Given this crazy environment and the fact that employees who talk with customers can have great ideas, it makes plenty of sense to go grassroots in your efforts to transform the bank. Asking these employees for suggestions to improve the bank can deliver an average of over $7k for each suggestion enacted, according to studies. Add that up across the bank, get everyone involved and you could be well on your way to not only enhancing productivity, but also transforming the bank. On the other hand, if your bank already has all of the answers and asking employees for input is just too messy, you might want to ignore the grassroots piece and go straight to Astroturfing. As its name implies, Astroturfing happens when you set the agenda and strategy without employee feedback and then put on a show that would make P. T. Barnum proud. No matter which path you choose, since so many things at the bank are in play, we outline a few changes that are already happening to get you thinking.
Competition is rough right now and it is going to get tougher. The large banks are making a strong push into small businesses, which have been the lifeblood of community banks for decades. Bank of America for instance, has announced plans to offer a full service payroll solution from Intuit to its small business customers. The service outsources payroll functions, calculates taxes and offers live advice. Under the program, the small business will get one month free of payroll service, then pay $99 per month, plus $2 per employee and $10 per state. This makes perfect sense, when you consider the average small business is 2x to 8x more profitable than a retail customer.
Another area of concern will be the industry at large. Here, flat rates, fewer areas of profitability, regulatory overhang from Dodd Frank and weak loan demand come into play. Revenues will be tough to capture, margins are contracting and overhead levels for community banks are running about 18% higher than larger banks (measured by efficiency ratio). Get started by rolling out a project to evaluate every single business line, understand the profitability drivers of each and focus on how you can grow each one to boost performance. For banks the math is simple - when margin compresses, fees must rise or costs will need to be cut to maintain performance.
A third area of possibility lies with the customer. Steve Jobs has forever changed our world and a tumultuous industry has shifted customer behaviors. Think about your bank from the view of the customer. Is it "easy to use," digital, streamlined and friendly? Go outside the branch, walk back in and look around as you would with fresh eyes. How well trained is the staff, do they approach you with an interest in getting to know your preferences and your business? Everything needs to be designed to improve the customer experience, so it is time to rethink the business model to tear away the complex and replace it with simplicity.
Finally, we mention USAA because they were one of the first to get into the mobile banking game and remain one of the most innovative banks around. They serve 5mm banking customers using remote services; handle about 1.5mm checks deposited through mobile applications; process some 2.8mm checks online or scanned by remote capture; process 95% of all checks without a teller; are now introducing two-way video technology that will run on a customer's desktop and are piloting a program with PayPal that will let customers make payments to non-customers.
These are but a few examples of areas where competitors are ramping things up and community bankers are actively discussing as areas for potential expansion. Everyone is trying to find the ideal business model going forward, so there is a lot to consider and evaluate. As you discuss how best to modify your own bank's business model in the months to come, consider these examples and focus on the customer experience to help redesign things in this ever-changing environment. By doing this, you will provide plenty of water for your bank to grow and thrive into the future, while avoiding the need to install turf to hide underlying patches of dirt.