We talked with Sam Kilmer, Senior Director at Cornerstone Advisors, about how banks and credit unions need to adapt for the age of digital technology. Kilmer talks through the need for bankers to learn a variety of roles and focus on their skills with technology.
What do you think is the biggest thing that banks should be doing that they're typically not doing?
From a marketing perspective we see a lot more need to fight for resources. Marketing is one area of the organization that struggles to get the resources needed — especially at mid-sized institutions. Fighting for those resources is going to be really important to stand out in a crowd.
So that's a pretty big obstacle to overcome. What hope is there for a bank that's looking to solve that problem?
A lot of it gets down to strong leadership, whether it's the chief marketing officer, or others in the organization. It also hinges on collaboration between marketing executives, technology executives — all the way up to the CEO.
So that alignment is important. One of the things we've seen is that sales, lending, retail, marketing, and service were very different disciplines 5 or 10 years ago. Now these disciplines are converging, and it's creating a real need for leaders that work across the shop as opposed to focus on their area of expertise.
So it sounds like this "leader" you're talking about isn't necessarily a traditional leader. You're talking about somebody who also has a good grasp of technology. It's somebody who understands banking and who understands where technology is going. Is that the kind of leader that you're saying when you refer to "leadership"?
Yeah, a real integrator. Somebody that can tie together the conversations. Technology is no longer the domain of IT. It used to be banks would say, "It's a technology issue, let's get IT involved." Now, if you talk to an HR executive what are they using every day? They're using LinkedIn, they're using other applications.
You talk to a marketing executive, what are they using? They're using analytics, they're using Google's Adwords, or they're using different applications to engage the member.
So now a leader has to think about different customers and members across the organization and how they pull all that together. The technology has essentially taken over lending. It's taken over all these different areas of the bank and in turn, increasingly, you cannot be an effective COO, CMO without being tech-savvy.
Very interesting. So what do you think about the partnership with fintech and banks? Some banks are a little nervous. Others aren't so much. What are your thoughts?
Well, I think the discussion around it has been very healthy. I think for some organizations the partnership is a good deal.
The disruption particularly around lending and payments has been getting a lot of attention. If we just focus on lending, for example, I think we need to be careful not to confuse any underwriting woes out there that have happened with experience. I think the fast loan decision, and the fast funding once there is a decision that has been made, I think that ship has sailed and consumer and the business customer expect that. It doesn't mean that banks have to write bad loans, it just means that they have to be faster in their turnaround and responsiveness, and I think tech has been healthy for that. I think a lot of mid-sized banks that I talk with, some of them might be considering a partnership, but if nothing else bringing technology into their own shops that allow them to be competitively responsive to their customers, regardless.
So what do you think is the biggest thing that banks need to keep their eye on? A lot has changed in the past 10 years, but what about the next 10 years? What should they be focused on?
One of the biggest challenges and the biggest areas to push, an area we call the delivery redirect. So there is this notion that we're seeing that our branches are going to get smaller, if some of them don't go away while we're shifting resources into online, mobile, and other tech.
I think that transactionally we have seen that. I think the struggle is how do we interact with customers better, so it's the sales cycle, the sales and marketing cycle, and how do we do that better digitally. And the real struggle here beyond the technology is as I said earlier about the resources. The real trick on this is how do we push across the bank to make sure that we are finding the resources that are being mis-allocated in some areas to reallocate to things like digital marketing, and outreach.
So it's part of the leadership — making the decisions to say we're going to need to cut this back, and allocate here?
We've done quite a bit of research on this recently. One of the things we have found is that for every billion in assets of a bank, what we've found is that they're over spending on compliance by about $1.2 million a year. At the same time a typical one billion dollar bank only has about $800,000 in their marketing budget. So if you're way overspending on compliance and not automating that, you're essentially taking resources away from something that then helps you go out and grow in the market and compete against the big banks and disruptors.