ABA Banking Journal - March/April 2016 - (Page 59)
> BOARD MATTERS
Can Banking Learn from
Music and Publishing?
BY BRIAN NIXON
IF YOU'RE CONSIDERING the forces shaping the future of your bank and the
banking industry-and you should be-keep an eye on the "digital disrupters."
Such initiatives and enterprises swept through the music and publishing
industries-think of Pandora and Spotify in streaming music, or the Amazon
Kindle in e-publishing-leaving in their wake revamped and revised business
models, low-cost digitally-driven products and services, and faster and easier
In financial services, digital disrupters
include PayPal, Moven, Quicken,
Lending Club, Prosper, Google, Apple
and others, says Joseph Cady, who
spoke on the topic at ABA's 2015
Directors' Forum in Los Angeles.
"The trend is banking is becoming
digitized," says Cady, managing
partner of CS Consulting Group.
"This happened with music and
books and it's happening to the
Digital disrupters are very good at
developing faster and easier-and
frequently cheaper-solutions. These
are features that appeal to unbanked
or underbanked millennials. The
disrupters can operate more nimbly
because they are less regulated, Cady
says. Disrupters also excel at picking
off profitable niches. Quicken Loans,
for example, has become one of the
largest originators of mortgage loans
and receives top marks from J.D.
Power for customer service.
"Banking is simple, but the
environment is complicated," Cady
says. "The regulators put [banks]
through a tremendous amount of
effort to provide deposit insurance."
Millennials-now roughly on
par with baby boomers in terms
of numbers participating in the
American workforce-are a
growth opportunity in banking and
financial services. By contrast,
older boomers, for example,
have less need for credit than
younger millennials. Millennials,
who are projected to represent a
large majority of the workforce by
2025, are also open to different
alternatives when it comes to
managing their money and they
tend to see less of a need for
traditional banks, Cady remarks.
He points to the well-known Viacom
survey as an example, which found
that a larger majority of millennials
would rather go to the dentist than
visit a bank.
So, what can banks and their
directors do? Cady says banks
should focus on customer needs
and priorities, and leverage
technology to enhance efficiency
and lower delivery costs of products
and services. Better decisionmaking algorithms, for example,
lower costs, smooth customer
service and speed response
times. Using "big data" enables
better tailoring of products and
are very good at
services to specific customer needs,
or better ways to suggest them to
Still, key questions remain when it
comes to efficiency. Among them:
"What do we do about branches?"
And: "Do you need to transform
your bank? Do you want to be in this
business in five and 10 years?"
For most institutions, the answer to
the latter question is clearly yes. But
it won't necessarily be an easy road.
Cady advises bank directors to think
like competitors and not like bankers.
What are your bank's distinctive
competencies? What compelling
reasons do you offer customers to
do business with your institution?
Does your bank offer the right lines of
business at the right time and through
the right channels?
"The future is promising," Cady says,
"but [directors] will have to work
aba.com/BankingJournal | ABA BANKING JOURNAL
Table of Contents for the Digital Edition of ABA Banking Journal - March/April 2016
LEARNING THROUGH LITERATURE
PUMPING IT UP
CRE AT A CROSSROADS
LAYING A FOUNDATION FOR INNOVATION
A PASSION FOR ADVOCACY
WHY BANK CONSOLIDATION IN THE U.S. WILL LIFT OFF IN 2016
ABA COMPLIANCE CENTER INBOX
BOOKS FOR BANKERS
FROM THE STATES
CORPORATE SOCIAL RESPONSIBILITY
INDEX OF ADVERTISERS
ABA Banking Journal - March/April 2016