Imagine if banks really understood their value


I feel stirred having read this article in the National Post yesterday (Scotiabank’s outgoing CEO Rick Waugh: Customers may not like us but they feel comfortable and safe) for several reasons.  The headline certainly grabbed my attention because being proud of customers not liking you but feeling comfortable and safe seems to suggest that our banking system is lacking something that every other business I know desperately needs…an attitude that customers DO like them as well as feeling comfortable with their service.  If you read the article you might note that the outgoing CEO has been with Scotia for more than (yes more than) 40 years.  The incoming CEO has been with Scotia for 30 years.  Hopefully I don’t need to point out the obvious but when you have people that have been in one environment for that long it would be reasonable to conclude that their ability to offer new perspective is significantly hindered by their lack of exposure to other environments and ideas.

Why would I bother mentioning this?  Because as I interact with bankers and get to know some of them on a personal level they all seem to offer the same opinion even though they may not voice it publicly.  They believe that bankers are generally antiquated and out of touch with the real world.  Terms like “common sense” lending ring empty and the lack of innovation from banks can be seen at the street level with everyday businesses.  Here is a simple example: in the past few years the prevalence of accounts receivable or factoring companies is becoming too overwhelming to monitor.  Because banks don’t provide credit to small businesses to float their cash flow many businesses have turned to high interest rate lenders who eat away at their profits and erode their ability to really grow and offer more to the market (i.e. jobs, innovation, etc.).  In my experience many companies who utilize this type of financing don’t even know the name of their business banker (mostly because they seem to change every 10 days) and can’t be bothered to waste time asking for help from the very place where they should be able to get it because it isn’t worth the effort to be declined.

While I don’t disagree for a moment that we want banks being safe and good stewards of our money (in fact see my blog post on what I really believe – click here) I believe that banks can do a much better job of using their resources to help more businesses (and individuals) do more.  If banks understood what their resources really are (not capital but knowledge and systems) they would have people on the street taking the time to build relationships with businesses and based on those interactions develop products and solutions that could really help.  Why not show businesses how to better utilize their cash instead of approving them for a loan facility they could never practically meet the terms of?  Why not use the data from their bank accounts to identify for businesses the trends that could be managed better to improve cash flow?  Why not take a moment to learn more about where a business is going and figure out how to move along with them and support their growth?  The answer in short is because this type of thinking would require someone to go against the grain, step out and raise the bar for everyone.  It requires a fresh perspective.  How fresh can a perspective be when it is to come from a 40 year old experience in the same environment?

And for the record, the obvious rebuttal to my comments are “well at least we are safe and if it isn’t broken don’t fix it” to which I would respond “you don’t know what you are leaving on the table that might result in better performance, better returns and increased safety if you don’t try to test the old ways of thinking”.  What do they have to lose?  It’s not as if trying something innovative or dedicating resources to being innovative would really damage their bottom line.  In fact if customers don’t like banks being innovative might actually get a few customers to change their minds – what’s that worth?

“Hesitation increases in relation to risk in equal proportion to age.” – Ernest Hemingway

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