Expect the Unexpected

“If past history was all that is needed to play the game of money, the richest people would be librarians.” – Warren Buffett

#AOBA17 pre-conference intel
By Al Dominick, CEO of Bank Director | @aldominick

This may be a phenomenal—or scary year—for banks. Banks have benefited from rising stock prices and rising interest rates, which are expected to boost low net interest margins. Indeed, the change in the U.S. presidency has resulted in a steepened yield curve, as investors predict improved economic growth. Currently, many anticipate regulatory relief for banks and the prospect of major corporate tax cuts. Such change could have a significant impact on banks; however, those running financial institutions also need to keep an eye on potential challenges ahead.

As we head to our 23rd Acquire or Be Acquired Conference in Phoenix, Arizona, with a record breaking 1,058 attendees Jan. 29-Jan. 31, I am expecting the mood to be good. Why wouldn’t it be? But what is on the horizon are also fundamental changes in technology that will change the landscape for banking. What will your competitors be doing that you won’t be? Our conference has always been a meeting ground for the banking industry’s key leaders to meet, engage with each other and learn what they need to do deals. It is still that. Indeed, most of the sessions and speakers will be talking about M&A and growth.
But this year, more than 100 executives from fintech companies that provide products and services to banks join us in the desert, on our invitation. We want to help banks start thinking about the challenges ahead and how they might solve them.

Here are some things to consider:

  • How will the Office of the Comptroller of the Currency’s limited-purpose fintech charter enable more established fintech companies to compete with some of the incumbents in the room?
  • If smaller banks are indeed relieved of many of the burdens of big bank regulation, will they use the savings to invest in technology and improvements in customer service?
  • How will customer expectations change, and from whom will customers get their financial services?

To this last point, I intend to spotlight three companies that are changing the way their industries operate to inspire conversations about both the risks and rewards of pursuing a path of change. Yes, it’s OK to think a little bit beyond the banking industry.

Spotify
Rather than buying a CD to get their favorite songs, music-lovers today favor curated playlists where people pick, click and choose whom they listen to and in what order. There is a natural parallel to how people might bank in the future. Just as analytics enable media companies to deliver individually tailored and curated content, so too is technology available to banks that might create a more personalized experience. Much like Spotify gives consumers their choice of music when and where they want it, so too are forward-looking banks developing plans to provide consumer-tailored information “on-demand.”

Airbnb
The popular home-rental site Airbnb is reportedly developing a new service for booking airline flights. Adding an entirely new tool and potential revenue stream could boost the company’s outlook. For banks, I believe Airbnb is the “uber-type” company they need to pay attention to, as their expansion into competitive and mature adjacent markets parallels what some fear Facebook and Amazon might offer in terms of financial services.

WeChat
One of China’s most popular apps, the company counts 768 million daily active users (for context, that’s 55 percent of China’s total population). Of those users, roughly 300 million have added payment information to the wallet. So, WeChat Pay’s dominance in the person-to-person payments space is a model others can emulate. PayPal already is attempting such dominance, which Bank Director magazine describes in our most recent issue.

Many of those attending our conference also have done amazing things in banking. I can’t name all of them, but I’d be remiss to not mention CEO Richard Davis of U.S. Bank, our keynote speaker. After a decade leading one of the most phenomenal and profitable banks in the country, he is stepping down in April. We all have something to learn from him, I’m sure.  Let us think about the lessons the past has taught us, but keep an eye on the future. Let’s expect the unexpected.

*note – this piece first ran on BankDirector.com on January 26, 2017

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