Competition has always been as much a part of the banking industry as dollars and cents. Today, we hear a lot about how years of mergers, acquisitions, consolidations, and collapses in the banking industry have culled the playing field … all the way down to a “mere” 1,799 insured, U.S-chartered commercial financial institutions with assets of $300 million or more, according to the Federal Reserve.
Fewer banks may operate in the U.S. now than decades ago, but competition is as fierce — and in many ways fiercer — than ever. As tech continues to infiltrate the banking world, reshaping consumer and business needs, consolidation will persist. Some banks and credit unions won’t survive the squeeze unless they have an optimized strategy and design.
What will your community financial institution do to ensure it stands out amid tough competition?
We looked at exactly that question in our webinar “Standing Out Against Tough Competition.” Featuring L.T. Hall from Resurgent Performance, John Hubbert, a retired banker and former executive vice president of American Bank of Texas, and Deluxe’s own Cindy Lambert, the webinar covered what community banks and credit unions can and should be doing in order to survive and thrive.
While the industry’s essential challenges — providing value to customers and shareholders, providing positive customer experiences, and minimizing risks while maximizing profits — will never change, the avatars of those challenges have morphed.
- Helped along by the Great Recession, an influx of Fintech companies, marketplace lenders, crowdfunding, and digital financial services companies has replaced the excess capacity of traditional financial institutions.
- Customer service expectations are higher than ever, with borrowers expecting quick loan approvals, speedy funding, and less hassle, paperwork, and human intervention.
- Digital delivery and servicing equates to higher margins.
- Big banks are pursuing opportunities historically dominated by community banks and credit unions.
- Financial institutions must balance risk management and compliance requirements with the need to grow through existing customers, as well as new customers and services.
- Bank cultures have not adapted to the need for increased accountability, faster, better and cheaper delivery, personalization, creativity and innovation.
Compounding the frustration of all those evolving challenges is this: Way too many community banks and credit unions haven’t evolved their processes or integrated their technologies in the past decade.
Doing what they’ve always done simply won’t solve those challenges for community financial institutions committed to standing out from the competition. In order to move forward at the forefront of the pack, your organization needs to:
- Prioritize high performance and a culture of performance management.
- Make marketing more efficient and strategic.
- Identify what strategic growth looks like for your organization, be it acquiring other financial institutions, being acquired or nurturing a niche area of service.
- Analyze capabilities and limitations in human resources, management, technology, operations and markets.
What to change
While our webinar delves more deeply into this area, here’s a high-level overview of what community financial institutions will need to change in order to remain competitive:
- Apply industry best practices across the organization and review tasks system-wide to cull activities that don’t add value.
- Streamline processes to eliminate log jams.
- Take an innovative, data-driven approach to optimizing branches. This may include repurposing space or consolidating branch locations.
- Explore outsourcing services that make sense, especially in low-value areas (like office supplies) where you might not have the scale or time to get the best value.
- Improve use of technology, including achieving better integration.
- Establish metrics and service-level standards to drive higher performance. Staff and management must be on the same page in expecting superior performance.
To learn more about the changes community financial institutions need to make, and insights on how to implement those changes in your own organization, listen to this on demand webinar when you have some free time.