“Can’t anybody in this town take the law into their own hands?”
–Chief Wiggum, The Simpsons
March marked the twelfth year (or so) that Tom Brown of Second Curve Capital has hosted the Best Practices in Retail Financial Services Symposium, held this year in Las Vegas. In the interest of keeping current on the buzz, the Gonzo team dispatched your humble reporter to the conference to nose around and see what the hot topics were in the area of retail delivery. It’s funny. I’ve been to a lot of conferences in my day, but this is the first one in 12 years I attended strictly as an attendee (not speaking) and sat from the first minute on day one to the last minute on day three (breakout sessions included) in my seat, ears ready, and pencil sharpened. More on that later.
One thing Tom can do is gather the current roster of “A List” bank C-level speakers. Vernon Hill of Commerce Bank, Ray Davis of Umpqua, John Kanas of North Fork, John Stumpf of Wells Fargo and several others gave keynote presentations. William Taylor, a co-founder of Fast Company, was a pretty good non-industry addition to the mix.
And now to our take on the proceedings. First, this was a conference that focused the discussion of retail delivery on two things – branches and deposit growth (due at least in part to the analyst influence on this conference). Insurance sales, investment sales, lending and managing alternative delivery channels really got short shrift. What attendees wanted to talk about was how their branches could provide a sustainable source of low-cost deposits.
Second, there’s no denying that there are banks getting their share of deposits and then some. Commerce averages $41 million in deposits in its new branches within three years vs. an industry average of $19 million. North Fork has a $1.3 BILLION branch in New York. In fact (based on FDIC numbers), every CEO that presented leads a bank that has substantially higher average deposits per branch, and higher transaction account totals, than the industry average. Numbers don’t lie.
It was clear that there is no single model for getting there. Ask Commerce about branching, and Vernon Hill likens it to his Burger King franchise. North Fork bought thrift branches and transformed them into commercial bank branches. Umpqua focused on unique branch design and a community center concept. North Fork got where it is because of its efficiency ratio, with a very strong focus on big sales incentives, and by placing a large percentage of its front line employees’ salary at risk. Commerce got there despite its efficiency ratio, with a fair amount of indifference to sales culture and sales incentive pay, and by putting much less employee salary at risk. These are very different models and approaches, but both work.
But there were certain things they all had in common, and I’m going to break their messages into three categories:
Category “A” – Things they do that we all knew we should do the first day we started in banking
1. They get specific about their models, and they sweat the details. These banks think very specifically about the customer experience – how the bank appears in every medium and the specifics of the customer experience they provide: what’s said, when it’s said, how it’s said, who says it, exactly how long it takes, how well it’s done, and on and on. You get the picture. Their marketing materials, branch design, branch layout, incentive plans and other aspects of retail delivery are consistent with their vision and consistent in every location.
2. They are very methodical in their hiring. BankAtlantic can look at as many as 25 applicants before it hires for a position. North Fork will keep a position open for several months while it interviews to get the right person. All of the banks that presented keep “hit lists” of specific employees at competitor banks they target and recruit. All of them put prospective employees through extensive interviews and they fit them to the bank’s model.
3. They all over-invest in training. They have a very lockstep approach to progression and the training that supports it. They all have extensive staff that coaches each retail employee regularly. This isn’t sales training, although there is a sales component. Rather, they train and coach employees on how to deliver the service and delivery experience the bank has designed in its model.
4. They don’t waiver from their model. No “strategy of the year” in this group, their model is very consistent year over year.
5. Their incentive plans are very focused: get deposits, get money.
A question – how many times do bankers need to go to conferences and hear this message? Why is it so hard for so many banks to get this done?
Category “B” – Things they said that gave me pause
1. They don’t compete that much with rate. Really.
2. They are pretty cool to traditional marketing. What they really focus on is creating local “buzz,” i.e. creating a memorable presence in the immediate area of a branch, particularly a new one. Some of the things they do might seem a bit corny – ice cream trucks, pizza for local businesses, showing movies in the branch in the evenings – but they also seem to work.
3. They are not fast adapters of technology. In fact, they didn’t talk about technology much at all. And to the extent they did talk about it, they really seemed to have only two things they were interested in – making it easier for customers to bank with them and making it easier for front-line employees to do their jobs.
Category “C” – Things I didn’t hear that I wish I had
1. More talk about how the Internet and alternative channels will affect the whole area of retail delivery. Even in a session called “the role of branches in a multi-channel world” the focus seemed to be on Internet banking and then right back to branches and branch delivery. Wireless, text messaging, cards, P2P and a whole lot of other topics didn’t seem to be high on anybody’s list of discussion points.
2. Most of the success stories, while legitimate, were banks in pretty high growth areas – New York, Florida, Oregon and California. I’d like to have heard one story from a banker who pulled this off in a flat or slow growth market.
Other Random Thoughts
This big message I got was this: Figure out your retail delivery model, stick to your model, train your model, pay for execution of your model, and keep working your model.
“I am beyond your peripheral vision so you might want to turn your head.”
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