Now in its 25th year, Bank Director’s 2019 Acquire or Be Acquired (AOBA 2019) had its highest ever attendance earlier this week in Phoenix, Arizona. Discussions of talent, deposits, mergers and acquisitions, and technology strategy dominated the agenda.
The key overall insight from the “Diversity & Banking” panel was that diversity is a strategic imperative. Diverse businesses perform better. “You can’t do business without diversity,” said long-serving U.S. Bank board member Dr. O’dell Owens. “Our customers want their bankers to understand their needs, and diversity is a very important part of that. It’s everyone’s responsibility.”
This is true across multiple dimensions. According to ConnectOne Bank CEO Frank Sorrentino, hiring millennials is a significant strategic priority because “…they’re the people who will be banking with us. They will create the right customer experience because it’s the kind of experience they would want.”
And according to Great Southern bank CEO Joe Turner, “Millennials are the largest generation ever and they’re all fast adopters of technology. This will require a rapid evolution of bank culture.” This is as true for the banks on the talent side as it is for deposits.
As the lifeblood of banks, the theme of deposits and deposit growth ran throughout the conference. Johnson Bank SVP Pat Lawton had a great perspective on this, saying “People are far more cognizant of their deposits now than they were 18 months ago. Given the rising rates environment, banks are spending as much time now maintaining deposits as well as growing deposits. To some degree, banks are spending as much time playing defense as well as playing offense.”
Umpqua Bank CEO Cort O’Haver spoke at length about his bank’s Next Gen initiative. The Next Gen initiative is a bank-wide effort to dramatically increase investment in mobile and customer-centric processes and technology. “Our digital strategy is a significant part of our growth. We’re not going to be able to out-compete JP Morgan and Bank of America but we can certainly find a customer who wants a different type of mobile digital experience and we think we know who that customer is. If you’re choosing where to invest $100M, mobile would be a great place.”
Playing offense and defense with an eye towards customer-centricity were key parts of Zafin SVP Meenaz Sunderji’s presentation during the “Don’t Give Up Your Deposits” presentation. In this mainstage session, he discussed how banks could achieve True Deposit Growth through the Zafin platform. True Deposit Growth is a strategy that goes beyond simply acquiring short-term rate-focused clients and seeks to increase retention by focusing on the wider client relationship. According to Meenaz, building customer balances in this way starts by, “Incentivizing behavior and retaining that behavior once the client is on-boarded.”
MERGERS & ACQUISITIONS
The “Advance Planning for a Successful M&A Transaction” session lived up to its name. John Gorman, a partner at banking law firm Luse Gorman said that, “A key part of advance planning for M&A is having it and a discussion of the board’s fiduciary duties on the agenda at your meetings.”
While M&A and organic growth are typically seen as opposites, First Interstate Bank CEO Kevin Riley discussed how his bank used one to fuel the other. “After completing seven acquisitions in five years, we’ve learned we can increase organic growth by using acquisitions to move us into better markets.”
Offering advice based on his vast M&A experience, Riley said “Study the deals that have gone well as well as the ones that didn’t. Oftentimes, the ones that went badly were overpriced. The good deal is when you announce it and the stock goes up the next day.”
Speaking on the extraordinary L. William Seidman CEO panel on how to structure your post-merger activities, Mick Blodnick, former CEO of Glacier Bank, said: “We thought our partners were successful on their own, which is why we gave our acquisitions so much autonomy.”
TECHNOLOGY & STRATEGY
With the launch of Bank Director’s FinXTech platform connecting technology providers with forward-thinking banks, the changing dynamics between financial technology (“FinTech”) companies and banks was in focus throughout the conference.
At the “Next Wave of Innovation” panel, Stinson Leonard Law partner Karen Garrett gave insight into how FinTechs could accelerate their integration with banks, saying that “The best partnership is the one where the FinTech company builds into the compliance needs of the partner bank.”
In turn, Bank Director CEO Al Dominick discussed how the banks could make their processes less painful for FinTechs: “As much as FinTechs are trying to sell to banks, banks need to make it easy for them to sell. Quick NDAs, shortened decision cycles, and fewer meetings are all important to working with providers who can contribute innovative solutions.”
The discussion of financial technology naturally flowed into a broader discussion of banks’ overall technology strategies during the fantastic “Aligning Yourself for Future Growth” panel. The key takeaway from this discussion was that banks can no longer get away with a laissez-faire approach to technology or strategy in the context of customer service.
Interestingly, Frank Sorrentino noted how this has dynamic has unexpectedly played out between FinTechs and banks. “The role reversal with startups and banks is astonishing. Years ago, people left banks for lending startups because they felt like just a number. Now, they’re coming back because the banks are giving them better rates and service.”
Jonathan Hightower, a partner at law firm Bryan Cave Leighton Paisner, captured the scope and urgency of the technology challenge well: “Are the people you’re putting in front of your best customers beating out the experience that that customer could have had if they had shopped online? If not, you have a problem. Know who you’re there to serve. Figure out who they are and what they need and serve them. Your bank is not indispensable.”
AOBA 2019 was a fantastic and useful event that touched on challenges faced by banks when it comes to talent attraction, deposit growth, mergers and acquisitions, and technology strategy. The road ahead for community banks will not be an easy one. Despite this, Bank Newport CEO Sandra Pattie urged community banks to know their worth and play to their strengths: “Don’t sell yourself short as just a community bank.” With the right combination of urgency, customer-focus, and adaptability, community banks can survive and indeed thrive in a rapidly changing world.
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Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.
Jeremy De Mello
Jeremy De Mello is an Associate Account Executive on the Zafin Growth team. He is passionate about how financial technology can create a better customer experience. In his spare time, Jeremy enjoys personal development, cooking and baking, and working towards his goal of being described as dashing. You can follow him on Twitter @JeremyDeMello or connect with him on LinkedIn.