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Trends in the Banking Industry
It was my pleasure to attend the recent Lancaster Chamber of Commerce and Industry presentation of the “Changing Nature of Banking in Central PA.” The presenters were Brian Bisignani of Post & Schell and Dave Hornberger and Andria Linn of Orrstown Bank. They spoke about topics ranging from the effect of the recent bank acquisitions in central Pennsylvania, to the growth of community banks in Lancaster County, the challenges of marketing to millennials, the decline in retail sales, and cyber security and phishing attacks.
One of the things that struck me was that over thirty percent of all of the cash deposits in Lancaster County were affected by the recent bank acquisitions, or “roll ups” to use the term that Dave frequently called them. In a very short amount of time there have been huge changes in local banking, affecting both banks and their customers.
Dave did a great job of summing up the concerns I have heard from many bankers over the past few months. He noted that very big banks can be competitive because of their rates and lending base. Smaller community banks gain customers by emphasizing their flexibility, with a faster speed to market and more personal customer service. While these are all necessary, especially the personal level of service, they are not everything that our customers need.
Dave pointed out that bankers (and the same goes for lawyers, accountants and other professional advisors) need to add value to their clients’ business. This happens when the banker, lawyer, accountant, etc., takes time to understand the business, its cash flows, its future growth or challenges and other things that make the business unique. Small businesses really need a team of professional advisors. This includes the legal, financial and banking aspects of their business.
Dave also spoke on a topic that I have not heard from others in the industry. He reminded us that in ten years, fifty percent of the workforce will be made up of millennials. Although things could change, we need to accept that new business and new business people consume professional services differently. For banking, this might be more online and twenty-four hour services. But more broadly, I think it means smaller and more dispersed interactions. For example, some established businesses might sit down to work through a long term business plan. To do this, they gather up all their financial information, their cash positions, legal challenges and work out a plan. New businesses, and younger business people, are used to having access to information at a moment’s notice. I think this extends to many kinds of professional advice. They are going to want an answer when the question comes up, or a commercial loan when an opportunity presents itself. Maybe instead of working matter by matter, or case by case, new businesses will work better with a subscription type of arrangement where they can feel free to pick up the phone and ask about whatever issue is hot at the moment.
Although this presentation dealt with the changing nature of banking in the area, the issues that face bankers are many of the same ones that affect other professional advisors as well.