Cinderella at Ball without a clock, Banks in trouble without IT Competence

By Robin Trehan, B.A, MIB, MBA electronic business

With so, many banks around and competition heating up from the big banks and trading house, how are small traditional community banks going to participate. The concept of e-banking and with ING, Citi bank, ABN Amro and e-trade etc. offering great rates, products and exceptional 24X 7 X 365 days of service and quality commitment, how long will small banks live in the changing times. Or the small banks under $700-$800 Million dollars in assets are still playing the Cinderella at ball. We know that at midnight everything is going to turn back to pumpkins & mice. But we look around and say, 'one more dance,' and so does everyone else. The party does get to be more fun - and besides, there are no clocks on the wall. And then suddenly the clock strikes 12 and everything turns back to pumpkins and mice. Welcome to the real world.

Hoping for a bigger bank to come and acquire a smaller bank with no proper infrastructure and management layout will be costly mistakes to make. Lots of mid size banks even does not have a chief financial officer, chief operating officer leave aside a chief technology officer. Everything is done by the C.E.O! C.E.O can be a great entrepreneurial person, who might have done well in the past when big banks were playing a different game, but now big banks are sprouting in your backyard. Look at Citi bank, Bank of America they want the same deposit and are ready to play the game with you.

Mid size and small banks are too busy in making relationship with the clients in the local area. They need to understand that with e-banking they better start offering better rates, products and 24 hours of services. Deposits are spread across the country, and bigger the customer base more the profit and lower cost based on economy of scale. Look, how many of us are having a bank account with Schwab, e-trade, INGDirect and Tdwaterhouse (now TdAmeritade). All of us want to make our money work hard and want to maximize the returns. We do not care where the bank is as long as it gives us better rate and provide services even at 1 A.M at night.

In the new world is of e-banking, customer even do not want to waste their time going to a bank and talking to a representative face to face. They want better time utilization and better customer relationship management when they call the bank and are able to get all the information by phone, email, or even as text massage on their cell phone. I am sure, that in 5-10 years small and mid size banks with expensive leases in terms of real estate will either have to sell or feel the heat. Better to go to cheaper locations and have centralized operation and do e-banking.

Small and midsized banks have to understand the concept of Information Technology. A separate department should be created in each bank and the operations of the banks should be aligned with its IT and CRM department. I know it is like making an elephant dance but it is better to do it now in an urgent manner rather than waiting for the elephant to collapse. It has happened in many industries and will happen in the banking field too.

Be lean and look out and in. Changes are great and accept it. Bring in the change management elements. Banks must begin by tearing down the old, so that they can really open themselves to something different and new.

Robin C. Trehan can be reached at rtrehan@creditcapitalfunding.com