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Financial Institutions Must Evolve for the Sake of the Consumer: An Interview with James Robert Lay


We talked with James Robert Lay, CEO of CU Grow, about the state of marketing in financial services and the importance of exceeding consumer demand for digital solutions.


What has been the biggest change over the past 10 years when it comes to financial services? 

The biggest change that I've seen has been the consumer — the way they shop, the way they buy, the way they transact with the financial institution. Consumers are driving the change in the marketplace today. 

What would you say is the biggest thing that financial institutions should be doing that they're typically not doing? 

Evolving for the sake of the consumer. If the consumer is driving change, the financial institution must change to evolve with the consumer. Ryan Solis, another thought leader, talks about the idea of Digital Darwinism, which is where a consumer and their technology evolve faster than an organization can. We saw what happened to the dinosaurs...


So you're saying that the changes are centered in digital? 

Yeah, at least for a financial institution they must be centered around digital for a digital consumer. Branch traffic is declining. The old business model was built around branches and broadcast, whereas the new business model has to evolve to be optimized around digital and mobile devices. That's the big change. It's not just "we built a branch and it's done." Now it's "We built something for the digital or the mobile device, and it's not done." It can continue to be optimized and refined over time by looking at usability, looking at data, etc. 


So in the past consumers were fine with going to the branch, but in the digital world they're no longer quite so fine with that?

I'm not of the campus that the branch is "dead." I think the branch is evolving to where it's not a transaction center. And it's not even a sale center. Sales in financial services will start and many times often end online in the future. Even now at this point, sales are starting online whether we like it or not. We look at the buying journey, we look at awareness, and we look at consideration. That's all happening digitally.

There are three different paths for the point of purchase. There's the branch, the call center, and the digital or mobile device. But at the start, sales is really happening digitally. 

What would you say is the biggest obstacle that financial institutions face in making this transition? 

There's really a few obstacles I see.

First and foremost is that the majority of financial institutions do not have a digital growth plan. We've done a study now for three years, and we're finding that the number stays the same: 70% to 80% of financial institutions, regardless of the asset size, do not have a defined digital growth strategy or plan. And so they're operating in this sense of confusion, this state of being overwhelmed. They ask, "Where do I begin?" They lack a plan. 

The second obstacle is a lack of resources internally, primarily around staffing and budgets. When it comes to staffing, we're finding that a lot of financial institutions don't have the capacity to handle this transition.

The third obstacle is that there's a lack of resource on the budgeting side as well. I mean let's just take the average financial institution website. It's nothing more than a glorified online brochure. You look at the average investment it takes to build a branch: $2 to $3 million. Why aren't those investments being made into the digital channel, into the digital space, considering the impact that digital investments are going to have on acquisition and retention? 


Yeah, that's interesting. So they need to change the mindset. A banker might balk at the idea of spending $2.5 million on a website... 

We don't need to be spending that amount of capital on a website per se. It could probably be done a lot more efficiently. Because then you take the operating cost as well for a branch. Half a million dollars a year. But you go back, those sales and acquisitions are starting in the digital space. We're judged by the signals that we convey. I think the other thing as well, we've worked with probably now close to 450 financial institutions ranging from $200 million in assets to $750 billion in assets and I've not found that what defines success is in regards to assets, what defines success will be adaptability. Can I make this change in my mind to evolve my business model away from a physical asset, to an intangible asset? And that's hard for some who have built their career in financial services, and I respect that. But we have to be willing to make these changes, and overcome three fears: fear of the unknown, fear of change, and fear of failure. 

Interesting, so how do fintech companies fit into this? 

Well it comes back to the capacity issue and the knowledge gap. We have fintech, you can look at it as competition. I look at fintech as a partnership, because you have organizations who are creating business models optimized for digital and mobile delivery where we're lacking on that on the traditional business model side. So fintech can bridge the gap in regards to the knowledge and the capacity, the resources, the talent, the technology needed to help move these financial institutions forward into a brighter and better future. 

Great. Finally, what do you think financial institutions really need to be keeping their eye on for the next ten years? 

When it comes into the future, it's going to be the consumer. The consumer drives everything that we do. It should drive everything we do. And that's a big change there as well. We look at financial institutions, what do we need? It's not what do we need? It's what do consumers need. If we can help the consumers succeed in their own financial journey, we'll ultimately reap the benefits and the rewards from that. It's not about pushing product, it's about helping first, and selling second. Because when we can help someone overcome their questions and concerns, and help guide them to success, to achieve their hopes and dreams, we've really positioned ourselves as the guide. And that's what consumers are looking for, because it's not just about financial services, it's about empowering them and giving them a much better richer life going forward.