Three Banking Trends that Fizzled—And One That Stands the Test of Time
As we prepare for the dawn of a new decade, I thought it was a good time to take a quick stroll down memory lane to look at a few buzzy banking trends from the last 20 years that have since lost their luster.
While some of these fads have reemerged with new names and new takes, others have been made obsolete by modern life.
In the early 2000s, FIs were fawning over consultants who were able to teach them how to implement the Six Sigma performance-evaluation methodology: recognize, define, measure, analyze, improve, control, standardize, and integrate. Popularized by General Electric CEO Jack Welch at a time the company was enjoying huge success, it monitored processes in order to eliminate manufacturing defects. Companies all over were soon adapting it to their own purposes.
At FIs, Six Sigma was used to evaluate efficiency and reduce errors to increase revenue and cut costs. From Bank of America to community banks, Six Sigma trickled down to smaller FIs, even though some experts questioned the value of implementing a process designed for huge companies.
Six Sigma was an industry darling until it wasn’t. It simply went out of fashion and was replaced by Silicon Valley’s focus on innovation over efficiency and containing costs.
Lesson learned: Management trends change. Before hiring a consultant touting the latest management system, engage in due diligence to make sure the concept is appropriate for your institution’s size and strategy. Not every fad will fit.
Do-It-Yourself Branch Banking
Back before everyone carried a computer in their pocket, vendors were hyping do-it-yourself branch banking technologies that helped customers discover new products.
In 2010, Umpqua Bank unveiled a branch with a “Discover Wall,” an interactive touchscreen that shared production information, to great fanfare. Barclays tested the Microsoft Surface Table in a London branch, allowing “customers to grab digital content with their hands and navigate information about banking services with simple hand gestures and touches.”
You don’t hear much about this type of technology anymore because customers are comfortable looking that information up on their phone. If they are actually visiting a branch, it’s because they have specific questions they want to ask a human being or they need to conduct a transaction that requires a trip to the bank, such as depositing or withdrawing cash.
Today DIY in-branch banking focuses on simplifying these activities, using technologies like remote tellers, cash recyclers, and function-risk ATMs. Screens are used to promote messages, including products and community service initiatives.
Lesson learned: Sometimes you invest in a technology, only to have it supplanted by another technology. Being an early adopter can mean making a choice with a short shelf life, but it can also help attract buzz and build name recognition in the interim. It all depends on your strategy.
Customer relationship management (CRM) was all the rage at the turn of the century. Customer data was increasingly available, and banks were convinced that using software to slice and dice that data would allow banks to identify their most profitable customers and customize offerings.
Financial institutions spent a fortune on this technology—more than any other industry—but didn’t see a return on investment (ROI) and soon soured on the investment.
Why didn’t CRM workout? According to industry reports, poor staff training and resistance to change. FIs were so focused on the technological aspects, they didn’t consider the importance of selling the benefits of CRM to the people who’d be responsible for acting on the insights by cross-selling products and implementing new sales methods.
As Big Data and artificial intelligence are offering new CRM insights, smart FIs are recognizing that the best results come from smart technology paired with smart people.
Lesson learned: Don’t go investing in technology without a strategy for implementation that includes adequate training. If staff doesn’t embrace a trend, it won’t last long.
'On the Wings of Carrier Pigeons'
The amount of data available today is unprecedented, but we are not the first generation of bankers to struggle with making sense of huge amounts of information. Consider this pep talk from William J. McDonough, president and CEO of the New York Federal Reserve Bank in 2000:
“For those who occasionally feel overwhelmed by technology’s marvels, it’s worth remembering that there was a time, and not so long ago, when reliable market information was decidedly scarce and concentrated in the hands of a privileged few. The Rothschilds built an international banking empire on the wings of carrier pigeons, whose messages enabled the brothers to buy and sell on information about investment opportunities or financial disasters in distant places long before their competitors heard the news.”
In a world with ever more information that is constantly moving faster, McDonough points out that one thing remains the same: FIs need to evaluate technology with a focus on risk:
“Even as supervisors confront change, the fundamental questions remain the same. Where is the risk in banks’ activities, and how effectively are they managing it?... The difference today is that the timeframe for answering these fundamental questions is dramatically shortened. As supervisors, we must be able to look at rapidly changing financial institutions and assess whether their strategies make sense and whether they are effectively evaluating the risks associated with executing those strategies.”
Lesson learned: Technology may change, but risk management never goes out of style.