By Michael Scheibach, Executive Editor
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.