October 25, 2015
Consumer Banking in America is as romanticized as the tale of the Wizard of Oz. In many ways, the American banking experience can be related to the 1930s classic movie with Emerald City being the idealistic banking institution. If you can for a moment, entertain your imagination; picture yourself as Dorothy and one of life’s unexpected events hits you like a tornado. Headed to the bank, you hop on your bike with your dog Toto. Upon arriving at the bank you encounter a Scarecrow without a brain, a Tin Man without a heart and a Cowardly Lion who lacks courage.
So how do all these fictional characters relate back to banking? The Scarecrow depicts the level of confidence consumers have in trusting their banks, the Tin Man represents loan borrowing and the Cowardly Lion is a portrayal of retail bank branches. For the sake of fictional comparison FinTech startups can be associated with the good witch or the bad witch, depending on what side of the spectrum you’re on.
When it comes to lending, it’s not out of the realm of imagination, to think that banking institutions would be unwavered by disruption. After all, before 2008, unless a home or car was purchased with cash, then more often than not, a loan by the bank was the only financing option available. If the financial and subprime mortgage crisis didn’t move financial institutions to right their wrongs for the betterment of the country, then why would consumers go groveling to banks for a loan if they didn’t have to?
The 2008 financial crisis proverbially flatlined the heartbeat of America, even with the signing of the American Recovery and Reinvestment Act of 2009 (ARRA) and after over $800 billion dollars transfused into the economy to stop further deterioration, America is still recovering.
America doesn't bail out the losers. America was built by bailing out winners, by rigging a nation of the winners, for the winners, by the winners, is a quote from the film 99 Homes that premiered October 23, 2015. The movie exposes the harsh realities that mortgage borrowers had to face when financial institutions operated businesses with a too-big-to fail attitude. While quick to accept a government bailout, banks didn’t have enough heart or gumption to rise from the ashes and as a result, the alternative lending market seized the opportunity and disrupted the financial ecosystem with lower marginal costs, greater agility and the financial backing of venture capitalists.
During a critical time when customers were rapidly losing their faith in banks and desperate for a change, building trust in a new and an unfamiliar financial system would appear unfeasible. But, some would say FinTech startups fought the good fight against much opposition from big banks.
Can consumers heartlessly blame banks for their sluggish adoption of FinTech innovation? It’s only been a few years since Operation Choke Point, a US Department of Justice investigation that started in 2013 was conducted. The initiative received little to no mass media coverage, but the arduous investigation put banks under a microscope and added friction to their already volatile relationships with many small businesses. 50 banks were issued subpoenas asking for information on their business relationships with Third Party Payment Processors. While banks tried to salvage what was left of some of their small business relationships, it’s somewhat understandable as to why big banks are still approaching the online lending side of the FinTech ecosystem with caution.
To be fair, big banks have been battling a two-front uphill battle, with alleged bureaucratic bullying and scorned, ankle-biting consumers with higher expectations, watching every move. But what’s the excuse for not updating the little things? When you think of a traditional consumer banking branch, the exterior most likely is a limestone structure with sturdy pillars surrounding the front of the building, the interior usually has washed out decor, mahogany desks, leather chairs, a cold sterile ambiance and the faint sound of elevator music playing. While brick and mortar bank locations are structurally secure, when it comes to changing with the times, banks have proved to be insecure and reluctant to update their branch locations with technology enhancements. Most on-site bank transactions at a teller still have paper deposit and withdrawal slips required to process simple money transfers.
The possibility that banking institutions are suffering from prosophobia (fear of progress) is unlikely, but my guess is as good as yours. What I am sure of is the delusional lack of self-awareness some banks have along with apparent inconsistencies big banks have within their own organization. Continuity, credibility and dare I say courage are crucial factors that consumers need, to gain confidence in their banks’ abilities.
Many banks offer online banking and mobile applications for easy account access, but there is an obvious disconnect between the online and on location experiences. The paradoxical depictions of customer-focused television commercials, web popups and branch marketing campaigns aren’t persuading intelligent customers to put their trust in banks. All of the bank sponsored stadiums and buildings are merely branding investments placed on the facades of huge structures. Similarly to how the Great and Powerful Wizard of Oz was portrayed as a larger than life figure of authority, the reality was that he was just a mature older man behind a curtain, ironically dressed like a quintessential banker.
By no means am I on a bank witch-hunt; nor am I implying that all banks should think the same or make business decisions based on matters of the heart. But I do implore banks to loosen their ties, cufflinks, suited and booted costumes and seriously consider building ties with or at least try to learn from the leading FinTech challengers paving the yellow brick road to the next generation of banking.
"Traditional concepts of what a bank does will change fundamentally and permanently," said Likhit Wagle, IBM Global Industry Leader for Banking & Financial Markets. "Bankers will no longer be bankers in the traditional sense. The most successful banks will be focused on collaboration, agility, innovation, analytics and above all on going beyond digital and transforming into becoming a Cognitive Bank."
Creating a genuine personalized banking experience is an advantage that banks need to leverage. While mobile payments companies, startups and other industry players are rapidly dominating the future of digital payments, there’s still a need for a centralized banking institutions. And now more than ever is the time for banks to join in the collaborative chaos and cause some disruption of their own.
 The Wizard of Oz (1939 film), Wikipedia®. Retrieved October 2015.
 Jim Brill, Nicholas Drury, Anthony Lipp, Anthony Marshall, Likhit Wagle. Banking redefined Disruption, transformation and the next-generation bank, IBM Institute for Business Value analysis. Retrieved October 2015.
 Financial crisis of 2007–08, Wikipedia®. Retrieved October 2015.
 111th Congress (2009-2010). H.R.1 - American Recovery and Reinvestment Act of 2009, congress.gov. Retrieved October 2015.
 NPR Audio.The Crisis Behind '99 Homes' — And How It Fueled The Film's Script, NPR. Retrieved October 2015.
 The McGraw-Hill Companies, Inc. "fight the good fight." McGraw-Hill Dictionary of American Idioms and Phrasal Verbs. 2002. Retrieved October 2015
 Scott G. Alvarez, General Counsel. Testimony: Department of Justice's Operation Choke Point
Before the Subcommittee on Oversight and Investigations, Committee on Financial Services, U.S. House of Representatives, Washington, D.C. July 15, 2014 Retrieved October 2015.
 Phobia Source. Prosophobia - Fear of progress. phobiasource.com. Retrieved October 2015.
 List of sports venues with sole naming rights, Wikipedia®. Retrieved October 2015.