From a competitive standpoint, would you describe your bank as a “hawk” or more of a “dove?” What do you think your competitors might say?
When was the last time you and your senior management team had a conversation about your bank’s ability to compete in today’s highly competitive environment?
At first glance many management teams might say that “compete” is what they do every day and all the time. And, while that may be true, the strategy behind how the bank competes may not get the time or consideration necessary to maximize your bank’s marketplace effectiveness.
Competition today is deep, complex and diverse compared to just a decade ago. Think of technological change: the growth of internet usage, proliferation of computers and smartphone adoption has both empowered millions with more choices and simultaneously enabled vendors (new and old) to reach enormous numbers of businesses and consumers unlimited by geography.
The effect of this technological transformation has been amazing. Consider for a moment the current turmoil in the retail industry. Amazon has totally redefined the retailing paradigm with a vast array of products, online ordering and quick delivery. Iconic retail brands such as JC Penney, Sears, Macy’s, Walmart and Target have all struggled to compete with Amazon.
Some might even go so far as to say that there is a retail “death spiral vortex” that may inevitably affect the traditional retailers in a very negative fashion. Store closings and empty strip malls could eventually be the result.
In the financial industry, online financial vendors (traditional and non-traditional) have exploded with multiple lending, savings and transactional products. Businesses and consumers alike have choices today that make those of 10 years ago pale in comparison. Fortunately, community banking as an industry has responded with diverse online capabilities to maintain customers and provide new services.
However, if one could gaze into a crystal ball and foretell the future, is it likely that technological innovation will accelerate, that new competitors will emerge and that your current customers and prospects will have more financial choices? That’s a good question to ask at your next managers’ meeting.
Relationship banking at both the commercial and consumer level always has been a key competitive advantage of community banks. Given the rate of technological adoption one can argue that community banks have done very well in capitalizing on the close relationships they have had with their customers.
But, does relationship banking neatly fit into the crystal ball scenario? Will generational attitude changes and e-commerce affect consumer and business attitudes regarding the value of a personal banking relationship? Or is the concept subject to erosion?
One phenomenon that many bankers have commented on is how lobby traffic has declined during the last 10 years. Relationships are typically structured and nourished on personal contact. If you don’t have personal contact, how do you maintain relationships which are at the core of a community bank’s competitive advantage?
So, is your bank a competitive hawk or more of a dove?
Are you soaring high looking for opportunities, taking active steps to maintain the customers you have and determining how you might acquire new customers? Do you know when to dive down and defend your very best customers against unwanted but inevitable solicitations by competitors? Is it all about interest rates or are there other factors such as terms, offering new financing options or partnering with a reliable correspondent bank that can bring added value to your customers and “keep the business”?
Whatever your bank’s situation, be thoughtful about how you compete. Define your market. Educate your staff so they understand the stakes involved. Know what your market potential is. And, keep your best customers!
Charles Hokans spent more than three decades as a correspondent banker at United Bankers’ Bank, Bloomington, Minn., before retiring in 2015.