Academic journal article ABA Banking Journal

What Did You Do When the Fundamentals of Banking Changed?

Academic journal article ABA Banking Journal

What Did You Do When the Fundamentals of Banking Changed?

Article excerpt

WHAT WILL YOU DO TO REMAIN A STRATEGIC LEADER?

What were once the fundamentals of banking have become its history.

What were once the common practices that supported growing, thriving institutions are now the practices that will minimize growth, if not stifle it altogether.

What was once 'business as usual" is now radical change.

Indeed, as Andrew Grove suggests in his book. Only the Paranoid Survive, businesses reach times in their lives when the fundamentals are about to change: Strategic Inflection Points. Banking is no exception.

And only those who recognize and act on the pivotal points about to happen will survive.

So perhaps it's time to be a little paranoid.

FUNDAMENTAL CHANGE: SIZE DOES NOT EQUAL QUALITY.

Consolidation is not strength Economies of scale that do not serve customers do not serve banks.

As banks combine and grow, they create more distance between the customer and the heart of the institution, not more intimacy and trust. As convenience and fees drive customers out of branches and into the drive-through and ATM lanes, the banker becomes more remote, more unreachable. To compound the problem. it's exactly those at-risk relationships that are being acquired at three or four times book value.

The distance between banks and their customers is growing. The most frightening evidence is that market share of assets held by banks has declined steadily over the past 20 years. Today, barely more than 20 percent of customers assets are with banks.

With greater size must come greater value propositions for the customer. Or the customer will forget we were ever there.

FUNDAMENTAL CHANGE: WE'RE NO LONGER THE "GO-TO GUYS"

Customers are disconnecting from their bankers.

In financial services, banks are losing the financial position we once held unilaterally. We're losing it to the non-bank, low-cost, mono-line provider. We're losing the customer service niche. We're losing the superior product choice niche.

We're losing loyalty. It's our challenge to lose no more an(l regain ourposition as the first choice financial advice and services. …

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