Too Big to Care?

HSBC_4C83In case you missed it… Brett King — the author of Bank 3.0, CEO of Moven and speaker at this year’s Growth Conference — shared some pretty head-turning stuff this weekend in the Huffington Post.  When HSBC Closes Your Bank Account Without Telling You provides his blow-by-blow after the bank inexplicably cancelled his small business account without notice, cause or remorse.  From where I sit, this is a stark reminder of the risks inherent to putting policy before people and taking the human side of banking out of “customer service.”  I’ll spare you further commentary and simply suggest a read of Brett’s piece that chronicles his misfortune.  

Size Matters – and Other Banking Notes From the Bay Area

The Ritz-Carlton San Francisco
Walking up to the Ritz-Carlton San Francisco

Last week, Lexington, Virginia… this week, San Francisco, California… next week, Chicago, Illinois.  Yes, conference season is back and in full swing.  I’m not looking for sympathy; heck, for the past few days, I’ve set up shop in Nob Hill (at the sublime Ritz-Carlton) to lead our Western Peer Exchange.  Traveling like this, and spending time with a number of interesting CEOs, Chairmen, executives and board members, is why I love my job.  What follows are three observations from my time here in NorCal that I’m excited to share.

(1) On Wednesday, I took a short drive up to San Mateo to learn more about Kony, a company that specializes in meeting multi-channel application needs.  I have written about customer demands for “convenient” banking services in past posts — e.g. Know Thy Customer –and will not try to hide my interest in FinTech success stories.  Learning how their retail banking unit works with financial institutions to deliver a “unified and personalized app experience” proved an inspiring start to my trip.  Consequently, our Associate Publisher and I talked non-stop about the rapid evolution and adoption of technologies after we wrapped things up and drove back towards San Francisco.  We agreed that consumer expectations, relative to how banks should be serving them, continues to challenge many strategically. To this end, Kony may be worth a look for those curious about opportunities inherent in today’s mobile technology.  Indeed, their team will host a webinar that features our old friend Brett King to examine such possibilities.

(2) When it comes to banks, size matters.  To wit, bigger banks benefit from their ability to spread fixed costs over a larger pool of earning assets.  According to Steve Hovde, an investment banker and one of the sponsors of our event, “too big to fail banks have only gotten bigger.”  He observed that the top 15 institutions have grown by nearly 55% over the past six years.  Wells Fargo, in particular, has grown 199% since ’06.  With more than 90% of the banking companies nationwide operating with assets of less than $1 billion, it is inevitable that consolidation will be concentrated at the community bank level.  However, as yesterday’s conversations once again proved, size doesn’t always trump smarts.  I said it yesterday and will write it again today.  Our industry is no longer a big vs. small story; rather, it is a smart vs. stupid one.

(3) That said, “nobody has told banks in the northwestern U.S. that bank M&A is in the doldrums.”  According to the American Banker, two deals were announced and another terminated after the markets closed Wednesday.  Naturally, this should put pressure on banks in the region to keep buying each other.  Here in San Francisco, the one being discussed was Heritage Financial’s combination with Washington Banking Co.  According to The News Tribune, this is “very much a merger between equals, similar in size, culture and how each does business.”  Now, the impetus behind ‘strategic affiliations’ (don’t call them mergers of equals) comes down to creating value through cost cuts and wringing out efficiencies.  The thinking, at least during cocktails last night, was that deals like these happen to build value for the next few years in order to sell at higher multiples.  Certainly, it will be interesting to see how this plays out.  In a few months at our Acquire or Be Acquired conference, I anticipate it generating quite a few opinions.

Aloha Friday!

Disrupt (or die trying)

Georgia peaches...
Georgia peaches…

If you’ve been on this site before, you probably recognize a pattern to my writing. Each Friday, I share three things I heard, learned or saw during the week.  In past posts, I’ve penned a number of “disruptive” stories that ranged from Brett King’s perspectives on banks (“Does Banking Need a Re-boot”) to John Cantarella’s on Time Inc.’s digital strategies (“Dass de Thing”).  So it should come as no surprise that I furiously began writing today’s column on a flight home from Atlanta on Wednesday evening.  I’d just spent several hours in the offices of the William Mills Agency, one of the nation’s preeminent financial public relations and marketing firms, and left inspired.  What follows are just three of the many Fintech companies the agency represents that are doing some pretty cool things.  IMHO, banks of all sizes might pay attention to these tech companies if they want to disrupt the status quo rather than have their status quo disrupted.

(1) In Bank Director’s home town of Nashville, TN resides the corporate marketing team for CSI, a leading provider of end-to-end technology solutions.  The public company delivers core processing, managed services, mobile and Internet solutions, payments processing along with print and electronic distribution & regulatory compliance solutions to financial institutions.  I like their resource center, but really appreciate their blog that highlights myriad client success stories.  For instance, “How One Bank “does” Social Media Right” shines a light on First Kentucky’s one and only social media strategy.  To wit: not a word about CSI’s involvement with the bank in favor of why the bank decided not to sell things to its social fans and followers.  A “fun and light” client example that shows a more intimate side of the bank vis-a-vis one of their preferred service providers.

(2) For many financial institutions, the gap between the strategy set by the board and subsequent execution can be quite wide.  As Steve Hovde (an investment banker and regular speaker at some of our larger events) shared with us, “bankers are conservative by nature, and the credit crisis served as a stark reminder why they should be. Still, many banks—particularly smaller, community banks—are reluctant to take advantage of strategic opportunities that could significantly enhance shareholder value.” So when First Midwest Bank (a not-so-small $9 billion institution based in Illinois) needed to measure product and customer profitability to support pricing and product offering decisions with accurate contribution margin results, I learned they turned to Axiom EPM.  The company, a provider of financial planning and performance management software, affords “visibility into profitability across the organization.” If you’re keen to learn how First Midwest analyzes profitability at their bank, you might take a look at this on-demand video.

(3) To wrap things up, let me pose a question: how fast would you switch to a different bank if you were the victim of online banking fraud?  Before you answer below (hint, hint), can you guess the percentage of your peers that would immediately?  From a banker’s perspective, such cyber risk poses a real threat to a business model.  Having worked in the IT space for 5+ years, I was curious if its possible to offer online and mobile banking with no possibility of this happening to a customer… ever.  Entersekt, a South African company with designs on the U.S. market, believes it is.  According to a few of the good folks at William Mills, the folks there are the pioneers in transaction authentication.  That is, the company “harnesses the power of electronic certificate technology with the convenience of mobile phones” to provide financial institutions and their customers with full protection from online banking fraud.  Authenticating millions of transactions globally, none of Entersekt’s clients have experienced a successful phishing attack on their systems since implementing the company’s technology.  A pretty impressive accomplishment, and nice way for me to wrap up this week’s column.

Aloha Friday!

Snowquester’d

The White House on 12/18/09
My attempts at photography: the White House on 12/18/09…

Summary: Yes, it’s snowing in the DMV… no, this picture of the White House doesn’t capture today’s totals just yet.  Nonetheless, the run on gas, food and firewood started early yesterday.  So what better time to post something new to About That Ratio than with the snow coming down and the power and wi-fi still on?

I’ve already touched on “Rebooting the Bank;” with today’s piece, I’m taking a look at “rebooting the branch.”  Whereas Brett King inspired my previous entry, credit for today’s falls to PwC.

Recently, I’ve had the chance to talk with several of the firm’s partners about the rise of the digitally driven consumer and commensurate high-cost infrastructure of physical banking locations.  I believe we’re in agreement that if the branch model stays on its current course, it will become a financial burden to banks; ultimately, cutting deep into cross-channel profitability.  So today, I thought to share some information produced by PwC that looks at reinventing branch banking in a multi-channel, global environment.

Yes, the branch of the future has a critical place in banks’ overall channel strategy.  However, in its December “FS Viewpoint,” the professional services firm cites the cost of a branch transaction being approximately 20x higher than a mobile transaction… and more than 40x higher than an online one.  Consequently, banks are beginning to adopt a mix of the following five branch models in order to compete and improve their ROI:

  1. Assisted self-service branches that cater to retail and small-business customers on the go with high-function kiosks;
  2. In-store and corporate branches; for example, in grocery stores and corporate office buildings;
  3. Full-service branches that provide one-stop banking (sales and service) to retail and small-business customers who prefer privacy and face-to-face interactions;
  4. Community centers that have a smaller footprint than traditional branches; and
  5. Flagship stores that deliver sales and advisory expertise while showcasing emerging capabilities to sophisticated customers.

The logic behind a mixed approach?  It increases the bank’s geographic relevance to consumers and balances customer needs, revenue opportunities and cost to achieve growth.

Anecdotally, I’ve recently talked with two CEOs, Ray Davis from Umpqua and Stephen Steinour from Huntington, about their branching strategies in advance of keynote speeches they’ve made at our Acquire or Be Acquired and Lending conferences.  It strikes me that when banks like theirs assess a prospective branching opportunity, they deliberate on things like:

  • How do you develop specific financial criteria for measuring branch performance;
  • How do you decide whether the best path to building customers is adding branches, or operating with a more centralized marketing strategy; and
  • What are the advantages — and potential pitfalls — of growing a branch network.

So as the snow continues to fall outside, I’m digging deeper into PwC’s perspectives.  As a “bonus” to the white paper referenced about, let me also share a video from the firm “Look Before You Leap: Analyze Customer and Business Impact Carefully Before Implementing Product Change.”  While the title is a mouthful, the message, pretty succinct.

Does Banking Need a Re-boot?

Now that I’ve baited you with the headline, let me tie it to the opinions of Brett King (who, in full disclosure, we just confirmed as a speaker at Bank Director’s upcoming Growth conference at the Ritz-Carlton in New Orleans).

Shawmut HD.001

A history lesson for those non-Bostonians reading today’s post.  Shawmut Bank was established in Boston in 1836 and its logo, the stylized bust of Chief Obbatinewat — seen above — became widely recognizable in the Greater Boston area over the next 150 years.  Heck, we had one in our house!  Sadly, the name and logo were retired in 1995 as a result of the merger of Shawmut and Fleet.  But for me — and many others I’ve met (hello Bank of the West’s CEO) — “the Chief” still inspires a smile and a story.

Robert Parrish -- #OO
Robert Parrish — #OO

In my last post, I wrote that its not easy for a bank to build a strong brand.  Still, as some are finding, the rewards can be immense.  So I bring up “the Chief” (not to be confused with the equally awesome Robert Parish who dominated the paint for the Boston Celtics) as an example of a formerly strong brand that still stirs emotions and memories.  It also provides a tie into what I’ve been reading of Brett’s in terms of building a “sticky” customer experience and developing a multi-channel distribution strategy.

Admittedly, his “BANK 2.0” book reminded me of many I read while in the IT space.  For example, those authored by Clay Shirky; at least, in terms of crowdsourcing, “disruptive” customer behaviors, technology shifts and new business models.   But as Brett focuses on our financial community, I’m eager to crack open his “BANK 3.0” to see what he thinks might redefine financial services and payments.  I’m particularly interested in his POV with respect to:

  • Where social media might shine a light on pricing, processes and heretofore obtuse policies;
  • How “customer advocacy” is killing traditional brand marketing; and
  • The growth of the ‘de-banked’ consumer who might not need a bank at all.

I’m always interested in hearing who’s “doing it right” in order to learn and share their stories.  So I ask: in addition to Brett’s ideas, any suggestions for other authors, entrepreneurs, innovators, etc. worth a follow/read?  Hit me up on Twitter or feel free to leave a comment below.  I’ll re-post later this week as part of my “Friday Follow” inspired column.

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FWIW, the Growth Conference focuses on how a bank’s board can become actively involved in building the bank – in securing customers, identifying lending opportunities, promoting the bank in the community, etc. Its a complement to our annual M&A conference, Acquire or Be Acquired, which I covered in detail on my DCSpring21 blog last month.