Last night, I dropped by my local Office Max store to pick up my annual copies of Turbo Tax. As much as I hate taxes, I have actually found TT to make preparation more enjoyable and have used the program for nearly a decade.
When I checked out, I had another encounter with yet another competitor for banking services. This was a coupon I received for RapidAdvance.com, an online lending source for small business loans. As a bonus the borrower would also get a gift card to Office Depot!
I decided to do a quick internet search on the company and came up with other business lenders like LendingClub, CanCapital, Kabbage, OnDeck, and others. Some of these offer funds in as little as three days from application. Now, I don’t know if these companies are good or bad. I assume they have a market niche they fill. Three days for funding is also quite short and I am sure this is some sort of credit scored decided product that anyone with a 6th grade education could read an approval or denial. They probably deal with a short term cash need for a relatively easy credit, something that we do not handle at our company. They are a lending source that competes against your business department.
Another good example is the Starbucks Card. My wife has a gold one and she will continue to refill it when it gets low. Those funds that sit on that card are funds that could be sitting in a deposit account in your institution and a few years ago they did. I imagine if you added up all the funds held by Starbucks it would exceed the deposits of many of your institutions.
Facebook announced it was working on a way where you could send cash to another person. In a way, Facebook is becoming a bank. Wal Mart also has made big moves into the banking field.
Thirty years ago none of these bank competitors—RapidAdvance, Starbucks, Facebook or Wal Mart—did not exist. The competition for deposits and loans was typically between credit unions and banks in a community. Rates could be set over meetings on the golf course. People adjusted their schedule to fit into the 9-3 hours of the institution. Businesses owners adjusted their schedule in order to fit into that of where their accounts were.
The problem we have today is too many financial professionals fail to realize that their competition for deposits and loans has grown much larger than just the other banks and credit unions in their community. Now not only does the competition extend throughout the country, it also encompasses firms that are not primarily financial in nature. The delivery method has greatly changed as people may be just as comfortable using LendingTree or Quicken Rocket Mortgage to get a home mortgage than they are in stopping in your firm and setting down with a mortgage officer.
It forces people in the finance industry to develop strong relationships where the customer thinks of going to you first, instead of dropping by the bank section of Wal Mart or clicking on a website that is not yours. It will require innovative methods to find solutions to their needs. The finance professional who wins will also be one that can also suggest new ideas that make the customer better and more profitable.
In the end it is about delivering value so the customer knows he is better by being with you than he is by clicking the mouse to select some online lender or dropping by his local retailer who happens to also offer financing. It is important to be aware that your field of competition is growing wider; this forces you to be better.