For retail bankers, the bad news keeps rolling in. Between 2010 and 2011, the number of consumers with checking accounts declined 4%, credit card ownership fell 7% and savings accounts dropped 10%, according to Javelin Strategy & Research.
The Federal Deposit Insurance Corp.'s 2011 study on the unbanked released earlier this year shows a record 8.2% of the nation's households – nearly 17 million people – have opted out of the banking system altogether. That's up from 7.7% in 2009.
Consumers – even affluent ones -- are turning to nonbank alternatives, such as Walmart and PayPal, to obtain prepaid debit cards, take out short-term loans and transfer money. Combine those statistics with a growing consumer preference for mobile banking and a projection by futurist Brett King that customers will visit bank lobbies only once or twice a year by 2016 and it's not hyperbole to suggest that branch-heavy banks are poised for the struggle of their lives.
Unfortunately, the problem is more than simply upgrading technology and selling off real estate. Bankers need to make sure they have the necessary skills to reposition themselves in this changing, highly-competitive marketplace.
Banks have flourished for quite some time in a highly regulated deposit and lending arena where rules are dictated and examiners ensure compliance. Entry into banking has been controlled and competition limited. For decades, many states prohibited branch banking to avoid subjecting smaller institutions to big bank competition. Now, the gates to vigorous competition are being flung wide open.
The skills that once brought prosperity are not the skills required to take bankers into the new environment. Conservative thinkers must now be imaginative, followers must become visionaries, an industry focused on looking back must plan for the future and the risk averse must embrace uncertainty. The mind shift will not be easy, but there's a seven step process that will help banks make the transition.
- Create a radical marketing committee composed of five key bank executives whose job is to imagine an ideal bank that would thrive in the 2016 financial environment. Bring in a professional marketer or savvy entrepreneur if you need fresh, outside thinking.
- Identify the six most important internal and external challenges facing your organization in the next few years. The challenges may include mobile banking, nonbank competition, underutilized real estate, dwindling profits and changing market demographics.
- Identify significant bank strengths. These may be attributes, market segments, history, services or other items that differentiate you from the competition.
- Develop a list of potential strategies that address the challenges, capitalize on strengths and will take you toward your model institution. Encourage radical thinking. If some ideas aren't outrageous, you are not stretching far enough.
- Group strategies that can be pursued simultaneously; separate those that are mutually exclusive.
- Rank strategy groups by challenges, bank strengths, practicality and expense.
- Present recommendations to top management.
This process can take three to six months depending on the frequency of the meetings and the energy of committee members. Larger banks may rely on management consultants to develop a survival strategy, but it's always advantageous to utilize those who best know the financial institution (and its customers) and who will be responsible for implementing these strategies in the future.
Kevin Tynan is a Chicago-based bank marketing consultant. He can be reached at firstname.lastname@example.org.