Paul Foley is an unusual community banker. Not only is the senior vice president of Safety Fund National Bank in Worcester, Mass., but he also has served for years as the president and chief trade executive of the Massachusetts Bankers Association - and was life insurance company vice president before that. So when Paul talks about the future of banking, he offers an unusual perspective.
He recently wrote the Weekly Adviser with a thought he had "at about 3 a.m." on the future of banking.
He writes: "When I got out of college, I took a job in a life insurance company in the underwriting department."
Processing Applications
"When we received an application for, say, a $1,000 life insurance policy, we'd review the agent's statements about the applicant.
"If the applicant was of a particular age or had some medical background, we'd require a physical examination, at that time costing about $12.50. If something in the medical background suggested a need for reports from attending physicians, we'd ask for such a report, which cost from $5 to $7.50. A regular retail credit report was a standard requirement, and cost about $5. All this plus my time and salary, fringe benefits, and overhead.
"No surprisingly, after a few years we determined that it cost as much to process a $1,000 policy as a $3,000 one, so we lifted the minimum policy size to $3,000. Then it went to $5,000, then $10,000, and today the smallest application for an individual life policy is $50,000.
"Now as to banking. Imagine the super-size bank in a few years - the Bank of the United States, or the Bank of America - truly national businesses. Will they continue to send out loan officers for small-business loans?
"I can imagine a request for a $250,000 loan where the businessman fills out a form that goes by fax to a clerk in the Super Bank, maybe 1,000 miles away.
"The clerk checks a computer and finds that companies in that industry, let's say wholesale plumbing supplies, calls for a 9% rate. But since the firm indicates a prior bankruptcy, the clerk adds another 1%. Then the line is approved, a check wired, and the loan is recorded in a loan pool of plumbing wholesalers, with loans under $500,000.
Envisioning a Loan Pool
"This would not be unlike group insurance, where somebody with a medical impairment can get $50,000 of group life insurance without evidence of insurability.
"Loan officers will challenge such a scenario. but I believe that pooling of loans doesn't offer much difference from pooling of individuals for life insurance.
"In such a world, I think it demonstrates a continuing place for the small bank that will seek out that market of small business and give the service and counsel that the small businessman is comfortable with."
SUGGESTION BOX
The phone rang. It was my auto dealer's service department.
"Mr. Nadler, we serviced your car last week. Was everything all right?"
In the past, I had appreciated these calls and felt they really cared. Though in the past, I had no problems to report.
This time, however, I had a complaint. I felt I was charged for something that I had been told would be handled under the warranty.
Her response: "I'm sorry this happened. Goodbye."
My rejoinder: "Can't you do something about this?"
Answer: "No. Goodbye."
Suggestion for bankers and auto dealers:
If you don't really care what people think or you have no power to do anything about it, don't call.
