Let me tell you a story. It’s not my story, but it is one I seem to be hearing a lot these days:
The world of financial services is changing. It is changing fast. Everything is shifting overnight. Even while you sleep, someone is getting a leg up on you. As a banker, you are behind the curve on change—woefully behind, in fact. You only have one option…
Now, depending on who is telling this story, your “one option” might be different. You can choose your own adventure here. Would you like to:
Sell your bank before all of the value drops out of it and leaves shareholders destitute?
Hire a consultant to help you get back up to speed, tackle change and become the hero of your community and your bank?
I don’t want to accuse anyone of making things up. You do not have to look very hard for proof that, indeed, the times are changing, but the details of the story bear scrutiny.
I recently read a white paper from an industry “thought leader.” This party shall remain unnamed to protect their identity. The paper was based on survey results indicating that a whopping 8 percent of bankers will change their core data provider in 2021. Taken at first blush, you might find that data point striking. After all, if that number bears out, almost 400 banks in the U.S. will be switching their core provider while you are stuck with your old system, which you probably don’t love. Those banks must be headed to greener pastures! They’re heading toward digital transformation. And you are stuck!
Take a deep breath. Step away from the ledge. Stop searching frantically for the consultant’s phone number. Let’s dig into that number a bit.
The survey was completed by 260 executives of financial institutions. Fifty-five percent of the respondents were from banks, 45 percent were from credit unions. So, 143 bankers completed the survey. Eight percent of those 143 indicated that they were going to change their core in 2021. That’s right, 11 people indicated in a survey that they planned to change their core—a far cry from 8 percent of the almost 5,000 banks in this country. That’s a different story, isn’t it?
Now let’s talk about the real numbers for a moment. What if I told you that, according to industry data, only about 2 percent of banks, on average, will change their core provider in any given year? Would that change the story? Would it make you feel less like things were moving at a speed at which you cannot keep up?
There is no doubt that change is coming to the financial services industry. But the real story of that change is being obscured by excessive hype. This hype is coming from the fintech industry, driving up wild valuations with sensational customer numbers and other data points. And the hype is coming from industry “analysts” looking to drive you to their conclusions.
You probably know the quote Mark Twain offered when New York Journal erroneously ran his obituary: “The report of my death was an exaggeration.” But you may not know about Twain’s other brush with death. In 1907, he was traveling on a yacht that was delayed by fog, prompting The New York Times to print an article speculating that he had been lost at sea. Twain followed up on the article upon his arrival by saying he planned to, “make an exhaustive investigation into the report that I have been lost at sea.” He added, “if there is any foundation to the report, I will at once apprise the anxious public.”
Not all the stories are true. And the true stories don’t point to demise of your bank or anyone else’s.
So, here’s my take: In these challenging days, we need to shine light on the true story of banking. Step one in that venture is backing away from the sensational headlines and questionable data. Step two is figuring out the real ways in which the industry must evolve to meet future customer needs.
The future of community banking can and will be bright. We need only take it one step at a time as we pursue that future together.
Christopher L. Williston VI is president and CEO of the Independent Bankers Association of Texas, based in Austin. He can be contacted at firstname.lastname@example.org.