One of the people I enjoy talking to when brainstorming story ideas is Bradley Leimer, who recently became the head of innovation for Santander Bank. He's always thinking about what comes next in banking, mashing seemingly disparate things together in an interesting way and going off in unexpected directions. A recent conversation where I asked him to weigh in on some of the topics we planned to cover in our annual ideas issue started off with him talking about the disappearance of the app and circled around by the end to him essentially predicting the disappearance of banking as we know it.
"When you can no longer make money off interchange and fees, how is that going to change the model? Unfortunately, it's going to take 80% of the market upside-down, and we're already seeing the beginning of that for smaller institutions," Leimer said.
We addressed this need for a business transformation in an idea we titled "Get radical in looking for revenue." But many of the other ideas we share in this issue also explore ways to boost income, whether through new lending opportunities or strategies to attract new customers.
Leimer, who is all in favor of experimenting with how to create income opportunities, suggested during our chat that banks could help their small-business customers save money by analyzing the payments these businesses make for supplies like paper and negotiating a bulk deal on their behalf. He heard Standard Chartered offered a discount on phone services to some of its customers in Asia after striking a deal with a telecom company.
"Who's talking about that? Nobody I know," Leimer said.
Nobody we knew either at the time. But it just so happens we later came across a small New York bank that is testing just such a service.
We wrote about this initiative from Pioneer Bank as part of an idea we titled "Embrace the new R&D", which explores how the industry's research and development tactics are changing. But it also could have fit into another idea about the new strategies some banks are using to make the transition from lender to adviser (see, "Increase fee income by serving small businesses holistically"). Both stories offer insight from banks that in different ways refuse to surrender to the status quo.
"We're in a space where, if we don't continue to evolve, we're not going to be relevant," Karl Johnson, Pioneer's chief innovation officer, told our freelance writer Joel Berg.
That's a message Cindy Solomon, the CEO of a consulting firm that bears her name, is busy trying to impress upon bankers too. At a recent New York Bankers Association event, she said that many bankers hoped to get back to "normal" after the financial crisis. "But the reality is that disruption is the new normal."
She pointed to the tech giants to illustrate: Apple took only seven years to become the world's largest music retailer. Google wiped out 85% of the market cap of the top GPS companies in 18 months. And Alibaba, often described as the Amazon of China, became a $16 billion lender in less than three years.
"Bankers realize things are changing around them, but they are making some really weird broad assumptions," like the hurdle of regulation protects the industry from encroachment, she said. But the highly regulated taxi industry thought the same thing about Uber at first.
Ready or not, "a shift is going to be thrust upon bankers too," Solomon said.
Leimer also brought up Uber in our phone call, wondering aloud how it could portend changes for banking. "The Uberization of everything is services on demand," Leimer said. "The bike is there to rent. The car is there to rent. Or, the flip side of that is, I'll deliver the bike or the car to you. What other ways can banks see those changes happening?"
Or, thinking about it from another angle, Leimer suggested banks could embed Uber into their own apps to allow customers the option to get a ride to the branch. "You have a 4 o'clock appointment to go over a loan application. Press this button and we'll have a car pick you up, and because you're doing something that is generating business for us, the ride is on us."
Leimer said many in banking are in denial about the danger the industry is in. He suggested the pace of evolution in the market, particularly the way technology is changing consumer behavior, is already too fast for most banks to keep up.
"Good or bad, this industry has a shelf life," he said. Though some banks will survive, "they'll be in a different format."
We hope this issue helps you to start thinking about what that format might look like. Please let us know what you think and keep the ideas coming.