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The Conversation Has Shifted

After coming back from the ICBA’s LEAD FWD conference (a very good conference that you should consider attending next year just to hear the discussions among community bankers), I did like most other conference attendees. I unpacked my bag, checked my emails, and started sorting out my notes that I’d taken at the conference to start the process of digesting all that I’d learned.
And one quickly written and barely legible note stood out…”find JPM Strat. Pl. 111 pg” with three big asterisks beside it. In Byron-speak, that means “find the JPMorgan Chase Strategic Plan. It has 111 pages. It is VERY important.” Here is the link to it for yourself. At the risk of losing readership and providing a link to a “big bank” I’m going to ask that you read it (or at least skim it) before coming back to the blog.
Tired? Scared?
Say what you want about Jamie Dimon and JPMorgan Chase, but they know what they’re talking about. You may not want to bank at a place like this (now)…or you may not want to have Jamie or any of the Morganites over for dinner…but they know banking.
Slide 6: $50 billion is being invested into Consumer & Community Banking group. See that last section…community banking. Sound familiar?
For years, the community banking industry has had a very clear and very strong message against the big bad banks…we’re convenient and we have good customer service. Despite not knowing what “good customer service” is, we continue to say it and we continue to harp it when up against the “big guys” and it usually works. Our customers know that they can get in touch with us, we send our kids to the same schools (meaning we get to answer banking questions in the grocery store, church parking lots, ball games, etc. and that’s fine. We like that.) Our tellers know your name, your kids get “the good suckers” in the drive-through, and if customers keep their credit relatively clean (especially at our bank) then they can get financing when Johnnie or Susie need a car or they’re trying to buy their first house. It’s a good model and has worked for a long time. It has come to define “the good ol’ days of banking”. It’s the standard by which we community bankers have tried to drive the day-to-day of a modern and litigious banking environment in terms of an experience for our customers.
Convenience and Service. Who can argue with that?! It’s been community banking’s strongest competitive advantage for years. It’s been the fuel in the economic engine of community banking for years and if community banking is relevant for the local economies (hint: it is), then convenience and service are crucial parts to the survival of a community.
The truth is…it still works, it will continue to work…and the “big banks” know that. The difference, now, is not just the money in the JPMorgan war chest or the war chest of any of the “big banks”. The difference, now, is that the words now have new meaning!!! “Convenience” is not just related to brick and mortar. “Service” is more than just knowing your name and having “the good suckers”.
Slide 9: 65% of clients would consider leaving if digital channels were not integrated. By the way, that’s not JPMorgan’s number…that’s from an international independent survey by Capgemini. 53% of wealth management customers (read this as “the people with money in your community that you tell your lenders and/or relationship managers to take to lunch and get their business) view “digital” as the #1 factor in their customer service experience. By the way, that’s not JPMorgan’s number. That’s from an independent survey done by Ernst & Young.
Slide 12: “Creating Streamlined and Simplified client documentation and approval processes”, “Enabling data collection from clients once”…doesn’t that sound like “banking the way it used to be?”
So, is it working? Is the “Digital Everything” strategy working?
Slide 13: Chase customers access the bank through digital channels on average 15 times per month. That’s every other day. The national average of branch utilization is around 2 times per month. Are your best customers coming through your door or talking to you every other day? Are you gathering information on them every other day?
Another great aspect of the community banking industry is that “we know our customers” and, by and large, that has been true. Our loan loss numbers for this “soft data” type of lending is actually pretty good. If a loan application is borderline, we have a good read on “Character” (and as a banking educator, “Character” is the most important of the 5 C’s…see, I didn’t fall asleep in all of my banking classes!) to either approve or deny the credit. But let me ask you something, how many of you shop on Amazon? How good is the Amazon recommended list? For me, I can get lost on Amazon quicker than anything…to say nothing of the YouTube analytics, Twitter analytics, Guitar Center analytics (honey, I really do need another guitar, I swear!). Now, apply that to banking.
Is your bank as good at making those finely tuned recommendations to their customers as Amazon is to theirs and as often?
That’s what all this AI and “fintech” stuff is really driving towards…providing differentiated, personalized, and value-added customer experiences. (Slide 19) That’s what community banking has been saying that we do best for years!! We know you. We’re local (i.e. convenient). We’ve got the best service (i.e. know how to take care of you). But it’s time to face the truth here…we don’t and the “big banks” are coming after us right in our wheelhouse. Right at our competitive advantage. They aren’t coming after us on price. Price wars have no winners even if they have the resources to last longer than community banks. They don’t have to do that. They can attack us right where we live before we have even realized it and with a much lower overhead. The battle for community banking is not going to be won or lost over basis points, it is going to be won or lost with community banks understanding that “convenience” and “service” now have different meanings than they did even 10 years ago. Simply having an app isn’t going to save your bank…rethinking and retrenching around your competitive advantage and doing what you do best (after an honest assessment of that) is what will save your bank.
I probably should be wrapping this up. I won’t go through the entire report but I suggest you do and I am certain that I will be dusting this back off at a future date. There are some really interesting points about branching strategy and multi-channel distribution that we as an industry should address.
So, what is the solution? The first step in any process is acknowledging the problem. The problem is not “hey, we need to get some technology around here”. The problem is simple: we must re-examine our competitive advantage, our “hedgehog concept”, our purpose in light of the shifting definitions of the words and phrases we have always used. The good news is that, in the report, JPM acknowledges that a) they are looking to grow into new markets, but b) they won’t grow into markets where they cannot win. That’s sound corporate strategy at any size and at any bank…so, it’s not just JPMorgan. Any of the other “big banks” are going to employ (or have already employed) similar strategies. It’s not about having the flashiest new toys…it’s about knowing what our customers really want and what they really mean when they say “convenience” and “service” and then delivering that to them in a value-added manner. Do that and you will have beaten the “big banks” at their own game. Fail to do that, and you have lost the battle before it even starts.
Regardless of which path you take…the conversation has shifted. Words and strategies we community bankers have known, loved, and used now have new meanings and our competitors are coming after us right where we should be the strongest.


written by


Byron Earnheart is the Programming Director for the Barret School of Banking in Memphis, TN and the host of the “Main Street Banking” podcast…the only podcast solely devoted to community banks. He has over 15 years experience in the financial services industry; 11 of which have been in banking in various roles from teller work to branch management. He spends his time playing guitar and singing in Delta Heart (the “house band of the Mississippi Delta”), writing music, cooking, reading, and enduring the University of Tennessee Volunteers athletic seasons. He is married to his wife Kelly of 11 years and has two children, John Aubrey (11) and Mary Laura (7). If you'd like to hear Byron's music, check him out on Spotify:
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