Jeff Judy

Jeff's Thoughts - September 9, 2015

Can Our Industry Survive?

A recent article by Jim Marous on the blog, "The Financial Brand", asks the question, "Could we see the end of banks as we know them in the next 20 years... or maybe the next five?" He then goes on to summarize some findings from research conducted with 110 senior management level staff at various retail banks, research underpinning the new book, "Bye Bye Banks?" by James Haycock with Shane Richmond.

I have written before about some of the "disrupters" in our industry, such as the impact of peer-lending and crowdfunding on the credit business. I won't take the time to summarize all of the points Marous makes, the discussion of technology and digital service delivery, their potential impact on our industry, and strategies for responding to the threat, as you can read the original post for all the details (you'll find the link to the original source below).

Rather, I was struck by the issues that may prevent a timely and effective response to these threats. I was struck by the central role culture will play in determining the success of financial services institutions.

Now, the attention paid to an institution's (and industry's) culture tends to wax and wane with economic conditions. When everything melted down a few years ago, it was obvious that differences in culture among various institutions often made the difference between failure and survival.

But conditions have improved a great deal since then, and the role culture plays in business success has become less obvious. The call to explicitly manage culture, loud among the leadership of many institutions just a couple of years ago, is more and more often drowned out by the noise of growth and short-term gains.

Yet Marous observes, in his article, "... despite the fact that banks are spending billions of dollars on digital transformation and innovation activities, changing the entrenched culture within these organizations is very difficult." In other words, identifying threats and crafting effective strategies for dealing with them depends very much on the culture in place in the institution.

What describes your culture?

I'm not seriously worried about "the end of banks in five years". But I also believe that there are some new sources of competition that are going to cause a lot of pain for our industry if we wait too long to recognize and respond to them.

And that means paying attention to culture again. Whatever the financial and technological resources you may need to compete against new digital rivals, without an alert, probing, anticipatory, and tight culture, you are likely to be in for some very ugly surprises.