MAY 25, 2017
The Road to Vegas, Part X: Dealing with Disruption
By Hilary Collins, Assistant, Publications and Research, Financial Managers Society
The Road to Vegas is getting shorter – with roughly one month to go until the FMS Forum, we reached out to Joe Sullivan, President and CEO of Market Insights, to get some of his thoughts on the state of retail banking:
FMS: What are some of the big disruptors you’ve been seeing in the industry?
JS: The disruptors themselves are things like blockchain, artificial intelligence, and P2P payment systems like Venmo and Paypal. Technology is controlling the flow of money. Whether people are paying, sending money to another country or getting robo-advice, the common denominator is how technology is changing the way money flows between businesses and between individual people. Blockchain and P2P are ways to do that, and artificial intelligence is another layer of that technology and knowledge – those are the main disruptors that are removing banks from the equation.
FMS: What can institutions do to predict disruptions and changes, and how can they best address them?
JS: Quit trying to predict the changes – that’s not where you need to spend your time. Instead, you should be asking ‘what are we doing to position our bank or credit union to compete in a climate where new types of competitors are working nonstop, and where the consumer is the one with all the power?’ To survive and successfully navigate disruption, you’ve got to pay attention to the Three A’s:
Alignment with the marketplace means understanding the needs of your customers, understanding the products, technology and trends in your marketplace and understanding what you need to be doing.
Agility is the ability to think and act quickly, but it’s a function of strategic responsiveness to the marketplace, and having the organizational bandwidth to make things happen. Banks and credit unions need to make decisions faster, and they need to use better data to do so.
Adaptability is changing everything we’re doing – from our physical branches to our culture to our processes to our people – to be in sync with the rest of the world. For instance, how quickly can people open an account on a mobile device? Or can they do it at all – do they still have to go into a branch?
All Apple or Google or any of those places have done is simply take the pain out of the customer journey.
So don’t predict – take action with the Three A’s.
FMS: What are some of the biggest mistakes community institutions are making in terms of assessing their retail delivery channels, and how can they fix these?
JS: There are a few mistakes that come to mind:
• Making decisions without getting data, and not aligning your decisions to the needs of your marketplace.
• Obsessing over the branch of the future. There’s no doubt that institutions need to adapt the physical space and the branch format for a more customer-friendly experience, but the branch of the future is just a buzzword and I’m sick to death of hearing about it.
• Random execution – be it ITM, universal bankers, cash recyclers or branch remodels. Instead, you should start by asking yourself where on the continuum of self-service to full-service a particular branch needs to be, given the demographics of the market and given the potential that’s out there.
• Copycat transformation. An institution sees the bank down the street doing something and they want to do it too. But you shouldn’t put an ITM in a market where the customers are technophobic, for example.
There is no magic bullet for community banks or credit unions. The important thing is to do your homework on the marketplace, understand the ability of your organization and be willing to adapt and create as part of your culture.
Tap into more of Joe’s insight during his session “Top Trends Shaping Retail Banking” at the FMS Forum this June in Las Vegas. Register now!