In a column he wrote for a journalism trade publication, a newspaper editor in southeastern Minnesota recounted a conversation he had with a banker. The writer was commenting on the vast differences between the banking industry, which is highly regulated, and the newspaper business, which – protected by the First Amendment – has almost no restrictions at all, save the usual wage and labor laws.
With respect to regulation, the writer is spot on but a broader comparison between the newspaper industry and the banking industry reveals numerous similarities. I have long thought the industries are alike and that they might even be able to learn from each other.
First, both industries are consolidating. While consolidation is a greater factor in banking, where the number of institutions has declined by two-thirds in the last 25 years, the number of newspapers also is shrinking. In banking, the industry is dominated by a very small number of very large institutions. The newspaper world also has its behemoth organizations while the vast majority of newspapers are small businesses, just like the vast majority of banks are community institutions.
Second, both industries are undergoing technological transformation. Probably the only industry that has been more impacted by technology than banking is media. Just as the very nature of money has changed from paper and coin to digital, news has changed from newsprint to digital. For both industries, the hand-held device has become the customer-preferred delivery channel. Migration to digital has forced bankers and publishers alike to rethink how they process the currency of their business (whether that’s news or money), to deliver services and meet customer expectations. The advent of technology has meant a reduction in staffing at both banks and newspapers. When I started in this business more than three decades ago, bankers used to number their FTEs about one per $1 million in assets; today it’s closer to one FTE for every $5 million or more in assets.
Technology gives organizations opportunities for greater efficiencies. This is nothing new in banking, where holding companies for years have provided services to their multiple bank charters and branches. An industry once known for family-owned and independent operations is moving increasingly toward centralized processes. The “big three” — Digital First Media, Gannett and Gatehouse — now own about a quarter of the nation’s daily newspapers.
From where I sit, with one foot in the publishing world and the other in the banking world, I see a couple of things that make both newspapers and banks successful.
While the headline-grabbing stories about newspapers focus on declining readership, cost-cutting staff layoffs, and publishing company bankruptcies, many, many smaller community newspapers are doing pretty well. That’s because they focus on their communities, which the bigger media outlets essentially ignore. People who live in and around small towns want to know what’s going on close to home. Community bankers understand when I say small-town newspapers succeed on relationships, not on volume.
Another kind of publication that is still strong is the narrowly-focused journal covering something very specific, like community banking in the Midwest, or coaching youth softball, or gluten-free cooking, or cycling adventures in Asia. The narrower the niche, the less susceptible the publication is to competition — print or electronic.
Publications that struggle are the ones that try to be everything to everyone. The regional dailies that try to report world events, national news and local developments are simply spread too thin. The internet-based publications specializing in each of these areas will beat them every time. Successful publications have a clear sense of their audience, which is generally linked by a highly defined geography or specific interest.
Ditto in banking. No community bank can offer everything to everyone and expect to excel. The really standout community banks have focused on, for example, general aviation aircraft loans, equipment leasing, RV loans, or government guaranteed lending programs. Or, their specialty might be defined by their geography.
The other thing that a successful newspaper does is help a community articulate its narrative, giving each reader a sense of belonging in the story. As much as newspapers deliver the news, they help people figure out what their role is. I think a bank can do the same thing. Through its advertising, social media presence, community outreach and general business approach, a bank can amplify a community’s character and make its customers feel like an important part of that story. When a farmer taps a credit line, it’s not just another ag loan, but foreshadowing to a rich harvest that will bring pride to the entire community. A business expansion loan isn’t just an entrepreneurial venture, but a new chapter in the mystery of Main Street.
People have long talked about the demise of banking. And in the last decade, talk has ramped up on the decline of print media. Of course these industries are changing, and it is likely these industries will move to a fewer number of larger players. But these industries are not going away. In the right niches, banks and newspapers remain important providers of essential services.