CU Data

Keep the Wolf at Bay

Thriving in a competitive financial services arena.

March 26, 2014
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When their mother sent them into the world to seek their fortunes, the three little pigs of fairy-tale fame were ambitious, dedicated to their projects, and hopeful for positive outcomes.

However, before they went about their business in pursuit of success, the practical pigs appropriately dedicated themselves to finding adequate housing. But “practical” meant something different to each pig. Ease of construction, lightness of load, and long-term security issues were all deemed honorable and practical considerations.

Yet, each, with its set of pros and cons, produced its own distinct style of habitat, while only one of the three was designed to survive the tempest of the Big Bad Wolf. What was it about the decision-making process of one pig that enabled it to trump the housing decisions of the other two?

As we shift our thoughts to today’s competitive financial services environment, it proves wise for us to know the wolves in our midst. 

What are the practical considerations that go hand-in-hand with constructing secure and appealing services for our members?

“I’ll huff and I’ll puff and I’ll blow your house down!” (Big Bad Wolf)

“Companies have a powerful tendency to compete on the basis of their core competencies rather than on the basis of the attributes that truly distinguish them in their customers’ eyes,” notes the strategy+business  article, “How Do You Compete?

The article indicates that the core competencies of a business are a “safe” aspect to promote. But doing so does not help differentiate an organization in a crowded field of providers and will not translate to success.

It goes on to say that core competencies are vital, but “. . . the focus should be outward in, rather than inward out.  A company must first concentrate on qualities or amenities that customers value and then develop core competencies that deliver these key attributes . . .”

It’s these key attributes or “salient differentiators” that are viewed to be critically important to your business proposition.

In the article, “3 Hard Facts Retail Bankers Need to Face” at Financial Planning the realities retail bankers encounter as they manage head counts, branch networks, and product pricing are made clear.

Core transformation is another important factor to consider in remaining competitive. 

“Banks today face convergent disruption . . . including tougher regulations, traditional and non-traditional competitors, and digitization,” notes accenture in “Convergent Disruption and the Case for Core Transformation.”  

The article suggests three questions when it comes to enhancing core operations.

“Not by the hair of my chinny-chin-chin!” (Three Little Pigs)

According to an article in Banks Systems & Technology, “New entrants can’t kick banks out of the payments system, but they could create a disconnect between banks and their customers if banks don’t catch on to the wave of digital disruption transforming payments.”

Should providers fail to prevent disconnects, they will find themselves becoming “a back-office function with less sticky customer relationships” as mobile devices become increasingly important for consumers. Although methodologies to create engagement will vary according to each institution’s business goals, it will still be vitally important to forge “closer relationships with their merchant providers.”

But banks cannot just count on “becoming more digital” as a solution to threats presented by non-bank providers, according to a Harvard Business Review blog.  Rather, “They themselves must move further into the commercial lives of their customers. They must learn to play a greater role not just at the moment of financial transactions but before and afterwards as well.”

The blog also reports that “competition from non-banks could erode one-third of traditional bank revenues by 2020.”

Perhaps one example of a bank attempting to identify a salient difference they can provide, one that also competes with prepaid debit is found at Bank of America, “Bank of America Set to Unveil Low-Cost Checking Option.” 

Their offering called, “Safe Balance,” is the product of four years of testing and a reaction to increasing scrutiny from lawmakers and the public over fees and the increasing incursion of non-banks into the financial sector.

The service is aimed toward low-income customers and came about after market testing various checking account strategies, including the 2010 attempt to charge a $5 monthly fee for customers using debit cards, a tactic that garnered angry public response.

Other market testing revealed customers “wanted fewer options and more predictability.”

Whatever methodology you use in identifying your salient differentiators, it’s important not only to know the wolves that can threaten your little brick house, but also the disruptive methods they may incorporate to unseat your best laid plans. 

And, always be ready to adapt. 

When the Big Bad Wolf failed to blow down the little brick house, he attempted entry through the chimney, but the well-prepared third little pig was ready and waiting with plan B.

 

 

 

 

 

Lora Bray is a research librarian at CUNA.

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