Category Archives: Small Business

Will the Future of Community Banking Include Banks?

Community banks—at least in my experience—provide banking services to the communities where their leaders and employees live and work. On the consumer side of the equation, they provide home loans, car loans, credit cards, and other deposit and electronic banking services. On the business side, they provide access to small business loans, deposit products, and cash management services. While banks generally, and community banks specifically, seem to provide a valuable service for their communities, the number of banks in the Unites States continues to decrease, in part due to lack of new banks and also due to industry consolidation through mergers. From 1992 to 2018, the number of banks in the US declined by over 61% from 13,935 to 5,406. In addition to this trend, non-bank entitieshave entered the industry in larger numbers and have put additional pressure on the banking industry to compete and stay relevant.

This article at Worldfinance.com makes an argument that I largely agree with. Community banks (more-so than large banks) fill a void by providing funding to small and medium sized businesses that are overlooked by bigger banks, either because they are not as profitable as larger businesses, or because they do not appear as viable, stable, or scalable as bigger businesses. This is where community banks flourish because they understand the local economy, opportunities, and what will work in the area. They also have a vested interest in seeing local business succeed. Consumer products, on the other hand, are becoming commoditized in the sense that technology has allowed many new players in the field for basic banking services. Because of the rise in non-banks providing financial services, what will the banking industry look like in another 10 or 20 or 30 years?

Brett King, a well-known and outspoken technologist who has been preaching for innovation in the banking industry for a number of years, and has written several bookspredicting changes in the industry, sees banking happening largely without branches in the future. Banking, according to King, will be imbedded in consumers’ everyday lives and tool and they won’t need to visit—or even identify with—a traditional bank. In order to succeed, banks will need to adopt this reality and provide “frictionless” banking where people can get banking services seamlessly and electronically, in a way that provides convenience.

I think there will be a niche for community banking for many years to come, but I agree with Brett King that the industry will continue to consolidate as a large number of banks will refuse to move beyond traditional banking to the way of the future.

Stolen Data: What is the Ethical Choice?

The rise of the internet, online commerce, and electronic payments has made a myriad of services more convenient. Shopping online has never been easier, cash is no longer a necessity when traveling, and we are all connected in ways we never imagined even a few years ago. But the rise of convenience through networks has also created a significant headache for businesses and consumers alike. Every time we eschew cash for a card, or sign up for a rewards program at our favorite retailer, we are giving our personal identifying information (PII) to a company who is likely to allow it to be compromised sometime down the road. According to Matt Tatham at Experian, 56% of executives in a 624 person survey compiled in 2018 stated their organization experienced a data breach during the year. While this is a scary thought on its face as PII is constantly being stolen from big and small companies, a similarly concerning point is that you may never find out your information has been stolen.

Right now, there is not a comprehensive piece of federal legislation that compels companies to respond in a uniform way if they lose or compromise your personal information. While the European Union enacted protections in 2018for consumers that requires companies to inform victims within 72 hours, the United States is currently relying on individual statesto police their own companies. The states do not have a consistent approach and there is much confusion about corporate responsibility in specific cases. In Ohio, for example, private and government entities are not required to notify potential victims until 45 days from the data breach being discovered. While this deadline is better than nothing, if a criminal has someone’s PII for 45 days before the victim knows about the situation, that amount of time is more than enough for a criminal to steal a victim’s identity. Or, equally as bad, there is enough time to sell the information to the highest bidder online so that someone else who is highly motivated can take advantage of the information.

Because of the rise of data breaches in recent years, there has also been an increase in the ways companies can handlethe situation, and there are many resourcesonline to guide the organization through the crisis, including from the Federal Trade Commission. Unfortunately, crisis management is often about protecting the reputation of the company more than the compromised individual.

While there seems to be momentum building for the creation of federal legislation designed to protect the consumer, what is the ethical responsibility of the companies who have been entrusted with the personal information of their customers and users? What is the right thing to do—both before and after a data breach. At a minimum, consumers should know exactly what will happen to their information once a company stores it. The company should provide information on how they are keeping it safe. The company should not sell the information to 3rdparties unless approval is explicitly received from the consumer. If a data breach occurs, a company should—as soon as reasonably practical—reach out and make sure victimized individuals understand what happened, including the potential risks associated with the breach. There are times when companies offer free identity protection and loss mitigation services after a breach. This seems like the least a company can do under the circumstances. However, the company often has a disclaimer that accompanies the free service and it removes the consumer’s right to hold the company responsible down the road. This practice seems unethical and could be criminal if a company is intentionally covering up a mistake they made. Because there are still protections that need to be created, companies have the opportunity to hide behind the confusion if they so choose. The ethical practice is to be transparent, supportive, and take responsibility for the mistake and the clean-up. The companies who do this will not only protect their reputation as a customer-oriented organization, but they will be doing the right thing.

Knowledge Management: What is It? And, What is it Good For?

Nancy Dixon, author of nancydixonblog.com, echoed my sentiments as I started trying to decipher what knowledge management actually was earlier this week. In a 2009 blog post, Dixon laments the name given to managing institutional knowledge: knowledge management. She doesn’t say why the label is regrettable, but I will make an assumption and assume she was accusing the label of being confusing and vague. Until this week, I had never heard the term knowledge management, and now I’m being told by author and professor Thomas Davenport in a 2015 Wall Street Journal article, that knowledge management may be on its way out of style.

Apparently, the early days of knowledge management consisted of having information located in a physical location and it was passed down from those who had the knowledge to those who did not. In the second phase of knowledge management, the information was identified as expertise or knowledge possessed by an individual rather than a textbook, and so knowledge was managed by sharing between individuals in more of a bottom-up rather than a top-down approach. In the third phase, knowledge is a collective exercise and is managed and shared by the group. In a possible fourth phase, knowledge lives in the cloud or on a network and is accessible by anyone at any time. Kevin Kelly, in his book, The Inevitable: Understanding the 12 Technological Forces that will Shape our Future, discusses the unbelievable amount of data and knowledge in the cloud, and he describes a world where it is accessible to everyone all the time.

So, if knowledge management is the exercise of managing one’s (or an institution’s) knowledge, than maybe today’s leadership problem is not generically managing knowledge, but specifically identifying what—in the infinite cloud of data—is important for one’s organization and then figuring out how to prioritize and disseminate the data in a way that is useful. There is more data out there than anyone could ever possibly hope to absorb, and it is not organized comprehensively or intuitively, so the challenge is less about access and more about prioritizing.

Evernote: Do I Want to Remember Everything?

Evernote is a service that, according to its website, “helps people focus on what matters most to them.” The basic function of Evernote is to provide a platform for taking notes, but it does much more. It allows users to record notes, collaborate simultaneously, capture data in a variety of forms within the software, and customize their experience.

In the vision of Evernote’s founder, Stepan Pachikov, Evernote is conceptually designed to “remember everything” and it functions as an extension of the brain by remembering the past, building connections, and creating new ideas for the future.

There are myriad ways Evernote might be used in leadership, both for individual leaders and for leadership of a team or organization. As an individual, Evernote enables leaders to take notes and capture ideas in virtually any format and then organize them in the way that makes the most sense for each person. Notes can be sorted, tagged, shared, and then accessed on any device. As a team, Evernote allows groups to work together virtually and collaborate on a document or a project simultaneously. It allows work to be shared among team members in a common web-based work setting or within a virtual bulletin board-type platform.

If there is a downside to Evernote, it may just be user preference. My own personal experience with Evernote goes back to 2012. I have continuously looked for the best way to be organized, efficient, and productive. I have used all sorts of platforms including word documents, excel workbooks, Microsoft Outlook and its tools, services and apps including Wunderlist, Smartsheet,  Cozi, and Apple’s Notes and Reminders. In every case, I tend to use the tool for a while and then after a while I lose interest and then move on to the next possibility when I realize it is time to get my act together again. I have picked Evernote back up multiple times after breaks of various lengths. I think my difficulty with Evernote is one of its most basic premises: remember everything. In my own life, remembering everything is not the problem, prioritizing is my main challenge. I don’t want to remember everything, and I don’t have the time or the energy to try. Evernote tempts me to record and store stuff I may never need to see again, and all it ends up doing is cluttering both my brain and my Evernote database. I get that there are many ways I can organize my data so that it is easy and straightforward to access and keep straight, but at this point I value simplicity and that is something I do not think Evernote provides, at least in my own experience. With that being said, I do continue to use Evernote on occasion and during my reading this week I realized I can get the Premium Evernote service for half price as a Creighton student, so I bought the subscription and will see if I can improve on my experience this time around.

In Kevin Kelly’s The Inevitable: Understanding the 12 technological forces that will shape our future, he talks about different unstoppable trends. In the first three chapters, he discusses the forces of Becoming, Cognifying, and Flowing. In each case, Evernote is already making use of these technological forces in the service it offers. Becoming, or the phenomenon of constant change and development, is manifested in Evernote. The company was formed in 2008 and has undergone constant change and development since that time. Cognifying, or the process of making inanimate objects more intelligent through artificial intelligence, is something Evernote has used extensively in a couple major ways. One, they partnered with Moleskin in 2012 to collaborate on a digital-friendly notebook that allowed users to upload handwriting in the notebook to Evernote’s digital platform. Two, they not only made handwritten notes searchable, but the entirety of one’s account can be searched for content across all the different types of data within Evernote. Flowing, or the idea of real-time access and updates, fits with Evernote’s vision because the service allows notes to be tagged, data to be stored on the cloud and accessed from any device, and it all to happen in real-time.

Finally, Evernote improves productivity because it allows an practiced user to stay organized by not only storing data but making it easier to sort and find later. Evernote has also partnered with a variety of other companies to integrate offerings including Microsoft Outlook, Google Drive, Salesforce, and Slack, among others. My overall impression of Evernote is very positive as I can see the value of what it offers even though my own personal experiences have been mixed because of my own preferences and tendencies.

Are Banks Lending Money to Small Business?

There is a misconception that was especially popular during the banking crisis of the last several years and that continues today at some level. As a small business lender, I often get asked if banks are lending money to small business. The misconception being that banks–including community banks–are just sitting on their hands and are unwilling to invest any loan dollars into small business growth. The reality is very different, at least at the community bank level. The FDIC recently released a report that stated while community banks only have a small percentage–14%–of industry assets on their books, they account for 46% of all small loans originated to businesses and farms in the United States. I would argue this fantastic percentage of small business loans from community banks is the result of community banks being invested in their communities, leadership and decision makers who live and work in the areas they serve, and community bankers who are invested in seeing small businesses in their towns and cities succeed. First National Bank has seen great small business loan growth in the last 18 months, and I know other area community banks have made a similar commitment to finding and helping creditworthy small business owners grow and thrive.

Small Business says “What Fiscal Cliff?”

After today’s Bluffton Chamber breakfast, the Chamber and the Bluffton Center for Entrepreneurs hosted a small business workshop on the challenges of being an entrepreneur. About 25 entrepreneurs (and 17 Bluffton University business students) representing businesses from Bluffton, Findlay, Pandora, Columbus Grove, Ada, Beaverdam, and Lima swapped stories, offered advice, and shared words of wisdom about running a business from personal experience.

What stood out to me were the answers given to the following questions: “Does political noise, “fiscal cliff” drama, and discouraging economic news affect the way you run your business? And are you less inclined to grow and look for new opportunities as a result of today’s business climate?” The answer I heard from people around the room was largely the same: “if you’re not moving forward, you’re likely headed in the other direction.”

There are certainly businesses that are cutting spending and taking a less optimistic approach to 2013. American Express announced yesterday they are going to eliminate about 5,400 jobs this year as part of a restructuring effort. Morgan Stanley is also eliminating 1,600 jobs according to reports earlier this week.

However, the small businesses in the room today maintained that success doesn’t come from sitting still and it’s better to look past the negativity and find ways to adapt and grow. It takes partners who share this mindset for businesses to succeed. In places like Bluffton, Pandora, Findlay and other local communities, willing partners include community banks. A bank of any size sitting on excess funds can decide it’s time to put loans on the books and grow by buying business. However, when the economy falters and large national banks retreat, cut ties with small businesses they’ve suddenly lost the appetite for supporting, and then wait for better days, the value of invested community banks is significant.

Chase and Jamie Dimon don’t need Bluffton or Findlay. Bank of America doesn’t need Pandora. But First National Bank needs Bluffton. First National Bank needs Pandora and Findlay. Ditto for Citizens National Bank and the communities it serves. Businesses and banks need each other to thrive–and healty communities need both–and the right mix is what allows small business to look forward and succeed in spite of challenges.

More Perspective on TAG

In case you’re interested, here is an interesting (if you like this sort of thing) article on the TAG program I posted about earlier. I don’t necessarily agree with every point about why we should keep the guarantee program for bank deposits, but I do agree there is still a lot of uncertainty in the market right now and caution may not be a bad thing. Also, keeping the program is not a taxpayer funded project because banks are the ones paying into the insurance program.