Magazine article American Banker

Getting Ready to Compete Means Looking Nationwide

Magazine article American Banker

Getting Ready to Compete Means Looking Nationwide

Article excerpt

Traditionally, bank competition has been defined in terms of bank vs. bank, with institutions jockeying for supremacy through their physical distribution in local markets.

The way to compete was by creating a more extensive branch network, putting branches on the right corners, and turning to a solid sales force to compete head-on in loans and deposits with the bank across the street. But that method relied on physical presence and saddled a bank with very high delivery costs.

I would like to offer an alternative view of bank competition. While banks do compete with local rivals with strong physical presences-and some are formidable indeed-nationwide competitors with a single product and a cheaper means to deliver it are at least as important.

All of us include these in our "threat" column when we do our strategic planning exercises. However, our distribution, product lines, and facilities management do not reflect our acknowledgement of this threat.

In order to deal with a redefined competitive environment, the following steps must be taken:

The branch network should be rationalized to compete effectively against rivals whether branch-based or not, with costs brought more in line with those of local competitors. Further, while building mausoleums may be our way of burying the dead, we should move beyond that to reconsider our physical distribution strategy.

Investments in branch facilities should be reviewed and compared to investments in other delivery channels. …

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