The Daily Dividend

News, notes and insights from around the industry

NOVEMBER 21, 2019
Lending Trends
By Mark Loehrke, Editor, Financial Managers Society

Lending TrendsAs we continue to work on a story outlining the history of banking for an upcoming issue of FMS forward, those interested in some of the key developments on the lending front for banks will want to check out the latest issue of FDIC Quarterly, which includes a look at bank and nonbank lending over the past 70 years.

The agency dives into decades of data to show that while total lending in the U.S. has grown dramatically in the past 70 years, the share of bank loans has generally fallen since the 1970s as nonbanks gained market share in the key areas of residential mortgage and corporate lending. In other business lines, meanwhile, shifts in loan holdings from banks to nonbanks have been less pronounced, as banks have continued to play an important role in commercial real estate, agricultural and consumer credit lending. 

Will the coming decades find banks’ share of lending activity increasing or declining? With the massive and rapid changes technology is bringing to the industry, the answer to that question is really anyone’s guess. But knowing how we arrived at the lending present may at least provide meaningful context and backdrop for whatever comes next.

NOVEMBER 20, 2019
Why Tech Companies Masquerade as Banks
By Hilary Collins, Assistant Editor, Financial Managers Society

It seems that every major tech company is edging into the world of financial services these days: Apple and Venmo are offering digital credit cards, Google is partnering with Citigroup and Facebook is attempting to launch a cryptocurrency. All of which begs the question – why do cutting edge tech companies want to act like traditional financial institutions?

Providing financial services to existing customers allows tech companies to pull in more money, yes, but even more important, it allows them ever more granular access to their customers’ personal data. To date, tech companies’ attempts to masquerade as banks have met with only middling success. Facebook’s cryptocurrency, for example, immediately came under fire from regulators, to the extent that it may never see the light of day. And Apple is now under regulatory scrutiny for offering larger credit lines to men than more highly qualified women. 

But even though there’s still plenty of red tape preventing tech companies from acting directly as banks, some are managing to do so by partnering with existing banks, including Google with CitiGroup and Apple with Goldman Sachs. Using these workarounds, tech companies and fintech startups are increasingly making inroads into financial services with banking apps like Chime. 

“We’re in a period of massive experimentation, and that doesn’t come easily to the financial sector,” says Jo Ann Barefoot, a former deputy U.S. Comptroller of the Currency and founder of the nonprofit Alliance for Innovative Regulation. “The future of the financial system is going to be a mix of banks and non-banks…and the winners are going to be the ones that are rapidly moving to transform themselves.”

NOVEMBER 19, 2019
How to Fix the Customer Leak
By Hilary Collins, Assistant Editor, Financial Managers Society

A leaky pipe often starts small, with the problem undetected until the damage is already done. 

But sneaky leaks aren’t just the provenance of plumbing, as new research from Bain & Company shows that when customers defect, it doesn’t always mean shutting down their accounts and leaving in a huff. Instead, many customers simply slip away by seeking specialized products from competing institutions and fintech companies rather than their primary bank.

But Bain’s research does more than point out the problem – it also offers guidance on how to stem hidden leaks and build customer loyalty. Here are a few of the major takeaways:

Offer a fully digital sales process
When customers can get almost anything they want within a day from Amazon, it changes their expectations. Consumers are increasingly unwilling to go through an unwieldy in-person sales process – Bain’s analysis of 20 major U.S. banks shows that when opening a checking account requires human assistance, it lowers the institution’s loyalty score.

Get it right the first time
Not surprisingly, processes that require corrections and/or further effort on the part of the customer tend to negatively impact loyalty scores. Digital processes are more likely than their human equivalents to get things right the first time – and most of the time, they cost less too.

Offer easy solutions
The two major issues that lower customers’ opinion of an institution are disputed bank fees and declined card transactions. Banks that lead in loyalty are less likely to experience a failed digital transaction – and thus less likely to annoy their customers.

You knew that customers wanted digital services, but it’s clear that one of the major drivers of customer loyalty is basic operational efficiency. By offering your customers smart solutions that work the first time around, you can immediately begin to stem hidden customer defections – before it’s too late and you have a real mess on your hands.

NOVEMBER 18, 2019
FMS Perspectives: The CBLR Playbook
By Mark Loehrke, Editor, Financial Managers Society

By allowing community banks to support and defend a customized capital requirement and forgo a standardized rule of thumb that was never based on their specific risk characteristics, the Community Bank Leverage Ratio (CBLR) provides a tremendous opportunity – but only if institutions approach the decision thoughtfully and strategically.

In his new FMS Perspectives piece, Simple is Not Always Better: The Community Bank Leverage Ratio Playbook, Adam Mustafa of Invictus explains why the management team of every community bank must take it upon itself to calculate a minimum capital requirement commensurate with its risk profile – and why that doesn’t necessarily mean blindly opting in to the CBLR.

NOVEMBER 15, 2019
FMStv: Unleashing the Full Potential of Balance Sheet Reconcilements
By Mark Loehrke, Editor, Financial Managers Society

Every institution knows well the importance of reconciling its balance sheets properly, consistently and in a timely manner. But having said knowledge doesn’t necessarily translate into a process that always goes as smoothly as it should.

In our latest FMStv episode, Unleashing the Full Potential of Balance Sheet Reconcilements, Nancy Wu of SkyStem explains why completing the balance sheet reconcilement process consistently is so vital to error and fraud prevention for banks and credit unions.

This is the era of peak TV – be sure to catch up on all of it with FMStv!

NOVEMBER 14, 2019
FMS Webinar: Three Tangible Profitability Analyses
By Hilary Collins, Assistant Editor, Financial Managers Society

FMS Webinar: Strategic Implications of CECLSome presentations deal in hypotheticals about what institutions can achieve by implementing a profitability system, but tend not to follow up with realistic and implementable advice. 

For a little something different, join us on Wednesday, November 20, for Three Tangible Profitability Analyses, as Ben Braun of Associated Bank (and the FMS Board of Directors) outlines how to evaluate products, officers and customers in terms of profitability. From one banker to another, the details outlined in Ben’s session will be based on what he’s discovered at his institution and straightforward enough to apply to yours.

FMS members enjoy special pricing on this and other virtual education offerings. (Not a member? Join today!)

NOVEMBER 13, 2019
The Turning Point of Digital Banking
By Hilary Collins, Assistant Editor, Financial Managers Society

Customers already carry out more transactions digitally than they do physically in a branch. Now research suggests that the next big shift may be customers moving away from traditional banks altogether in favor of digital-only providers that offer a better digital banking experience. New data from Marqueta reveals that while 14% of Americans use a digital bank exclusively, 43% use a digital bank in addition to a traditional bank and, of those, 53% prefer their digital bank’s service.

This kind of data is enough to send a chill down the spines of leaders at community financial institutions who have used their warm and personal customer service as a selling point to lure customers away from big banks and digital offerings and get them in their lobbies. The same survey found that 30% of Americans have considered changing banks in the past year, and 75% said a digital-only bank would be a possible replacement if they left their current institution.

So what’s keeping 86% of Americans at traditional institutions? 54% say they feel digital-only banks are more risky, while a separate Adobe survey shows that security ranks as the most important factor for consumers selecting a financial institution. 

In light of this information, what’s the winning formula for community banks and credit unions? While the equation will vary from institution to institution, some version of the following equation should be on every strategic agenda: Ironclad security + Enhanced digital banking options = Happy customers.


Mark Loehrke
Editor and Director, Publications and Research

Hilary Collins
Assistant Editor and Publications Manager