they have cheap deposits and those are consumer driven. So to keep the balance sheet balanced, you’re going to be lending on one side, which is commercial, but you need consumer on the other side to fuel that business. And so one of the big problems we see that we’re solving for is aging customer base is your younger consumer, not the young consumer, but the younger consumer. So we’re going to throw us into this is the 50 year olds. We are not young, but we are younger than the deposit base for a lot of these banks is we’ve got our money sitting in lots of different places from the Amazon returns we’ve done at the UPS store. And you’re like, yeah, I’d like the instant credit. I’m always going to go spend money on Amazon anyway. I might as well take instant rather than waiting three to five days to go back to the car.
Or I’m keeping it in pockets of I’ve pre-funded things or I’m paying for things, you know, in where they sit or because it’s easier to move money, I’m keeping it in various places. Like the business of banking is changing when you don’t have that regulatory lock around: “We are the safe place to store your money.” We do that asset transformation to turn that into a loan to a small business. We manage the duration risk very carefully.
What you find is, well, like Silicon Valley Bank is a good example of this. When things go awry awry having loans out that you can’t instantly call while people are pulling deposits out is a really bad situation to be in.
Rory Holland (29:17)
Yeah, I want to back up.
Jason Henrichs (29:21)
I’m stepping on bubble wrap, by the way. I’m trying to figure out what that weird popping noise is.
Telling the Ugly Truth to Community Bankers
Rory Holland (29:25)
Your stuff, man. We want to protect your stuff. There was a season of life that you were in between Perk Street and Alloy Labs. You wrote that you’re sitting in a conference room with community bankers and you’re so f***ed if you actually believe this. And what a remarkable statement. I know you that way. You’re going to say it like it is.
And if you’re actually believing what you’re saying, meaning these community bank, these bankers you were sitting with. And so from what I read that you wrote, Perk Street had crash landed and acquisition had fell through. what that was a tough season of life based on what I read. Was that the under where’s it? Was there some inspiration from that that like led you into Alloy Labs?
Jason Henrichs (30:10)
That’s a great question. I don’t know if it’s inspiration or desperation. Well, I I was, I don’t want say I was happily retired, but I was happily done with dealing with VCs that I didn’t feel incentives and values aligned with mine. But like that got particularly tough. Shout out to Dan Rosen, who had left the venture firm he’s at and was starting commerce, but had gone from being our biggest advocate who like got what we were trying to do to be out raising a fund. And so now we had the VCs who were like, let’s just axe the cash back program. It’s like, that is the product, You can’t axe the product. So it was tough to have gone from this, hey, everyone’s looking at going new, interesting model, the rise of fintech. You guys are doing great, dude. Dan and I used to joke.
And this became a series we’ve been running on Breaking Banks now called Killing It. So we’ll be like, how’s it going? We’re like, it’s great. We’re killing it. And we’ll be like, oh, you’re killing it. That’s great. And then they’d walk away. Dana and I kind of muttered under breath. like, we’re sticking a knife in it. they’re making us kill this. Right. It’s hard. That’s how it felt. And I think a lot of founders and that’s what the series explores is whether it’s selling the company or shutting down the company having to walk away from the company either because you’re no longer the right person to lead it or, know, like the Matt Harris episode, Matt Harris of Bloom, not Harris of Bain. You’re talking about like for his own mental health and his journey is like the startup was killing me, right? Like being the high flyer is actually a miserable place to be. Shamir Karkal talking about after the simple acquisition by BBVA and the writing on the wall that you know, for no problem with the product, really, it was going to buy BBBA, be shuttered right? And like this, this is a hard thing to go do and walk away. So I’m wandering out in the wilderness, kind of like bitter towards startup life and, you know, weird things had ended, you know, for right or wrong. And these banks and in the conference rooms being like, you honestly believe that? Like the problem is the startups aren’t regulated enough, or like this host of things that are external to you, where it’s like, well, maybe the problem that you’re trying to solve is a you cause thing. There are all these other things outside, right? Like this is what a good therapist tells you. It’s like, OK, but what things are in your control? What do you need to take ownership of?
Rory Holland Commentary
Rory Holland (32:57)
This is so true. It’s the same advice I get a lot of the financial leaders and companies we work with here at CSTMR. You can’t control the market. What you can control is your marketing and your branding. Success is never a guarantee, but if you follow a proven strategy to build positive brand awareness and attract the right audience, your odds go up considerably.
Resume Interview
Jason Henrichs (33:19)
And Alloy Labs, because some of our bank CEOs actually joke about this, is we’re a giant therapy session for them. For them and for their teams, come lay down on the couch of Alloy Labs and tell us about your problems. But in that therapy is how do you take ownership over you can’t wait for interest rates to go down. That’s not the answer to your problems. deregulation in the current regulatory environment, it’s like, oh, less regulation is going to be better for us. It’s like, no. Your other competitors are faster, more nimble than you. They’re going to be moving faster. Deregulation actually works against you. so the Alloy lab is almost a fine. If you don’t want to be F’d, here’s what I would do. Let’s just go do this. Put your money where your mouth is. And so I didn’t want to be running one of the top 10 largest banks by combined assets, but here we are. You know, and figuring it out day by day, but it’s been, you know, a ton of fun on that ride.
Rory Holland (34:23)
Yeah, I could imagine it’s a ride. That’s for sure. As leaders of companies, know, the responsibilities we take on, the highs and the lows and what I heard you say and what I really relate to is we really grow in the valleys. And it sounds like that was a time of life that was like, okay, I got to evaluate my circumstance and I’m going to grow from this and I’m going to make decisions for my family, for my business, to take the next step and just keep moving.
Jason Henrichs (34:58)
Yeah. I mean, it is always one step in front of the other. Yeah. Every marathon starts with someone having to run the first mile, then the next mile and the mile after that. You don’t think about, you know, mile 26.
What Problems Does Jason Think Are Worth Solving
Rory Holland (35:14)
No, right, just one step in front of the other. So Alloy Labs, you guys are, from what I hear you say and what I know about you guys, you’re adding a lot of value to the industry and there’s a lot of interesting things you guys are doing. You’re working with a of great people. Some of them have had on the podcast. Thank you for those introductions and those new relationships in my life. But what I wanted to talk about is how you decide what problems you’re going to solve.
Like a person like you with the resources you have, the network you have, the relationships, like it takes so much time and energy day to day to do the work that you do every day. How do you look at the problems you want to solve and prioritize those and really determining like that evaluation process for you?
Jason Henrichs (36:05)
Really good question. And so one of the things we’ve developed that we teach a lot of the banks, we work with them individually and now actually taught it three of the graduate schools of banking. And I’ve got an online fintech course with LSU. And part of that fintech course is not about the technology. That’s like kind of the confusion all the time. It’s like, do we need stablecoin and AI? It’s like, well, that’s part of it.
It really is you as you think about your business and what you’re going to go do it isn’t a single technology. It’s really a series of bets. In those bets need to be placed. You know, we use this retirement analogy is you’re not going to, you know, just go put all of your money in fixed income that guarantees a certain rate of return, it’s not going to be high enough. By you know,
The opposite end of the spectrum is like, you don’t go put everything in Bitcoin or a meme coin and expect it to work out. You build a portfolio. And so we always are building our portfolio. There are some things we are testing, call it our exposure to crypto currencies, right? Like there are some crazy high flying problems that we are trying to solve as a group. Right. One of those was around payments which actually became its own company that was spun out this back by over 20 of our banks called Rebolt, which is how do we actually solve payments for community-based FIs so community banks and credit unions in a way that opens up the ecosystem that allows them to partner with other players, whether those are big players or small players, but how do we keep them relevant in the payments value chain to like the current high flyers one around identity, and a company that we’re building right now called the Trusted Identity Network that is again owned by the banks for the banks. Other things that are more mundane like hey, figuring out AI, we know that is going to have a big impact. It is going to be a bigger impact than just operational efficiencies. So we need to actually get on board and go do that. And so in addition to our AI and our PA Center of Excellence, we actually have the AI Action Center where banks are digging in and doing deeper partnerships with partners that are as big as the Microsoft and how do we get better and do retraining around Copilot for our day to day to how are we leveraging AI to be offensive and revenue generating in what we go do. So there’s this portfolio of things with the expectation that as they’re working, will double and triple down on those things. And if they’re not working, we’ll also be OK and say, hey, we’ve learned as much as we can. It’s time to walk away from this. Let’s take the learning, make sure it’s widely shared, and walk away.
The Challenge of Differentiating as a Community FI
Rory Holland (38:59)
A lot of the things that you talked about, staying on top of technology, staying on top of the market, new opportunities, new way people move money, save money, invest money. You had said something to me a couple of years ago on the show actually that the community banks are going to die. At least that’s how I’ve referenced it. I heard it. But we both desire for community banks to thrive, because they’re such a core asset of this country and the way that small businesses operate. So I wanted to just ask you about, in a market like financial services, let’s just stay with community banks or banking in general. They most all do the same thing. So there’s literally thousands of them. How do you see, and this is a little bit what I do for a living. I’m curious your thoughts as a marketing person building fintech and financial brands, we think a lot about branding. We think a lot about messaging. We think a lot about unique positioning and helping our clients build captivating brands that stand out in the market. How do you think banks can do a better job or fintechs that you guys support too that are part of your network, bringing the value that they provide to the market in a unique way to distinguish themselves from everyone else.
Jason Henrichs (40:30)
Well, I mean, this goes back to like my first kind of call it real fintech job, right? I started life as an engineer at deluxe, the check printer, but I’m working for Michael Porter and right. The Godfather of corporate strategy. And he talks about the unique competitive advantage. And I think the problem that most banks and credit unions and fintechs have is they define unique in the way that they want to, right? It’s the thing they value, which isn’t necessarily what the customer values. And for the majority of our banks, the community bank will say, they value our relationship. What does relationship mean to you? our kids play softball together. We support the school. It’s like your customer doesn’t value that. Not in the way you think. It’s not like Chase is busing people from New York every day to be in the local community, right?
The teller at Wells Fargo and US Bank is also playing softball with your kids. That’s the reality. Your kids are playing together. The second piece of that is for the fintechs, like, we’re tech-driven, or we’ve solved this problem in onboarding. That’s not a problem anyone is going out to solve. I was interviewing one of the high-flying european neo banks that was coming to the US since crashed and burned here. And the CEO of the US business was telling me it’s like, we can do digital account opening back when that was actually relatively novel. It’s like, OK, but that actually isn’t a huge problem for most like that might get people through the front door, but they have to know your door exists, that it’s not true value. And so that is where I think for all, you know, the players in the financial institutions need to think about is how am I delivering real value? Because Joe has a competitive advantage because like I did say like truth in, you know, lending and speech to the community banks are going to be upset. said community banks and credit unions, a lot of them are going to die. In fact, maybe most of them are going to die. Also, I’m not alone in that was speaking at the Future of Banking Conference for.
Kansas City Fed and the president of the Kansas City Fed said the same thing. There are a lot of charters out there that are searching for a real problem to solve. Unless you find a real problem to solve, you don’t have a business. And that doesn’t matter if you’re a community bank, a credit union, or a startup. And so just because it’s a problem that you have or you think is valuable, right, like being tech enabled or being voice first, those aren’t problems most customers have unless you can get to that. You know, I love to go back to the five whys. Why is that? The problem that Rory is going to go open an account here. He’s not going, it’s like, Oh, do you want to be awesome? It is like, I can open an account digitally. I’m going to go do that. No, if you’re Jason Mikula or Alex Johnson, who’s going to write a story about it, you go open an account everywhere, but you’re not becoming a real customer. Right. In show, in order to deliver real value, you have to really know what your key customer is and what your unique selling proposition is to them, put real value behind it that they can measure and if they don’t value it that they’re going to choose you at a price that builds a business for you you’re going to be out of business.
The Market Is Shifting Under the Feet of Community Bankers
Rory Holland (44:03)
Yeah, I think that’s just something that’s been on my mind ⁓ the last couple of years since you mentioned that and reading what other people have to say that align with exactly what you said that many may fail as a result of not differentiating themselves, not adding value. The question for me is as new technology comes out and new ways for people to invest money, save money, deposit money, move money, mean all those sorts of things.
And you’ve got community banks that are behind the curve a bit. There’s no differentiation. Even deciding what problem to solve that might be unique, that helps them distinguish themselves. We are having success here as an agency for the banks that we support through really good marketing and helping them reach those customers in unique and interesting ways with a compelling message about the value they can provide in their local communities.
I mean, that’s just like one way to do it. But I’m just kind of curious, like, are there particular problems that you’re seeing with the community banks that they’re tending to want to solve, particularly as their market ages because they are aging out? I hear that all the time. and you mentioned guys like us in our 50s, we’re on the low end for some of these community bank clients. So as they start to pass away and their money moves to their kids, their kids are moving the money out or as we hear a lot too, and some of the guests have had on the show that are part of your group, fintechs that are part of your group, is if you peer inside of those banks’ clients, you’ll see that a good majority of that money is moving out to other institutions or other technologies, and they don’t even have an eye on it. So how can they claw that back or bring that back?
Jason Henrichs (45:57)
Well, one, they’re not going to bring it back when it’s gone. It’s too late. And let me since you invited me on and gave me a hot mic, let me go after I’m so sick of hearing about the greatest transition of wealth in history, right? This generational wealth transfer. OK, it is also the largest population we’ve ever had. So of course, it’s the largest now it’s transferring. But it’s not like a single wave that breaks. This is a slow creeping transition that is going on now and it’s going to go on for at least another 10 to 15 years. Right? So it’s not like this transition is like started here and we finish here. Now it is a slow going transition into any institution that has to be defensive about this because they’re the ones who fail by the time it’s gone, it’s too late. And so they need to figure out how do I go on the offense? Of providing new sources of value while I have those customers to get the Rory’s and the Jason’s on board. Right. And so that’s been a major thesis for us in investment is around that. How do we support generational transitions, not just for consumers, but for businesses as well, especially family owned businesses? How do we actually support that, maintain that and bring value to the relationship so that at the end of it, at the end of the transfer, someone’s going to be able to go, oh, you know what? It is worth banking, you know, with this bank that my parents were at and keeping the business account there. Or, you know, this is something that the wealth space faces all the time is after the death of the parents, there’s less than a six month half life of those assets staying with the original financial advisor. So how do I embed enough value that you say, I don’t want to move? Right. It’s not just that.
I’m relying on the friction that it’s a giant pain in the butt to move the PIA of the worlds, right? Like, yeah, friction helps slow the bleed, but they’re going to do everything they can to get out the first time they can unless you give them a reason to stay, to want to stay.
Lessons from History: Leadership and Trust
Rory Holland (48:09)
Yeah, let’s move on. Wanted to bring up something that I know about you and I wasn’t there with you, but kind of want to pretend that I was. so back in 2014, you were in London sitting in the shadow of the Tower of London. If I were there with you, what might we have talked about and what was going on in your head at that time?
Jason Henrichs (48:37)
That was crazy time, right? London was becoming the fintech capital of the world. Sorry, everyone else who wants to vie for that title, but they definitely with the effort they put into that as a hub, you know, really made their mark. And if you want to listen to a fantastic episode about sitting in the Tower of London, go to, you know, Provoked FM and look up the Killing It episode with Nektarios, who is like, he is career was taking off with Startup Boot Camp Fintech while I’m like licking the wounds of what went wrong and what to do next. But the through theme, like 11 years, almost 12 years later that I still think about, and the problem’s getting worse, not better, is this idea of where does the financial institution play from a trust? Bring us full circle back to your trust question at the beginning, which is, how does trust work? In AI, both makes it better and worse. And so I’d say, you know, that’s where a lot of my thinking goes on runs these days is, you know, is there such a, you know, nihilistic view? I’ve got an interview coming up with Frank Rotman, who recently left QED. And I’ve been fortunate, Frank and I go back to his Capital One days where he’s been an amazing thinker and pusher of like how I view the world. He’s got, you know, a pretty dark view of capitalism and its extreme when powered by digital, right? Like what happens with cryptos and with meme coins and gamification of everything. And it’s easy to get dark fast. And I think, you know, the silver lining, the part I keep coming back to that’s of interest in the problem that I want to see solved is how do we actually make that trust worth having? In the institution, how do we do well by our customers, whatever flavor they take, that they know that that trust is earned and deserved. And it’s also good for the institution.
Rory Holland Commentary
Rory Holland (50:46)
As an entrepreneur and marketer, I consider myself a capitalist as well. But the only way to keep capitalism from falling into darkness and greed is to build a win-win scenario for your customers. And those don’t happen by accident. Companies are better off operating from a clear set of guiding values and allowing customers to vote with their feet and their dollars.
Resume Interview
Jason Henrichs (51:10)
And so that’s what I started in the Tower of London in that, like what went wrong? That deep shadow that started there was part of it was capitalism in its extreme. Don’t get me wrong. I’m still a free markets person. I still make angel investments. We still run a venture fund that expects returns. And I still think banks need to be making great risk adjusted returns. But how do we think about that alignment of interests? Versus you know, I’d the current environment does very much become, you know, one side is a winner the other is the loser.
The Intersection of Entrepreneurship and Stewardship
Rory Holland (51:50)
Yeah, something came up for me when you were talking about that and thinking about being good stewards. Stewards of the gifts that we’re given, whether that is our capabilities in business or in life, and stewards of our family, and stewards of the businesses that we run. How are we doing stewarding these gifts?
When you talk about extreme capitalism, I question that if it’s a drive for profitability purely, you can leave your customers and your clients in the dust and they don’t matter anymore. They just become numbers on the page. And then you layer in AI. Man, yeah, who knows? I try not to go the nihilist route with that, but I do have some concerns for sure as a human and as a business guy too, as how that gets incorporated into the financial systems and what does that do to to our ability to steward well. And I’m kind of curious your thoughts. Like as you think about the leaders of the companies that you guys support and the other folks you know in the industry, where does stewardship and your mind come in?
Jason Henrichs (52:56)
I mean, it is, I think, one of the benefits of community banking. And I don’t think that if you ask most community bank CEOs, they would say this is like their superpower. But the superpower is they have local accountability. It’s not that they do a better job necessarily of supporting the local community. But if I am the community banker that is just ripping my customers off, or lending at user’s rates and like when they could have done somewhere else or I’m doing a switch on things that will come out. And if I live in the community, there is a different kind of accountability than if that decision maker, you know, is hundreds or even thousands of miles away. And I do think there is a reckoning. And I think we’re seeing this in, you know, the latest generation of choices they’re willing to make and who they support, based on the accountability to brands. I think if you look at the level of accountability that some brands, let’s pick on Target for a second, were held to because of taking on anti-DEI policies and saying, “No, we don’t do that.” Well, the Target boycott was, I think most would say, effective. I’m not trying to take a stance on the DEI part of it, but they had customers who voted with their feet, right? Like that should be the takeaway. We can have a whole separate conversation on how I feel about DEI, but like regardless of your politics, you could look at and say people voted with their feet when they were unhappy with a policy change within the provider. And I think part of what is going to get very interesting in a much more digital world, much more fluid world in terms of our ability to make changes in the visibility, and the impact of those choices, the ability to feed some of that into AI and project the impact and judge quest. Like the I was given this advice. Is that good advice? Bad advice is, you know, why is Rory telling me this? Right. Like, you know, put into this conversation to chat, cheap, et and say, is Jason trying to sell me some?
Buy my meme coin. Is it a pump and dump scam? Is it me being self-serving? Play the counter argument to me and dissect it. Compare it to other great thinkers or smarter people than Jason, which isn’t hard to find. How does his advice compare to Frank Rottman’s? Begin to dissect this.
Rory Holland (55:45)
Yeah, definitely an interesting time when you can do things like that at your fingertips. I’m a big believer in that stewarding the things and the gifts that we’ve provided well. And I’ve crashed and burned enough in my life and made poor choices to hit the bottom, to gain a lot of humility that I realize I don’t have all the answers. So your responses to these are just phenomenal. I think the things that you’ve done in your career and the people that you support and some of the topics we brought up are thought provoking for people.
Abraham Lincoln as Head of People
I wanted to talk about something you shared with me that I thought was really interesting. And you mentioned that if you could have a a fantasy executive headhunting pick, would be Abraham Lincoln. And I thought that was so cool. Before you answer the question, though, I wanted to ask you why you chose Abraham Lincoln and what about him made you choose him. But before you do, I want you to reach back in the box because there’s something else in there for you.
Jason Henrichs (56:50)
Is it the do not bend portion? Okay.
Rory Holland (56:52)
That one.
Jason Henrichs (56:58)
All right. Tape is cut. I love this. Lincoln’s inaugural address. Not just by the way, because I was born in the land of Lincoln and like everyone born in Lincoln had to make the tour of Abe Lincoln’s childhood home.
Rory Holland (57:20)
It’s good idea. Yeah, why Abraham Lincoln? What about him?
Jason Henrichs (57:34)
It really comes down to like the great book Team of Rivals. And I think, you know, as I look at the current state of the world, not just politically, but even like between startups, like we see this, let’s pick on startups, because hopefully it’s slightly less polarizing. But we will see this level of animosity towards other potential rivals within the space. Now, what I find interesting about this is sometimes like we will know two of these startups intimately. Like when we’re hearing like, they’re our competitor. I’m like, how are they your competitor? I had like, this was something the founders of bank simple later known as simple, course, Shamir and I in particular, we’ll talk about it’s like people assumed that we were like our travels and competitors. The reality is, okay, we were competing for fundraising, but that was really only with VCs that didn’t understand what our core business was.
While we had the same model, they were competing for tech forward customers that wanted a better user experience. I’ll be honest, our user experience at Perk Street was not awesome. We gave you cash back though. Simple did not. They didn’t have to. They were investing that money in the user experience, their ideal customer. We wanted something else. They wanted to be able to look on a map and see where they had been spending their money.
Our customers knew where they were spending their money. was Target and Diapers.com. Like we were sending an email and saying, spend too much at Target. But what they wanted was that cash back. Right. And so on the surface, you can go like, you’re both two of the first neo banks. You were competitors. It’s like, not really. And but we were dependent on each other growing the ecosystem. And so if I look now at this space and this is across startups, across big brands, it’s less about bringing the whole forward.
In Lincoln’s case about how do you actually take diversity of thought and these rivals and use them to solve some of the biggest problems that their case is like, how do we abolish slavery when half of this country’s economy is based on that? And how do we restitch the union when people are literally willing to split families and die for one cause versus the other? And I think we are facing this on so many fronts from
AI for the, you know, the speed with which it’s developing climate change, you know, more wars than we’ve seen in far too long. Like there’s this whole host of things where we should be thinking about how do we solve those problems together to make the pie bigger versus how do I protect my share of the pie? Reality is when you end up in the, do I protect my share of the pie? That mindset really leads to you’re not even protecting your share of the pie anymore.
You’re just trying to make sure you get the scraps left, right? Because you’re willing to upset the entire pie to try and protect your slice. And when the cookie crumbles, the whole cookie crumbles. Sorry to mix my desserts. Poor metaphor when I mix my desserts.
Wisdom from Jason’s Current Season of Life
Rory Holland (1:00:40)
Yeah. No. So one last question. I know you’ve come through a season in life and either you’re coming through it or you’re in it. And I wanted to ask you to know you right now, given the season that you’re in or one that you’re coming from, what would you want us to know?
Jason Henrichs (1:01:10)
Everything’s a work in progress. Every run starts with a step. A lot of times you don’t know what the destination is, and those are some of the best. I’d also say maybe this is the personal pet peeve of the moment is is every parent who has a teenager or younger that well, even above teenager, right? You’re everyone who has a kid of any age that is on social media and what is presented is not reality. And it’s really easy to let that reality, whether it’s the overly beautiful and everything’s perfect mode. I took my oldest or youngest niece to Greece for her graduation present. Right. It was basically take her to all the places to take Instagram photos and TikToks of her where we stood in this long line. Right. Like the what Instagram sees, what reality looks like version of things like that’s like the beautiful aspect, which is jaded.
The other side is what you believe in terms of how people are reacting to current politics and crisis is the other extreme. We need to find a middle ground and a come together ground. That to me is really where I think community banks can also help is they are present in the community. I’m not saying big banks are evil. That’s old Park Street, Jason, is they serve a place, but they’re not for everything, figuring out what are the true lines of competition and how do you compete in such a way that everyone wins?
Rory Holland (1:02:46)
That’s beautiful. I think we’ll end it there. Hey Jason, such a pleasure to have you on, man. Appreciate you making the time.
Jason Henrichs (1:02:52)
Thanks for having me and thanks for the hot sauce.
Rory Holland (1:02:54)
You’re welcome.
Outro
I’m privileged to know Jason personally and count him a friend. I love his willingness to say hard things to people and business leaders, but to do it in love. Community banks are facing some serious challenges and Alloy Labs is helping them walk bravely into a future that looks nothing like they’ve ever seen before. From a marketing perspective, things like legacy, geography, and customer service won’t be enough to save community banking.
Giving your customers a reason to believe that your bank is right for them is the path forward. You need a strong brand to help you build lasting connections. You have to dig deeper and move outside your comfort zone if you want to succeed. I’d like to leave you with this last thought related to our conversation about Lincoln. Think of an opinion or a point of view that you disagree with or that makes you really uncomfortable. Now, spend a minute or two imagining that perspective might be more right than yours is. You don’t have to change your position. Just try it on for size and observe how your thinking shifts. That’s the kind of diversity of opinion that Abraham Lincoln cultivated in his team. That’s the kind of openness that good leaders bring to their organizations and their cultures. I think our society could use more of that.
Thank you for listening to Mighty Finsights You’ll find all of our episodes on our website, cstmr.com, including more one-on-one interviews with fintech and financial leaders and deep dive episodes on topics like branding and marketing. This show is produced and distributed by CSTMR, a digital fintech marketing agency, all rights reserved. Our production team includes Zac Garver, Becky Dombrowski, Brad Jerger, Romina Gómez, and Belén Ancurio.
