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.

Flat or Spiky: Which World is it?

When Thomas Friedman wrote the world was flat in 2005, he was explaining forces at work that were increasing the pace of globalism and making people and technology around the world more accessible. When Richard Florida wrote a counterargument in the Atlantic Monthlyin 2005, he argued that the world was “spiky” and that technology, innovation, and opportunity were all clustered around certain, urban centers around the world and opportunity was not created equally.

I am wondering if they are both right, but for different reasons than they intended. First, maybe the world really is flat because information, opportunity, and technology are available at our fingertips, and the pace of technological advances are mind-boggling. It is easier to connect and do business with people from all over the world than it ever has been, and it gets simpler every day. However, maybe the world is spiky because—according to Richard Florida—talent, innovation, and investment are concentrated in specific urban centers that isolate and leave behind the rest of the world. The rest of the world that does not have the capacity or the resources to keep up and so are left in the valleys between the spikes.

I think the reality is a combination of the two arguments. I think the world really is flat for the reasons Friedman describes. The internet connects people. Technology makes communication and collaboration simpler than ever. These resources improve efficiency and profitability, and the entire world is available to anyone who decides to go—physically or electronically—seek his or her fortune. However, the maybe the world being flat is really contributing to Florida’s claim that the world is really spiky. Instead of this technology providing access to anyone wherever he or she happens to live, maybe what is happening is the flat world provides the access to information that is the avenue for innovators and smart people to travel from other places in the world to the innovation centers. Maybe knowledge, access, and travel allow those innovators to find and relocate to maximize their own talent and opportunity. Maybe the world being flat isn’t as much about innovate where you’re from, but instead find where you can maximize your talents and relocate so you can be most effective. It also seems to be about money and access to capital, and it makes sense again that people are drawn to where the opportunity—money and capital in this case—is. The forces Friedman describes to explain the world flattening all seem reasonable, but they are not distributed equally across the globe. For example, the proliferation of internet, cell phones, access to information, etc. have not been distributed equally around the world. Instead, these technologies are used where there is money for private and government investment, where there is a technology and information friendly political environment, and where there is incentive to invest. This seems like it spikes, rather than flattens the world.

Nick Bostrom gave a TED Talk in 2015 where he talked about the possibility of computers becoming smarter than humans. I’m not sure his premise promotes a flat world. Instead, it seems like computers becoming smarter than humans might accelerate the pace of computers absorbing jobs for humans. Whatever the reality, access to information and the global community has the potential to compress the world and make successful connections abroad easier. The challenge will be to bring others with us when we maximize the benefit of a flat world.

Community Banking Month is a Wrap

April was Community Banking Month and banks everywhere highlighted what makes them stand out. In prior years, First National Bank participated in the 3/50 Project and all bank employees pledged to spend locally during the month of April.

This year, the Bank decided to highlight one of the primary things that makes us a community bank: community involvement. Because all of our employees live within the Bank’s market area, they are all personally invested in seeing their towns and cities thrive. And as a result, they are all VERY willing to volunteer their time and energy to people and organizations that need help. We decided to keep track of their involvement to highlight what makes our Bank different. Here are the results of their voluntary efforts through the first quarter of 2013: 47 employees volunteered at 183 different events and collectively spent 625 hours investing in their communities.

“Community” can be an over-used word these days, but the efforts of this group exemplify what community banking truly represents.

Thinking Small is Big after Black Friday

Black Friday has come and gone and retailers hopefully had a great start to their holiday season.  Big stores like Wal Mart, Macys, and Best Buy had their day yesterday.  And now today is Small Business Saturday, where the real shopping starts.  According to the Small Business Administration, 2 out of every 3 jobs is created by a small business.  Small businesses are the lifeblood of the United States and are especially important to keeping communities vibrant in places like Bluffton, Pandora, and Findlay.  So, get in the spirit and support your local small businesses on Small Business Saturday and every other chance you get!

http://www.facebook.com/SmallBusinessSaturday

I Did My 50 in April…How About You?

In 2009, a business owner in Minneapolis, Minnesota, tried to encourage locals to support locally and independently owned businesses by starting an initiative called the 3/50 project.  The initiative took off and today the project has spread all over the United States.

 The premise is simple.  Pick 3 local, independent businesses and spend a total of $50 between them over the course of a month.  According to The 3/50 Project, of every $100 spent in locally owned stores, $68 remains in the local economy.  In contrast, only $43 of every $100 remains local when spent in national chains, and little or no local revenue results from online purchases. 

 This is the sort of effort that makes a community great.  If people are inspired to think and spend locally, then they ultimately benefit themselves by improving the quality of life where they live. 

 Many community banks celebrate Community Banking Month (April) by doing something to celebrate the connection between Bank and Community, because without a strong community, these banks would not be successful.  First National Bank is celebrating the month by participating in the 3/50 Project.  Every FNB employee has committed to participating in the initiative during the month of April to commemorate Community Banking Month.  Even though many of the Bank employees already spend well in excess of $50 locally every month, the exercise is useful because it reminds people why the process is important.

 Feel free to check out the project online and consider making the 3/50 Project part of your monthly routine.

    

It’s not too late for your “Young Entrepreneur”

If you have a child, grandchild, niece, nephew, neighbor kid, young sibling or youthful acquaintance, it is not too late for any of them to visit any of our branches and pick up a youth business kit.  Between now and June 26 the kits are available for youth with a savings account at the bank.  In Bluffton, the first 50 youth can get a free poster board to advertise their lemonade stand or other business enterprise.  There are still poster boards available but they are going fast.  The Bank is planning to advertise and encourage the community to come out and support its young entrepreneurs on the 26^th.  This is a great chance to get youth excited about saving, earning, and being responsible with money.  At the very least make sure you are nice and thirsty on the 26^th!

 

How Did This Get Started?

First, a brief history to get this blog started…I didn’t really plan to be a banker.  I stumbled onto the scene and ultimately have a group of angry “soccer moms” to thank for landing my first banking job.  My career path can probably be chalked up to poor career planning.  Graduating with my undergraduate English degree at Anderson University in Anderson, Indiana, did not steer me in a particular direction, and I didn’t spend enough time in the Career Development Center to come out of school with a good plan.  Mike Baker, who was President of Madison Community Bank in Anderson in 2002, saw me surrounded by angry parents at a local soccer tournament I was helping to coordinate.  He apparently thought I handled the heated exchange well enough to also calm down potentially disgruntled bank clients and said if I ever needed a job to apply at Madison Community.  Because of my aforementioned career planning, I did eventually find my way to the bank during my senior year and the rest really is history. 

I spent four years learning the basics of banking.  My job titles included teller, customer service representative, Manager in Training, Branch Manager, and Commercial Lender.  I accepted customer deposits, opened new accounts, made consumer and commercial loans, and as a manager supervised a modest branch staff.  I worked full-time at six different branches in three different towns over the course of four years.  I learned from some great community bankers including Mike Baker, Senior Lender Kirk Klabunde, and once retired John May, who will probably never officially retire again. 

In 2006, I moved back home to Bluffton, Ohio, and began working at First National Bank of Pandora as a Commercial Lender.  I typically serve small businesses in Bluffton and the surrounding communities.  It was probably at this point that I began to embrace the mentality of a community banker.  I am personally invested in the community and I want to see Bluffton grow and continue to be a great place to live and raise a family.  Although my wife, Renee, and I never planned to return to Bluffton, we’re glad we did.  I have enjoyed coming back to my hometown and seeing it from a fresh perspective.  It is inspiring to see how local entrepreneurs have contributed to the growth and prosperity of Bluffton, and working closely with small business has given me an even greater appreciation for the commitment shown by these individuals.  Even though the part I play as a banker was and is relatively small, working with local business owners and seeing them grow and succeed is very rewarding and continues to be one of the best parts of my community banking career. 

This weekly blog will hopefully paint an accurate picture of community banking, both locally and across the industry and will give me a chance to share banking insights, helpful tips, First National Bank activities, and hopefully some entertaining reading.