Gone are the days of bank employees repetitively completing their tasks. A productive day in today’s banking environment consists of collaboration and teamwork to solve challenging problems.
Community banks and credit unions need to deliver on two industry trends to succeed: 1) managing interest rate, compliance, and regulatory risks, and 2) adapting with technology and products to compete against a decline in branch visitors, check volume, and cash transactions. The question is, how?
The answer is new ideas. Managers and leaders must cultivate an entrepreneurial environment where employees are not afraid to share them, because they are the future of the banking industry.
1. Refine the team
Leader Bank itself is an entrepreneurial venture started in 2002 with $6 million in assets. After spending the first six years focusing on implementing traditional methods, we began shifting our hiring practices to include employees with little or no banking experience but had a lot of potential for creative problem solving. Today, almost 40 percent of our employees (excluding loan officers) are new to the banking industry.
By not hiring solely based on education and experience, and focusing more on potential, we have seen some of our most successful periods of growth to date.
2. Listen to customers
New ideas often present themselves as customer issues.
Take this example: A landlord customer encounters legal complications with his tenant’s security deposit, so to avoid future issues he assumes a greater risk by no longer requiring security deposits. Identifying this real-world problem led to the creation of a new security deposit platform that manages compliance headaches for landlords.
3. Pursue lopsided opportunities
All ideas come with upsides and downsides, but as we all know, the best ideas are asymmetrical, meaning the upsides outweigh the downsides.
A great example is when we developed our rewards checking product.
Before developing the product, we knew we not only wanted to grow deposits but also reward our customers for using us as their primary bank. We analyzed the downside versus the potential upside before deciding to move forward.
The downside vs. the upside
A downside is best kept small and finite. It’s something you would be comfortable with if it actually happened.
With our rewards checking product, the only real downside we could foresee was lack of participation. There is always a risk with a new product or process that the client may not fully adopt it.
However, in this particular situation, the upsides significantly outweighed our fear of failure.
To start, we developed Zeugma in-house. We had existing employees working on it, to keep our cost of investment low. It gave us control of the product features, which allowed us to differentiate leading to strong growth in deposits.
Assessing the upside vs. downside
With any new idea, senior management and the board will want to know what the downside is, and if it is limited. That limitation is finite and can be articulated, then odds of approval increase.
When trying to measure the downsides relative to the upsides, there are questions we ask to lean one way or the other:
- Is the total potential financial loss greater than the cost of the project?
- Could the project cause significant reputational damage?
- Does the project require additional resources?
- Does the project effort need significant interdepartmental coordination?
If the answers are “no,” then the idea likely carries low risk and can move quickly.
There are also additional ways to mitigate risks throughout the launch process of any new idea.
Start a focus group
There is no better way to see how a new idea works before launching full-force than experimenting with beta groups. Testing the product with hand-selected, vested people first helps gives managers an idea how customers will use the product and understand pitfalls before going live.
Conduct weekly meetings
Weekly meetings are great for adapting procedures as necessary throughout the development and launch process. Teams from product development to marketing can share ideas on how to develop and grow the product to its utmost potential.
Maintain strong financial tracking
Tracking every penny will ease the anxiety that comes along with the development and launch process of any new idea. Start a shared spreadsheet among involved employees and enter in the income and expenses along the way. If the financial budget is kept in check, it is easier to plan where to allocate future expenses.
Also don’t forget to track success, including each new customer acquired or deposit gathered.
Banks are inherently risk-management institutions, which is why understanding the downsides of new ideas is so important.
Transitioning a financial institution to an entrepreneurial, spirited workforce takes time, patience and dedication. Every idea, whether a success or a failure, is a stepping stone to the next. Over time, even in a highly regulated industry like banking, a culture of energy and entrepreneurship can be a competitive advantage.