Western Banker - May/June 2014 - (Page 17)

New Product Development - A Big Challenge and a Potentially Big Reward By Barry A. Abbott A fter the Great Recession began, most financial institutions focused on survival and not on innovation. Now that the economy seems to be stabilizing, thoughts have begun to turn to new ways to increase the top line. New Dodd-Frank Act restrictions make this ever more difficult, but successful bankers continue to explore new product opportunities. The development of a new product for a bank or other financial institution typically requires careful coordination among the bank's finance, marketing, systems and legal areas, and usually requires buy-in from senior management and the board of directors. The following are some of the areas a bank (and its holding company) should consider before proceeding. 1. Determine whether the product is new to the industry or only to the bank Most independent banks will not be developing a truly new product, but will only be implementing, and perhaps modifying, a product used by other institutions. If there are other institutions that market a form of the proposed product, it is extremely valuable (if possible) to obtain copies of the other institutions' forms and to discuss the product's financial and legal aspects with those other institutions. Some product forms (such as credit card initial disclosures) are available publicly through governmental and other websites. However, it is important to recognize that the fact that other banks are offering a product is not assurance that they are doing so in either a legal or a profitable manner and that, to be in legal compliance, all of the product's disclosures, documents and marketing materials have to reflect accurately what your bank and its systems are actually doing. In the event that your bank is developing a truly new product, it is important to meet first with knowledgeable financial and legal advisors, who should be able to provide some initial advice as to the issues that your bank is likely to face before you expend a lot of time and money on an idea that may not work. 2. Make sure you have the answers to the initial basic questions Be sure your bank has done its initial due diligence on the new product. What is the need for the product in your Western Banker May/June 2014 17

Table of Contents for the Digital Edition of Western Banker - May/June 2014

A Message from the President & CEO
What the Regulators are Looking for to Manage Vendor Risk
Fallout from the Target Data Breach
Will Your Compliance Management System Pass Muster?
Don’t Be Caught Off Guard: Prepare Your Bank for a Successful Compliance Exam
2013 Innovative Community Bank Award Winners
New Product Development – A Big Challenge and a Potentially Big Reward
Compliance Issues and Considerations in M&A Due Diligence
The Second Wave Breaks: The CFPB’S Final TILA-RESPA Integration Rule
Dodd-Frank Pre-Purchase and Monitoring Requirements for Your Bond Portfolio
Professional Development Resources
2014 Annual Conference
Index of Advertisers/ Advertiser.com
Welcome New Members

Western Banker - May/June 2014

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