In 1965, Gordon E. Moore, co-founder of Intel and Fairchild Semiconductor, predicted the amount of transistors in a dense integrated circuit would double every two years. He theorized that processing technology power, bandwidth and storage capacity would progress at the same rate. By 2015, that pace of advancement had slowed only slightly to closer about two and a half years, but his predictions largely have held true. We are in an age where technology is increasing so rapidly, it is no longer just changing. It is transforming.
This rapid transformation has meant greater opportunities for people to access information more quickly, and to produce knowledge and services more efficiently. But progress is double-edged. Just a few years ago, the typical lifespan of a small business was 50 years. Today, it is roughly 35 years. If you aren’t keeping up, you likely won’t be in business long. This is true in every sector, including banking.
Over the past few years, our team has focused on building our practice around hard trends—things that are certain to occur. Here are three of these trends that are impacting your bank’s growth and sustainability:
Technology Risk and Complexity
With advancements like mobile banking, online banking and remote deposit capture have come new and more complex cybersecurity risks. A former FDIC board member once told me, “At one time in banking, there was only one thing that could close a bank’s doors—credit risk. In today’s marketplace, there are two—credit and cybersecurity risks.” Very few community banks have the necessary expertise in-house yet to combat this complexity. Banks should continue to augment their own internal efforts with the expertise and resources of outside parties that specialize in mitigating these complicated and changing risks.
By being online, your bank is not just competing against another local or regional bank. You are competing with banks all across the country and around the world. Your client base is composed of a broad demographic with wide-ranging needs, expertise, perspectives, and cultural expectations. It’s more important than ever for banks to ensure their leadership team reflects this variety, and seriously consider at least one individual who understands the impact of technology on banking.
As technology complexity increases, so does the regulatory landscape. In response, the largest banks have increased their spending in regulatory compliance as much as $4 Billion per year. While community banks can’t keep up with this level of spending, many are fortifying their regulatory departments and efforts. As regulations become more complex, community banks will have to work to sustain an appropriate level of expertise, which may require more third-party partnerships.
Creating the perfect storm is the fact that there currently is an extreme talent shortage in the banking and risk management field due to factors like retiring baby boomers, insufficient management training programs, and competition from FinTech companies. Many of these realities seem more immediate, and are making it that much more daunting for community banks to compete with their larger counterparts. Our recommendation is for community banks to partner with firms and companies that can help them navigate through these complexities so they can focus on growing the business and shareholder wealth.
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 Banks face pushback over surging compliance and regulatory costs, Financial Times, May 2015
 Is Banking Industry on the Verge of a Talent Crisis? American Banker, December 2015; Is the Banking Industry Suffering from a Talent Crisis? International Banker, April 2016