Banking is Back to Basics
By Shel Horowitz
The days of a loan made on the strength of the banker's personal knowledge of your character may be over, says Dave Hobert of FBC sponsor Sovereign Bank, but still, banks are building relationships based on…relationships.
Only this time, it's the bank that has to prove its worth to you, the customer. "You've got to reach out and deliver other things besides credit and deposit accounts. If you can provide economic updates, seminars, industry information - relationship banking is going to remove the 9-to-5 historic characterization and move it more toward 24/7. You'll be able to call your banker at home on weekends. You'll find banks help you almost as a business partner. If you need an accounting or law firm, you should be able to call your banker. Our goal is to achieve world-class customer service, and that's a whole culture. We're not there yet, we have a ways to go, but we're working on it."
The 24-hour-a-day, seven-day-a-week accessibility is one thing that banks have brought back from their flirtation with the online world. Many bankers thought the future would be "clicks, not bricks. A lot of banks got into the rush of online banking. It didn't take long to figure out that technology was moving so quickly, it was going to be extremely hard to make money. So today, we find that technology is still a key driver," but the number of people banking online is far lower than what had been predicted.
As a result, "within the last three years, banks got back to the basics: acquire branches slowly and carefully. The branch presence gives them the deposits overnight" that would take years to build online.
Still, industry consolidation is changing the picture. "In five years, you'll have a lot of very large and a lot of very small banks. Not much in the middle."
And that creates both challenges and opportunities for bankers. "The larger you become, the more difficult it is to provide the personal service to small business and middle-market companies. Bank of America will approach things differently, 18 or 24 months out. They're going to get excited at a $50-$100 million transaction in Manhattan, before they look at a small transaction in Western Massachusetts," even though the smaller accounts were inherited in the takeover of Fleet.
Sovereign actively seeks those smaller business who'll be ignored by huge banks like Bank of America. "As a company, I'd want the bank to understand my business."
And courting the smaller firms means that Sovereign is well placed to run a profitable business, because it understands its market. "In the last four years, we have not written off one dollar in our commercial portfolio. A lot of the businesses that have been there a long time, that were maybe defense-oriented, have built their business to take those bumps in the road. We're seeing things slowly improve. It's going to take a good 6-18 months to see the improvement, but we're seeing it in the financial statements."