Tag: Bank Director

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Three Observations From Bank Director’s 2015 Acquire or Be Acquired Conference (Monday)

News and notes from the second day of Bank Director’s annual Acquire or Be Acquired conference.

Key Takeaway

My biggest takeaway from the second full day of Acquire or Be Acquired (#AOBA15 via @bankdirector): instead of asking why take the risk of doing a deal or why take the risk of creating a high performing bank, a better question might be can you be relevant if you don’t?

Trending Topics

To start the day, I polled the audience — using an automated response system — on a number of non-M&A topics.  Of note, the majority of attendees believe the greatest organic loan growth opportunity is in commercial real estate.  Likewise, the majority of people voted for cash management services to businesses when asked what provides them with the greatest fee-growth opportunities.  Anecdotally, the issues I took note of where, in no particular order:

  • The expansive views of the regulators continue to frustrate bankers;
  • Where stock will be issued in a merger, an auction may not only be not required, but can be counterproductive from maximizing value to shareholders — hence the reasons why negotiated sales processes are gaining in popularity;
  • Key regulatory obstacles remain centered on compliance -‒ for buyers and sellers alike (e.g. BSA, consumer and increasingly, CRA);
  • There have been 28 transformational mergers — one bank acquiring another that is over 25% of its size — since 2013. These are merger of like-sized companies (yes, we are getting away from the term MOE). The market likes these deals — stocks in these deals have out-performed the market.

Picked Up Pieces

A really full day here in Scottsdale, AZ with quite a few spirited discussions/debates.  Here are some of the more salient points I made note of throughout the program:

  • The only thing worse than a flat yield curve is an inverted one.
  • If stocks do well after a deal, means you have the runway to do more deals in the future.
  • When it comes to buying another institution, keep in mind just because somebody has the money doesn’t mean they are going to spend the money.
  • Per Bill Hickey at Sandler O’Neill, capital markets are “open for business” given the lower rate environment and attractive yields/costs for both issuers and investors alike.
  • Without big bank M&A, community groups now review and protest transactions by much smaller banks.
  • A fundamental truth: as you grow, compliance & regulatory expectations grow with you.

More to come from The Phoenician and Acquire or Be Acquired tomorrow morning.

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Bank Director’s 2015 Acquire or Be Acquired Conference Primer

On Sunday, January 25, we kick off Bank Director’s 21st annual “Acquire or Be Acquired” Conference (@bankdirector and #AOBA15) at the luxurious Phoenician resort in Scottsdale, Arizona.  I am so very excited to be a part of this three day event — and am supremely proud of our team that is gearing up to host more than 800 men and women.  With so many smart, talented and experienced speakers on the agenda, let me share a primer on a few terms and topics that will come up.  In addition, you will find several links to recent research studies that will be cited before I share one example of the type of issues being both presented and addressed at “AOBA.”

Colorful Language

Just as M&A is a colorful — and complex — issue, so too are the words, terms and considerations used by attorneys, investment bankers and consultants in management meetings, in the boardroom or at the negotiating table.  Here are three terms I thought to both share and define in advance of AOBA (ay-o-bah):

  • Triangular merger: This happens when the acquirer creates a holding company to acquire the target and both the acquirer and the target become subsidiaries of the holding company.
  • Cost of capital: You could say this is the cost to a company of its capital, but another way to look at it simply is this: the minimum return you need to generate for your investors, both shareholders and debt holders. This is what it costs you to operate and pay them back for their investment.
  • Fixed exchange ratio: This is the fixed amount for which the seller exchanges its shares for the acquirer’s shares. If the buyer’s stock price falls significantly post-announcement, that could mean the seller is getting significantly less value.

Again, these are but three of the many terms one can expect to hear when it comes to structuring, pricing and negotiating a bank merger or acquisition.

Research Reports

Throughout the year, our team asks officers and directors of financial institutions to share their thoughts on board-specific issues — like growth and more specifically, mergers & acquisitions.  Allow me to share an overview on these two research reports along with links to the full results:

Of note: 84% of the officers and board members who responded to this Growth Strategy Survey, sponsored by the technology firm CDW, say that today’s highly competitive environment is their institutions’ greatest challenge when it comes to organic growth — a challenge further exacerbated by the increasing number of challengers from outside the industry primed to steal business from traditional banks.

Of note: There’s no shortage of financial institutions seeking an acquisition in 2015, but fewer banks plan to sell than last year, according to the bank CEOs, senior officers and board members who completed Bank Director’s 2015 Bank M&A Survey, sponsored by Crowe Horwath LLP.

Valuing a Bank

Understanding what one’s bank is really worth today is hugely important.  Whether buying, selling or simply growing organically, a bank needs metrics in place to know and grow its valuation.  On BankDirector.com this past October, I shared why earnings are becoming more important than tangible book value (Why Book Value Isn’t the Only Way to Measure a Bank). Clearly, a bank that generates greater returns to shareholders is more valuable; thus, the emphasis on earnings and returns rather than book value.  Yes, investors and buyers will always use book value as a way to measure the worth of banks. Still, I anticipate conversations at the conference that builds on the idea that as the market improves and more acquisitions are announced, we should expect to see more attention to earnings and price-to-earnings as a way to value banks.

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Please feel free to comment on today’s piece below or share a thought via Twitter (I’m @aldominick).  More to come from the “much-warmer-than-Washingon DC” Arizona desert and Acquire or Be Acquired in the days to come.

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Bank Director: A Year in Pictures (part 2)

Last week, I shared pictures from the first half of 2014 (Bank Director: A Year in Pictures — part 1).  Today, some of my favorite photos of our team from July through the end of this year.  Be it a board meeting in Jackson Hole, WY, FinTech Day at NASDAQ’s MarketSite in New York City or taking a trip to Pinewood Social in downtown Nashville when a fire knocked us out of our office, a pretty fun final six months.

Jackson Hole, WY — home of our summer board meeting
One of our board meetings (Jackson Hole, WY)
Why ask why (Jackson Hole, WY)
The team’s 4 year celebration? Don’t ask (Leiper’s Fork, TN)
I think I see lightning coming towards Jackson, WY
Confirming the winning team’s work (yes, Kaitlyn, we won)
Let’s get stuck on the tram!
I’m taking the back bowl back to Bill’s
NYC in Sept
Most of our senior team / © 2014, The NASDAQ OMX Group, Inc.
Kelsey signing off for the day / © 2014, The NASDAQ OMX Group, Inc.
My exec coach, Ronni, and me @ NASDAQ’s MarketSite
So proud of our team! © 2014, The NASDAQ OMX Group, Inc.
Closing time / © 2014, The NASDAQ OMX Group, Inc.
Kelsey and me © 2014, The NASDAQ OMX Group, Inc.
post-FinTech Day dinner in NYC
Pinewood Social post-office fire
Pinewood Social “Fire in the Building” HH
Mika is always posing for the camera!!!
Why am I not surprised?
Huntington Beach, CA to speak at a Moss Adams conference
A typical Kelsey session
Conferencing
Demo’ing the office
The old office
New office space
Our new office space
United Way Day
The unofficial ice cream of Bank Director
Team colors
Bank Director representing in DC

An early Happy New Year!

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Giving Thanks for Great Leadership

We are getting close to that time of year when people start writing their top ten lists, providing year-in-review posts and taking out the proverbial crystal ball.  In this spirit, my post-Thanksgiving piece provides a list of bank CEOs I met this year that impressed me with both their bank’s performance & personal leadership styles.  From the outside looking in, I have to assume shareholders and employees alike appreciate what each has done for their organization.

A few days ago, David Reilly authored a piece in the Wall Street Journal entitled “Wanted: Dance Partners for Bank Merger Ball” (sorry, registration required).  Citing Bank Director’s annual M&A research report, he reminded us that it takes two to tango — and “that is still the issue for investors expecting, or hoping for, a significant pickup in bank merger activity in 2015.”  As we showed in our survey of about 200 bank directors and executives, 47% said they planned to purchase a healthy bank in the next 12 months — but 87% also said they had no intention to sell.  So a steady hand to lead an institution strikes me as imperative for those banks seeking growth through traditional, or acquisition-based, means.  This got me thinking…

Over the course of the year, I am lucky to meet Chief Executive Officers from all over the country.  To build on three posts from earlier this year (my “FI Tip Sheet: Some of Banking’s Best CEOs,” “FI Tip Sheet: Great Bank CEOs” and “FI Tip Sheet: The Top Women in Banking“) here, in no particular order, are nine community bank CEOs that made memorable impressions on me in 2014:

  • Jay Sidhu, the Chairman and CEO of Customers Bank, ran Sovereign Bank for nearly 20 years and started Customers Bank from scratch in ’97.  The bank has grown from its original five branches in the suburbs of Philadelphia to 14 offices in three states — Pennsylvania, New York and New Jersey. Thanks to Jay’s disciplined approach to growth, Customers has seen its assets increase to $6.5 billion as of August 25.
  • Down in Texas, Scott Dueser, the Chairman, President & CEO at First Financial, embodies the concept of loyalty — to his employees, his customers and to the First Financial family as a whole (he’s been a part of it for more than 38 years).  Oh, and his bank placed first in the $5 billion to $50 billion asset category in Bank Director’s annual Bank Performance Scorecard — a ranking of the 200 largest publicly traded bank holding companies in the United States based on their 2013 financial data.
  • Up in RedSox country (sorry, CT might be a swing state between Yankees and RedSox fans, but the team from my home town is far superior), Bill Crawford leads United Financial Bancorp, the bank holding company for United Bank and Rockville Bank.  A $5 billion community bank founded in 1858 with 60 branches in New England, Bill’s determination to merge the two proverbial “equals” as seamlessly as possible reflects a real commitment to the combined teams, client bases and cultures.
  • Billed as the “bank for VCs and entrepreneurs,” Doug Bowers, the President & CEO at Square 1 Bank, oversees the NC-based bank with more then $1bn in assets.  As he shared, their focus on banking entrepreneurs and their investors is all that that they do.  Yes, it is 100% of their business.
  • Robin McGraw, embodies “intrapeneurship.”  The Chairman & CEO of Tupelo, MS-based Renasant Corporation, the parent of Renasant Bank, runs the 110-year-old financial services institution.  With approximately $5.8 billion in assets, Renasant operates more than 120 banking, mortgage, financial services and insurance offices in Mississippi, Tennessee, Alabama and Georgia. Under Robin’s watch, the bank made in-sourcing their IT work a priority — which puts them in a favorably competitive position as the world becomes even more digital.
  • I know Daryl Byrd, President & CEO at IBERIABANK Corporation, sees quite a few potential deals cross his desk as he runs the oldest and largest bank headquartered in Louisiana.  The financial holding company operates 280 combined offices and successfully serves a niche commercial and private banking target audience.  Over the past few years, IBERIABANK has been held up as one of the better acquirers in terms of integrating a team/brand into its own — something they will do again with their recently announced acquisition of Old Florida Bancshares.
  • Any time I am able to spend time with Mike Fitzgerald, the Chairman, President & CEO at Bank of Georgetown in Washington, D.C., I come away inspired.  Being a local presence since 2005 — with a great reputation for growing organically — Mike and his team have quickly made this one of the best community banks in the Washington metropolitan area.
  • John Corbett, the President & CEO at CenterState Bank of Florida, runs one of the fastest growing community banks headquartered in the Sunshine State.  Founded in 1999, CenterState Bank has grown to nearly $4 billion in assets.  Just last month, John talked with us about the need to innovate or risk becoming stagnant and losing the ability to compete for exceptional talent.
  • In terms of taking risks, David Brooks, of Independent Bank Group in Texas, can share a story or two.  As I wrote for BankDirector.com in October (Deciding Whether to Sell or Go Public), David was one of the first to take a bank public following the financial crisis, guiding the bank’s 2012 IPO that raised $100 million at 2.2 times tangible book value. The company has announced eight acquisitions since 2010; most notably, with Bank of Houston in a deal that added more than $1 billion in assets to Independent Bank when the deal closed in April.
  • Finally, a tip of my hat to Leon Holschbach, the Vice Chairman, CEO and President of Midland States Bancorp. Leon stands out for his recruitment & retention efforts and has graciously shared how his company develops executives, attracts leadership and approaches compensation in our highly competitive and economically challenging world.

This is by no means a comprehensive list, and I realize there are many, many more leaders who deserve praise and recognition. Click the “+” button on the bottom right of this page to comment on this piece and let me know who else might be recognized for their leadership prowess.

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This Week in Pictures (and Videos)

As I wrap up the week, let me take a look back at Bank Director’s annual Bank Executive & Board Compensation conference vis-a-vis video recaps and a gallery of pictures from the Swissotel Hotel in Chicago.

Video Recaps

If you’re curious for a <90 second summary of our time in the Windy City, take a read at what I wrote on Monday (Does Anyone Want To Work At A Bank?) or Tuesday (Trending at #BDComp14) and check out these two videos. The first, of our talented editor Jack Milligan; the second, my two cents.

Picture Time

Welcoming folks to Chicago
Early arrivals
Jack and I welcoming folks in
Mika is always posing for the camera!!!
Nice shoes
First Financial’s dynamic CEO
A look to the right side of the stage
Sharing a laugh w/ some of our panelists
Jack Milligan, Bank Director’s Silver Fox
A pop of color
Winding down
Strong Board, Strong Bank

Aloha Friday!

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A 90 Second Look at the ‘Innovation Requirement’ Facing Banks Today

While the larger banks in the U.S. continue to increase in size, many community banks are fighting for survival in today’s regulatory and low-interest rate environment.  Here is one key takeaway from yesterday’s Bank Executive & Board Compensation Conference.

Up next?  Pictures on Friday from the conference.

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Trending at #BDComp14

This January, at Acquire or Be Acquired, I wrote that most successful banks have a clear understanding and focus of their market, strengths and opportunities.  So one big takeaway that builds on this idea from our annual Bank Executive & Board Compensation conference (#BDComp14 via @BankDirector): it is time for a bank’s compensation committee and HR officer to reassess their viability of their performance plans and incentive programs.

Today’s agenda covered a lot of ground; namely, how economic, technological and demographic trends are reshaping the financial community. With nearly 300 attendees with us in Chicago, I heard a lot of interesting comments and questions made throughout the day. Three that stood out to me from our “on-the-record” presentations:

  • The Fed’s policies are forcing banks to ask tough questions: When will rates rise? Should I make fixed rate loans in the 4% range? How will this play out? How does it affect my stock value? (Steve Hovde, the CEO of the Hovde Group)
  • It is not what you do for people that they remember; it is how you make them feel. (Scott Dueser, the Chairman & CEO of First Financial Bankshares)
  • When it comes to Dodd-Frank, I thought we’d be through it all, but its still going full force (Susan O’Donnell, a Partner at Meridian Compensation Partners)

Trending topics
Overall, the issues I took note of were, in no particular order: loan growth is now paramount to profitability; with cybersecurity risks growing, protection is becoming more and more costly (especially in terms of time & resources); standardized loan products are reducing competitive advantages of community banks (naturally impacting compensation plan participants); if compensation plans are overly complicated, step back and ask if your are trying to solve for something else; culture and performance is what it’s all about.

More to come from Chicago tomorrow…

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On Recent Bank Mergers and Acquisitions

Earlier this week, American Banker’s Robert Barba wrote that bank M&A could reach an “inflection point” (sorry, paywall). With bank valuations increasing — and asset quality improving — I’m seeing deal premiums make a comeback, along with banks able to pay them.  The title of Robert’s piece caught my attention, as did his look at BB&T’s agreement in early September to buy the $2 billion-asset Bank of Kentucky Financial in Crestview Hills.  While that high-stakes deal has generated headlines, let me share some observations about another transaction that “shows well.”

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As Robert wrote on Tuesday, the $188 billion-asset BB&T is “often viewed as one of the bigger banks most likely to acquire. It managed to make a few deals during the downturn, including buying the operations of BankAtlantic from its holding company and picking up Colonial Bank’s assets and deposits from the Federal Deposit Insurance Corp.”  While this deal alone does not represent a resurgence of big bank M&A, it might foreshadow a pick up in activity.

Of course, no two deals are alike — and as the structure of certain deals becomes more complex, bank executives and boards need to prepare for the unexpected. The sharply increased cost of regulatory compliance might lead some to seek a buyer; others will respond by trying to get bigger through acquisitions so they can spread the costs over a wider base.  For this reason, I wrote a piece for BankDirector.com called “Deciding Whether to Sell or Go Public” earlier this week (no registration required).  As you can read, David Brooks, the chairman and CEO at $3.7-billion asset Independent Bank Group based in McKinney, Texas, and Jim Stein, the former CEO of the Bank of Houston and now vice chairman of Independent Bank, talked with me about their experiences and decision to merge their banks.

With merger activity on the rise, more boards of directors are considering whether the time is right for their financial institution to find a strategic partner, especially if they want to maintain the strategic direction of the institution or capture additional returns on their shareholders’ investment.  In the end, no one knows what will happen with bank M&A in the coming months, but looking at deals like the one Robert wrote about and the one I shared… well, one can guess.

Aloha Friday!

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Four Years Strong

Just as I did last year, I am taking a break from my regular Friday writing routine to highlight the last few days with our exceptional team.  Admittedly, I try to keep the company stuff to a minimum on About That Ratio; however, I feel it is more-than-ok to pull the curtain back a bit and share my pride and enthusiasm for our dynamic team following our “four year” anniversary.

Yes, the Bank Director name/brand came into being in 1991; however, many of the relationships with our hugely influential audience are the result of our core leadership team’s efforts over the past four years.  So as we celebrated our team’s four-year anniversary on Wednesday (I’ll explain below), I thought to share some  pictures from our time together.

Atta Boy’s new friend
Scripted fun
Decorations going up
Quite amused w/ the camera
Taking pride in our koozies
Lunch gets served
Deliciousness from Puckett’s Grocery of Leiper’s Fork
Bill’s retreat in Leiper’s Fork
Al fresco dining in TN
Celebrating our largest shareholder’s b-day
Kaitlyn, the horse whisperer
Bill takes Naomi out for a paddle
Why am I not surprised?
Confirming the winning team’s work (yes, Kaitlyn, we won)
The team’s 4 year celebration? Don’t ask (Leiper’s Fork, TN)
Cornhole competition
Robert in action

Following the sale of a sister company to the NYSE in 2010, we re-designed our entire business around the information needs of a bank’s leadership team and board.  From a proverbial tiger-team of ten, we now boast a talented team of nineteen men and women that I’m proud to work alongside. Of particular note, congratulations to Joan Susie, one of the co-founders of the company, who takes over the role of Chairman from our largest shareholder, Bill King.  Bill also deserves more than just a tip-of-the-cap for inviting us down to his farm in Leiper’s Fork.  Finally, a BIG-time thank you to everyone for helping with yesterday’s office clear-out.  Demolition begins on our new office space next week!

 

Aloha Friday!!

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This Week in Pictures

As our editor, Jack Milligan, writes in How One Large Bank Fosters Innovation, “conventional wisdom holds that banks are not very good at innovation — and large banks, with their entrenched bureaucracies and clumsy legacy systems, are probably worst of all. It might then come as a surprise that Bank of New York Mellon Corp. has run a highly successful innovation program that has made a meaningful contribution to the bank’s profitability, and also manages to get most of the company’s 10,000 employees involved in the process.”

Earlier this week, I shared how Declan Denehan, BNY Mellon’s managing director for strategy and innovation, provided his thoughts on staying relevant while engaging with the “startup ecosystem” during Monday’s FinTech Day.  Jack’s article offers a great summation of Declan’s perspectives — and for today’s post, I simply wanted to recap the event as a whole.  The fun for our team started well before the doors opened at 9:00; however, FinTech day kicked off with:

  • A number of video shoots in the NASDAQ studio that we will post to BankDirector.com;
  • Continued with a live-streamed discussion focused on innovation with Declan and me; and
  • Wrapped up with a closing bell ceremony and a lot of great company logos rotating on the exchange’s video board in Times Square.

FinTech Day, a collaboration between Bank Director and NASDAQ OMX, attracted over 40 participants from 30 financial technology companies.  For those of you that joined us, I am pleased to share the link to the official photo gallery from the ceremony.  We are happy to send over any that you’d like as our way of saying thank you for joining us.  Simply leave a comment below, reach out via LinkedIn or Twitter and let me know what you’d like.  Below, some of the pictures in the gallery…

BD and BNY Mellon © 2014, The NASDAQ OMX Group, Inc.
Kelsey and me © 2014, The NASDAQ OMX Group, Inc.
A group shot © 2014, The NASDAQ OMX Group, Inc.
Group photo / © 2014, The NASDAQ OMX Group, Inc.
Light it up / © 2014, The NASDAQ OMX Group, Inc.
Closing time / © 2014, The NASDAQ OMX Group, Inc.
My signature / © 2014, The NASDAQ OMX Group, Inc.
Kelsey signing off for the day / © 2014, The NASDAQ OMX Group, Inc.
Aloha! © 2014, The NASDAQ OMX Group, Inc.
Well, my name is in lights / © 2014, The NASDAQ OMX Group, Inc.
Do I look like a NYC tourist? © 2014, The NASDAQ OMX Group, Inc.
A view from Time Square / © 2014, The NASDAQ OMX Group, Inc.
Crystal awarded / © 2014, The NASDAQ OMX Group, Inc.
Most of our senior team / © 2014, The NASDAQ OMX Group, Inc.
My exec coach, Ronni, and me @ NASDAQ’s MarketSite
© 2014, The NASDAQ OMX Group, Inc.
So proud of our team! © 2014, The NASDAQ OMX Group, Inc.

Before wishing everyone an Aloha Friday, let me thank the entire Bank Director team — and in particular, Kelsey Weaver, Laura Schield, Michelle King, Mika Moser, Jack Milligan and Joan Susie — for your efforts to make the day a success.  Each of you contributed something special and for that, I am very appreciative and already getting excited for next year (dare we call it FinTech 2.0)!

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Today is FinTech Day at NASDAQ (here’s what you need to know)

The who, what, when, where and why of FinTech Day at NASDAQ, a collaboration between the exchange and my company, Bank Director, that celebrates the contributions of financial technology companies — fintech for short — to banks across the U.S.

 

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Who: Bank Director, a privately-held media & publishing company focused on issues fundamental to a bank’s CEO, senior leadership team and board members, teams up with the NASDAQ OMX to showcase various technology-driven strategies and tactics successful banks use to fuel profitable, sustainable growth.

What: FinTech Day at the NASDAQ

When: Today, September 8

Where: The NASDAQ MarketSite (4 Times Square – 43rd & Broadway)

Why: Because who says there is no innovation in banking?  During this day-long event, we keep our focus on a board’s level, exploring growth opportunities made possible by various technology products and services.

To Watch: We will welcome a number of executives from the Fintech community throughout the day, along with one of the country’s biggest (and actually, oldest) institutions: BNY Mellon.  Personally, I’m looking forward to chatting with their Managing Director – Strategic Growth Initiatives, Declan Denehan, at 2 PM ET for an hour-long session focused on innovation, competition and staying relevant. Thanks to our friends at NASDAQ, you can watch the live feed for free (click here to register and watch).  At 3:55 ET, I’ll join our publisher, Kelsey Weaver, to ring the closing bell. A webcast of the NASDAQ Closing Bell will be available (click here or here) if you are keen to see how we wrap up FinTech day.

Of Social Note: To follow the conversation, let me suggest these twitter handles: @bankdirector, @nasdaqomx, @bankdirectorpub and @aldominick. For photos from the ceremony and event, you can visit NASDAQ’s Instagram Page or Facebook page later today.  As we are all about being a part of the community and broader conversations, Bank Director will use #fintech for its tweets.

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For Banks, the Sky IS Falling

The first in a five part series on emerging threats to banks from non-financial companies.

For bank executives and board members, competition takes many forms.  Not only are banks burdened with regulation, capital requirements and stress testing, they now have the added pressure of competition from non-financial institutions.  In case you haven’t been paying attention, companies such as Paypal, as well as traditional consumer brands such as Walmart, are aggressively chipping away at banks’ customer base and threatening many financial institutions’ core businesses.  So today’s piece tees up my next four columns by acknowledging the changes taking place within — and immediately outside — our $14 trillion industry.

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The race is on…

A few months ago, at Bank Director’s annual Growth Conference in New Orleans, I polled an audience of CEOs, Chairmen and board members and found the vast majority (a whopping 91%) have real concerns about non-banks entering financial services.  These bankers aren’t alone in their concerns about competition from unregulated entities.  Just days after polling this audience, Jamie Dimon, the CEO of JPMorgan Chase, warned an audience of investors that he sees Google and Facebook specifically as potential competition for the banking giant.  As he notes, both offer services, such as P2P, that could chip away at income sources for banks.

…and its not pride coming up the backstretch

As Emily McCormick wrote, Facebook is already a licensed money transmitter, enabling the social media giant to process payments to application developers for virtual products. Likewise, the retail behemoth Wal-Mart launched Bluebird in partnership with American Express late in 2012 so users can direct deposit their paychecks, make bill payments, withdraw cash from ATMs and write checks.  This makes the results of a recent TD Bank survey about millennials banking online and on their mobile devices more frequently than in a branch so relevant.  Specifically, 90% of survey respondents said they use online or mobile tools for their everyday banking activities, such as checking balances or paying bills, and 57% said they are using mobile banking more frequently than they were last year.

Along the lines of “what is the industry losing”: eventually you’re going to have a generation that has learned how to live without a bank.  That’s a very sky-is-falling, long-term consequence of not adapting.  But there’s also an opportunity for retail banks to do more than simply allow the same types of services digitally that were once only available in-person.  Banks could actually expand what banking means to consumers by offering online services that go beyond their legacy business model.

What I am hearing

Of course, non-banks can, conceptually, expand what banking means to consumers by offering online services that go beyond legacy business models too.  However, the sheer complexity of entering this market is one reason why we have yet to see a startup that truly rebuilds the banking industry brick by brick.  At least, that is the perspective shared by Max Levchin, founder and CEO of online payments startup Affirm, a company with the goal of bringing simplicity, transparency, and fair pricing to consumer credit.  As the co-founder and former CTO of PayPal, Levchin is one of the pioneers within the payments industry.   In a recent piece in Wired magazine (The Next Big Thing You Missed: Startup’s Plan to Remake Banks and Replace Credit Cards Just Might Work), he notes

I don’t know if I want to own a bank. But I do want to lend money in a transparent way, and I want to create an institution people love… I want to be the community bank equivalent for the 21st century, where people say: ‘I trust my banker. He’s a good guy who’s looking out for me.’

Coopetition anyone?

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To comment on this piece, click on the grey circle with the white plus sign on the bottom right.  Next up, a look at PayPal, a the e-commerce business that is “eating the banking industry’s lunch.”