July 2016

Every bank should send their new employees out and mystery shop at least one other competitor and report back. Further, every senior manager should do the same once per year. If they did that, most banks would find that the account opening process leaves much to be desired and the act of mystery shopping would create a desire to improve. Most banks don’t improve because their customers put up with the opening process so no one realizes that something is wrong. But, something is wrong. As an industry, our account opening process leaves much to be desired.

Once you hit about $500mm in total asset size, your bank should be asking what organizational architecture it wants – centralized or decentralized. A smart bank lays the ground work at $500mm, and then by $750mm can start to reap the benefits of design. By $3B, the bank should be fully leveraging the results of the decision. In banking, success has been had both ways. We can point to many banks that centralize management, credit, marketing and many other functions.

We are not sure if fintech companies are from Venus or Mars and where banks fit into the universe, but there are differences in how these groups think. Pricewaterhouse Coopers just did a study on the cultural and understanding issues that frustrate banks in dealing with fintech firms and fintech firms dealing with banks. By the graphs below you can see the points of frustration for each party.

We recently talked to two banks about their loan strategies and actual performance.  Both management teams were not satisfied with their lending performance year-to-date, and both were looking to alter the banks performance for the remainder of the year.