What Does Detroit Have to Do With It?
The recent bankruptcy of the iconic city of Detroit serves painful notice of how things can dramatically change. While that situation transpired over a period of several years, change can be more sudden. The point is, we best be prepared for the changes that inevitably lie ahead in the banking industry.
The iPhone As Your Branch
I recently attended a banking conference where a professor of finance from the “other USC” – the University of South Carolina – pulled out his iPhone and declared, “I had to get one of these just to keep up with my students.” He then held up his phone and stated: “THIS IS THEIR BRANCH.” What a powerful concept. What does this trend mean for your bank?
What Business Are We In?
This is a question worth asking and repeating regularly. I propose that banks, particularly community banks, are in the currency transfer business, in its simplest terms. The worst mistake you can make is to replicate the Encyclopedia Britannica. They thought they were in the encyclopedia business. Wrong: they were in the information business and the printed version of their delivery system became obselete.
What Should Banks and Their Boards Be Doing?
I just moderated a strategic planning session with the board of a successful community bank. It was fun. Among other things, we talked about the Bank of the Future – what it will look like and how to prepare for that. Not only will you need to determine what products and services your present and future customers will demand, but you also need to think about how those products and services must be accessed and delivered.
While branches are not yet obsolete, over time as we move to future generations, some form of remote banking will become the dominant delivery system. What it will be exactly is less important than recognizing this fact. You must be geared toward meeting those demands. While not necessarily on the bleeding edge, I suggest you best not be on the trailing edge. You must protect your assets and that, plain and simple, is your customer base and market share. Also, if branches become passé, what happens to the value of the branches you own? Will GAAP make you mark those down to market value, not just in a sale context? (A scary thought.) Hey, they can only turn so many empty branches into convenience stores or gas stations, right?
Plan Ahead; Be Proactive
So what should you do? Be proactive. Create a Bank of the Future Committee – a kind of think tank within the bank, cutting across all lines and levels. Have the board set aside at least 30 minutes quarterly to brainstorm on big picture issues. Have a session on this topic at your annual board/management retreats. Plan for the future, and seek good information. As they say, “The best defense is a good offense.” So take charge of your destiny and don’t become the next Encyclopedia Britannica or city of Detroit.