Changes in technology, demographics, globalization, regulations, and interest rates have altered the business of banking dramatically. In the past few weeks, the Wall Street Journal reported that for the first time ever, more people are using mobile banking apps than going into bank branches on a weekly basis (39% versus 24%). The stat is not all that surprising. What is telling is how quickly we reached that pivot point.
Innovation and pace of change are accelerating, and they are forcing community banks to consider the best ways to build and sustain growth. Understanding trends and building a strategy for keeping the entire organization working toward shared end goals has never been more important to survival. Sounds like common sense, but with everything going on with banking regulations, M&A, fintech, and economic shifts happening in near real time (to mention just a few of the issues), keeping up is more common than staying ahead for many banks.
I recently enjoyed dinner with a president of a $200MM+ community bank in north Mississippi. He said something that struck a chord.
“We are going to be who we are for now.”
This bank recently went through their strategic planning process. They decided they would focus on being the best community bank they could be. They would not try to grow through M&A or other means. That approach didn’t fit their strategy for who they wanted to be.
This decision seems so opposite to what so many companies are trying to do today. I tried to put myself in his shoes to consider how a community bank can grow by focusing on their core assets, rather than focusing on the industry trends (e.g. M&A, new products and services). In fact, a number of ways exist for community banks to grow organically. They require some change, but not a complete disruption, and can actually help these organizations be a better version of “who they are” now.
- Niche lending Consider unique expertise your bank has or can develop (e.g., through strategic partnerships), and use that to create a competitive advantage.
- Focused investment Follow the trend on this one, and put more financial focus on technology and less on opening up large branches.
- Play to your strengths Focus your people on doing more of what your bank is great at (e.g., customer service, building relationships, helping your customers grow their business).
- Focus on people Improving staff development minimizes the cost and time needed to hire and improves customer service by encouraging continuity and relationships.
- Use vendors wisely Analyze your return on your investment in vendors. Instead of putting out bids every three years, consider better ways to use your vendors, whether that is streamlining their services or tapping into different capabilities.
- Educate the community Offering financial education to members of your community raises the chance of success for those individuals and for your institution – you’re building a knowledgeable customer base that trusts you for guidance.
- Meet new needs Pursue opportunities to meet the needs of the unbanked or underbanked in your communities through small loan programs like CreditPlus or savings programs.
On the surface, a statement like “We’re going to be who we are right now” could appear as stagnation. But it doesn’t have to be. Perhaps today more than ever, it’s important to keep a strong focus on who your bank is and what you’re best at and use those assets to grow in the face of challenges and opportunities you can’t control.
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