Sunday, March 01, 2020

PNC Cares Far More About the Penguins Than the Flyers

Reporters occasionally call for my opinion. And I have them. Oh I have them.

Last week an American Banker reporter called for my opinion on WSFS Bank's strategy to deploy much of the cost savings from its recent Beneficial Bank merger into technology. Read the resulting article here

The reporter e-mailed his questions. And I responded back. The article carried two quotes from me. But I assure you I was far more loquacious. Here are the reporter's questions followed by my responses with only slight modifications for clarity and grammar. I have to keep Sister Ann Eulaine happy. :)



Q: WSFS is using the synergies from their Beneficial merger to improve their technology. What do you think of that strategy?


A: I am a firm believer in making strategic investments to propel a bank's growth. It is a cultural change for banks, that typically take the synergies from an acquisition and drop them to the bottom line. Many banks make strategic investments only if they can recoup the costs quickly. Such as hiring lending teams. In today's environment, banks need to try, and yes fail, at implementing many technologies to learn what their customers want and to identify what will drive future growth. So, the long-winded answer, I like the strategy of taking resources and investing for the long-term future of the bank.


Q: Where is WSFS' greatest need for a technology upgrade?


A: I can't speak specifically to WSFS. When talking technology, we often talk about customer facing technology. And that's not necessarily the case. Do you know the resources banks put into reconciling accounts, researching customer deaths, and reviewing mobile deposit capture images, etc.? These processes drain resources from more promising investments such as small business loan decisioning, integrated cash management, and retail customer marketing solutions. Sometimes the tech stack shortfall is in the engine.


Q: How can WSFS compete in Philly when some of the country's largest banks that spend billions on tech are there?


A: A very small bank CEO once told me he compared his mobile app to Wells Fargo's and found only minor differences. Banks will figure out how to "keep up". But keeping up or exceeding big banks on tech is a tough strategy and tough sell. The community bank advantage is that most of their deposits will be deployed in their markets. Profits generated here contribute to the charitable works in time and treasure here. In WSFS' case, it's the Philly/ Wilmington market area. Loan and policy exception decisions that impact customers are made here. Not in Charlotte, New York, or Pittsburgh. Wells Fargo can't say that. Neither can PNC. PNC cares far more about the Penguins than the Flyers. 😊



Q: On tech, how much of a spend is necessary to "keep up with the Jones'"?


A: Data processing expense in 2018 for Beneficial was $6.2 million, and $7.8 million for WSFS according to their respective Call Reports. That doesn't include personnel in tech areas of the banks. They should have plenty of opportunity to innovate. You may hear that JPMorgan brags about spending $11 billion on tech. But we don't know how much of that is to keep the lights on. There are so many firms in the Fintech ecosystem to leverage off of to implement solutions important to running the bank and to the bank customers. The critical piece is to build a culture to try many things, even if that means failing in a few of them and missing your budget, and knowing who your strategically important customers are so you can determine the financial solutions important to them. If you do that, the $14 million combined tech spend should be sufficient.



~ Jeff

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