Magazine article American Banker

Since Banks Compete Niche by Niche, That's How They Should Plan Strategies

Magazine article American Banker

Since Banks Compete Niche by Niche, That's How They Should Plan Strategies

Article excerpt

The banking industry is no longer the largest purveyor of financial products and services. And most of its offerings, from transaction-based depository products to low-volume middle-market investment vehicles, now produce minimum margins or face anemic growth.

Some experts go so far as to say that banks and thrifts are becoming almost irrelevant as financial vendors.

Bank managements, especially at community and midsize banks, should take a strategic-planning approach that includes a complete assessment of their current positioning in each product and market segment.

This should include an understanding of each key segment of the bank and its share of the targeted market, percentage of total bank profitability, and inherent risks.

Each segment's regulatory constraints and perceived product differentiation should also be considered, along with competitors' strengths and strategies.

In short, bankers must understand who they are, what they do best, and their managements' strengths in each of the markets they compete in.

This is the first step in developing a blueprint for future direction and strategy.

The laws of the marketplace are not determined at the bank level. There is no across-the-board rivalry between banks, such as Bank of America and Wells Fargo, except in terms of overall size, which is largely irrelevant for competitive advantage.

Competition takes place primarily in hundreds of niches, such as credit card processing, student loan processing, and transaction processing. …

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