Sunday, April 19, 2015

Bankers Tell Me Their Top Industry Game Changers

If you were asked what one industry trend will change the face of banking forever, what would you say?

I did that very thing to dozens of bankers that attended their respective state banking associations' Executive Development Programs (EDP). And their answers gave me a more positive outlook for our future.

I teach Bank Profitability for the Washington, Utah, and Montana Bankers' Associations EDP programs. Each year I make pilgrimages to Seattle, Salt Lake City, and Helena to meet future leaders of our industry. Each state has its unique flavors of banking. Washington has a more traditional mix of very large and community financial institutions. Utah has many Industrial Loan Companies (ILC's), which are FDIC supervised financial institutions that can be owned by commercial firms not regulated by a federal banking agency, like a utility company. Montana has many small, closely held financial institutions. 

As part of the day-long curriculum, we discuss trends facing our industry and at the end of this discussion, I asked for their opinion regarding our top industry game-changers. Their answers are summarized in the chart below.

This should not be surprising to anyone. Neo banks are investing and moving quickly into creating a banking experience not based on personal relationships or locational convenience. Moven, a banking application that was seeded with $4-5 million, and subsequently raised $8 million more last summer, aspires to remake banking through the smart phone. They see their IT department as a profit center. 

Traditional community bankers see it as a support center, and staff it accordingly. Oddly, if you look at top IT projects for financial institutions, Online, Mobile, and Product Development reigned supreme (see chart). So why do we continue to view the IT Department as a cost center staffed with techies that have little feel, responsibility, or accountability for acquiring customers and improving their experience?

In 2013, I wrote a blog post on a job description for an EVP of Distribution and Service Excellence. Not that I've experienced such a position, but that does not mean it should not exist. Readers of my blog know I like to dabble in how things should be, rather than how they are. Two years and I still haven't seen this position.

There should be no more debate that customers interact with your bank more frequently with technology than any other distribution point. That ship has sailed. It is not only how it is, but I believe it is how customers prefer it. As a society, we are becoming increasingly accustomed to self service, and by our actions deem it more desirable to get a task done on our own time rather than wait for another human being to help us. There are exceptions of course, but in the main, don't you agree?

If you do, then here are some ideas on what to do next:

- Build a technology platform with the right partners that makes our customers' lives simpler that has a distinctive look and feel, even though we are likely to use the same platform that hundreds of other financial institutions use.

- Create a separate profit center for your online/mobile banking center. That means you have a center manager that is responsible for growing customers and balances, and generating profits via your technology platform.

- Implement a rational costing scheme to charge branches for their customers use of the mobile/online banking platform, and for your mobile/online center customers' use of branches. Keep it simple and understandable.

- At the top of the Mobile/Online Banking Center, put an executive with customer acquisition and customer experience know-how. Not a former FORTRAN programmer that wears a pocket-protector that is more comfortable discussing circuits and switches than how to acquire more customers.

Do you think the time to treat our mobile/online banking centers as support centers should end?

~ Jeff

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