It was November 21st, 1980 at 6am. Texaco was drilling an oil test well in the middle of Lake Peigneur in southern Louisiana. Everything was fine for the first 1,227 feet, but then something went terribly wrong. The drilling rig started to shift and water began to drain from the lake. A whirlpool formed that eventually sucked up the $5mm rig, boats, docks, structures, trees, a parking lot, cars, equipment, 70 acres of land and 2.5B gallons of water. By the afternoon, the lake was drained and Texaco had an environmental disaster on its hands. What happened? While the facts are a little sketchy, it appears drilling engineers overlooked the fact that an arm of a nearby salt mine extended below the drilling operation. As the drill pierced the salt dome, water drained into the giant mine. Remarkably, despite 55 people in the mine at the time and some 20+ people on the lake, the only loss of life was 3 dogs.
While the consequences won't be nearly as tragic, one area community banks may be overlooking is product development and technology on the lending side. While we agree that most of the product and technology focus should be around mobile banking, cash management and customer service; banks that ignore lending could find their current pool of loans draining fast.
There is a whole world of technology around lending still to be developed. This technology, we will quickly add, is largely simpler than deposit technology and comes at a fraction of the cost. We recently brainstormed with a group of banks, borrowers and a technologist and came up with list of 25 projects ranked in order of projected ROI. While we will be sharing the whole list and more details of the technology at our next Tactical Workshop in Richmond VA on November 17th (if you can't make it stay tuned as we will be following up on this topic in the future); we will give you a trickle of the Top 10 in case you want to consider similar projects in the coming years.
They are: 1) Online loan applications; 2) an online lending center that helps borrowers determine what loan structures are best for their capital profile, provides SBA information, calculators and credit approval information; 3) Alerts that tell borrowers when payments are due, have been received, loan status, balance outstanding and financial reporting reminders; 4) Live rate quotes and comparisons of different lending structures on rates; 5) Electronic accounts receivable tools; 6) Ability to securely and automatically upload financial information (tax filings, statements); 7) Automated disbursement request for construction or working capital lines; 8) Online working capital line increase request; 9) Online business banking directory; 10) Automated consulting center where business loan customers receive a certain number of hours of consulting by on-call, bank approved, CPAs, tax accountants, tax attorney's or estate planners.
As you can see, there is no shortage of ideas to help your bank stand out from the competition using technology. Since most banks are awash in deposits, it might make sense for your IT teams to focus on delivering solutions in lending.
As for our drilling mess, we note that Lake Peigneur has been refilled and is doing fine. While it was once a lake with a 3ft average depth, it now is one of the deeper lakes in the state at 3k feet. So, as you go into the heart of strategic planning season, remember the Lake and how a little oversight can turn into a large error. Consider weighing the strategic advantage of devoting more resources to lending technology to not only gain a competitive advantage, but to reduce costs, make the lending team more efficient and increase customer retention.