During the depths of the Great Depression, watching a Busby Berkeley musical provided a brief respite from economic woes. Movies such as Flying High, Whoopee and Strike Up the Band renewed one’s spirit and confidence that good times would soon return. Unfortunately, good times did not return until 9,000 banks had failed.
Today, the country is mired in a lingering recession; and, once again, banks are failing. Through it all, however, small and mid-tier financial institutions remain cautiously optimistic. A recent FIS/Leede Research survey, for example, found that 44 percent of bank executives are concentrating on revenue growth, in contrast to last year when the majority of respondents were focused on reducing expenses to protect profit margins.
“With the shift toward growing revenue,” said Dan Shannon, senior vice president of consulting services at FIS, “we anticipate bankers planning a change in their strategy that will place more attention on sales. This includes activities such as shifting cultures from operations-oriented to sales-focused; investing in technology that increases servicing speed, such as online applications; and looking carefully at outsourcing discrete business processes that can provide a unique advantage, such as an after-hours call center to support online product applications.”
In today’s competitive marketplace, said Shannon, no financial institution can afford to resist change. The winning formula should encompass growing revenue, improving sales, streamlining operations and improving customer service. He recommends the following best practices to help maintain a competitive edge:
Focus on interest income and loan yields — High-performing banks will not become so distracted in dealing with fee income that they lose ground on the lending side of their organizations.
Develop a consistent sales culture — Sales goals and objectives should be understood throughout the financial services organization.
Enter high-growth markets — High-performing banks understand the need to apply maximum sales resources to the highest potential sales territories. Consequently, they set sales goals and targets based on market potential, not past performance.
Leverage customer and market demographics — Savvy financial institutions continuously study their markets to carve out niches for themselves and to gain a clear understanding of how they can best compete.
Use key metrics that work — Revenue growth cannot be achieved, maintained or improved without accurate tracking and measurement of performance. Appropriate behaviors need to be reinforced with clear measures of sales performance.
Another key to success is understanding the bank’s specific market and customer base. According to Shannon, technology investment should be guided by a well-crafted marketing strategy such that banks rolling out a mobile banking product will understand how to best package the technology for bank customers, what adoption rates to expect and what additional income is possible.
“Mobile banking and remote deposit capture are positively impacting customer service and reducing branch transactions,” said Shannon. “For banks looking to make transformational large-scale changes, we suggest they look carefully at their business processes around planned technology implementations in order to ensure they obtain maximum return on investment.” An example he points to is a $5 billion institution that worked with FIS to improve customer service and loan-processing turnaround time, and, as a result, identified $3 million in annual savings by removing paper entirely from its loan processes.
No one disputes that small and mid-tier financial institutions can and must offer the latest technology. Yet, as Shannon emphasizes, this does not mean these institutions can afford to beat the mega-institutions to market; it does mean they need to partner with their technology providers in order to offer the latest technology solutions that meet their customers’ banking demands and that, ultimately, make everyone happy.
Michael Scheibach is executive editor of BankNews.
Copyright (c) September 2012 by BankNews Media