Quick Guide: 2015 Growth Strategy Survey (Bank-specific)

Recently, Business Insider and the Wall Street Journal picked up Bank Director’s 2015 Growth Strategy Survey.  The research project reveals how many financial institutions continue to recognize growth in traditional areas — most notably, loans to businesses and commercial real estate — while struggling to attract a decidedly untraditional digital generation.  So in case you missed it, today’s piece highlights key findings from this annual research project. 

By Al Dominick // @aldominick

Over the weekend, our friends at the Wall Street Journal ran a very telling story about the efforts being made by the San Francisco 49ers to better engage with their millennial employee base.  Clearly, the NFL franchise’s challenge to “relate to a generation — generally described as 18-to-34-year-olds — that has been raised on smartphones and instant information” parallels that of most banks in the U.S.  In addition to being a fascinating behind-the-scenes look at what’s happening out in Santa Clara, it also sparked today’s post.

You see, as a 38-year old who runs a great privately-held company that employs quite a few folks under the age of 30, I have to admit that I am tiring of the broad strokes being used to describe millennials’ needs and ambitions.  However, I will admit to being surprised to learn that there are approximately 75 million people in the U.S. under the age of 34.  This is a huge number, especially when you hear that every day, for the next 15 years, 10,000 people will turn 65 (h/t to the CEO of Boston’s Chamber of Commerce for making me aware of this reality).

Surprisingly, 60% of the executives and board members that responded to Bank Director’s 2015 Growth Strategy Survey say their bank might not have the right products, services and delivery methods to serve the vast majority of this demographic.  While I haven’t run this by our very talented Director of Research (*hello Emily McCormick), to me, this shows that the relationships that community bankers nurtured for decades will be increasingly of less value with this emergingly-influential generation who have grown up in a digital world and who, stereotypically, value the speed with which it operates.

As the Wall Street Journal shared when reporting on our research results, “banks have watched less regulated finance companies ranging from mortgage lenders to private-equity firms encroach on many of their main businesses.  But ask an executive or board member at a bank what nonbank company they most fear, and they’re likely to name the world’s biggest technology company, Apple Inc.”  So what were our key findings?  Glad you asked…

Three key findings (click this title link to access the full report):

1. Apple is the nonbank competitor respondents worry about most, at 40%  — just 18% of respondents indicate their bank offers Apple Pay.
2. Bank mobile apps may not keep pace with nonbank competitors. Features such as peer-to-peer payments, indicated by 28% of respondents, or merchant discounts and deals, 9%, are less commonly offered within a traditional bank’s mobile channel. 49% of respondents indicate their bank offers personal financial management tools.
3. Despite the rise of P2P lenders like Lending Club and Prosper in the consumer lending space, just 35% of respondents express concern that these startup companies will syphon loans from traditional banks.

Instead of millennials, banks have been finding most of their growth in loans to businesses and commercial real estate.  Yes, 75% of respondents want to understand how technology can make their bank more efficient… and 72% want to know how technology can improve the customer experience.  But I find it telling that today, loan growth remains the primary driver of profitability for the majority of responding banks.  In fact, 85% of respondents see opportunities to grow through commercial real estate loans.  As we found, executives and board members also expect to grow through commercial & industrial (C&I) lending, for 56%, and residential mortgages, at 45%.  So for those looking to predict the future of banking, I think findings like these are quite telling.  Indeed, it would appear what’s worked in the past may be what to bet on for the future.

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The 2015 Growth Strategy Survey, sponsored by technology firm CDW, reveals how bankers perceive the opportunities and challenges in today’s marketplace, and technology’s role in strategic growth. The survey was completed by 168 chief executive officers, independent directors and senior executives of U.S. banks with more than $250 million in assets in May, June and July of this year.  Ironically, last year’s survey found that credit unions, not Apple, were the “non-bank” competitor that banks were most worried about.  In fact, can you believe that Apple didn’t even make the cut?  My, how quickly times can change.