COLUMBUS, Ohio-Corporates must to go back to the basics and learn how to be both efficient and competitive if they are to survive, as the drive towards greater operational efficiency will be the "transforming factor" for corportes' future, according to Lee Butke, CEO of Corporate One FCU here.
In the past, there was a lot of subsidization of products with portfolio risk, Butke observed, adding many also priced products inappropriately. But changing pricing models does not mean the cost of doing business with a corporate will go up. "Everyone of our products has been and continues to be a profitable product and you can ask any of our members-our prices are competitive," Butke said.
A unique and distinct business expense model has helped the $5.2 billion corporate keep prices down while boosting the bottom line. The day the corporate implemented Check 21, for instance, it never again saw a single piece of paper in its offices related to clearing those items, Butke pointed out. Corporate One also has a very active brokerage program and, with its entire sales staff Series 7 certified, any salesperson can sell any product the corporate offers. Butke noted that the program generates "sizeable fee income."
Moving ahead, some corporates will likely have to build entirely new business models, especially those who were overly reliant on U.S. Central and other large corporate partners. Institutions without strong risk management will have to create whole departments and complex models out of whole cloth, or simply look for a merger partner.
"These things aren't things you become an expert in overnight," said Butke. "If you don't have a fairly sophisticated group along with the modeling you can't meet the new regulatory requirements. For them to remain independent, to remain profitable and to remain in compliance, it's going to be quite a hurdle."
