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CPA Now
Sep 14, 2020

The Pandemic, the Banking Industry, and Change

Jeff MarsicoBy Jeffrey P. Marsico, MBA


In the banking industry, the pandemic-induced pivot from less than 5% of our staff working from home to 50% was abrupt, disruptive, and surprising. That said, the coronavirus pandemic could hold a silver lining for an industry that rarely changes quickly and is run by individuals who, let’s say, might be technology and change resistors. They’re not difficult to identify. They are the ones who walk the cubicles to provide close oversight over employees, making sure they’re not goofing off. In meetings, they talk about past recessions, business development successes, and relationships built on the golf course, over the lunch table, and with a handshake.

But I think there is now enough evidence to change these tough-to-change traditionalists.

  • Did your bank function remotely?
  • Did payables get paid?
  • Were call reports filed?
  • How did your bank do with the Paycheck Protection Program?
  • How was your productivity?
  • Did branch-centric customers begin using mobile and online banking?
  • Did business customers use remote deposit capture and online banking?

If we review all these indicators, I think we’ll find significant evidence that how our customers bank with us and how we run our banks have changed.

The question is how we are going to adapt and move forward.

People First

Counter scene from a community bankAlthough we should reflect and learn from the past, we can no longer let it hold us back. The pandemic taught us that we can adapt rapidly, and we should not let that momentum go. There will be change resistors who saw the light and are ready to adapt; but there also will be those who work tirelessly to restore the old-world order – the anchor bearers of progress. To implement change and make forward progress part of your operating culture, leaders must lead. Don’t be an anchor; be a catalyst.

There are middle managers in our ranks that we know are highly capable, yet we may not have allowed them to blossom because their ideas, presented so passionately, were so foreign to us. They might have asked “Why pay for and implement Zelle when we could teach our customers how to Venmo for free.” Crazy talk … or so it seemed.

Leadership isn’t about hatching all the ideas and putting ourselves in charge of implementing them. Leadership is nurturing ideas and developing subordinates who can effectively put them to work. Quality people will shine a light on how well a leader leads.

My advice is to develop middle managers who can recognize opportunity, develop disciplined business cases for their ideas, and lead projects to move your institution forward. If you only have one or two doers in your institution who end up on nearly all project teams, that’s a testament to ineffective leadership. I know. That hurts.

Technology Second

When bankers moved to have half or more of their personnel working from home, most of us were in awe of how fast it came together. For me, that shined a light on the fact that nearly half of our employees did not need to be in front of customers.

When industry pundits talk of bank technology or fintech, they are mostly referencing customer-facing technologies. But there are plenty of applications designed to make the business of banking more efficient and less risky. Some might be right under your nose.

We’re in the habit of raking our core processors on their pricing power and oligopoly behavior, but they have tools that we might not use to the fullest. In our process improvement work, accounts payable software is rarely used as it could be. You can automatically manage the workflows for easy approval of invoices and auto approval of recurring invoices. We frequently hear objections that use terms such as “controls” or “FDICIA” as excuses not to use them. Am I getting a little close to home? Multiply that attitude over every department in the bank. There are resources being dedicated to processes that should be automated.

We over-invest in support activities that we can relegate to technology with less risk than having human hands touch the process. But if we over-invest in support functions, where are we under-investing?

Marketing. IT. Branch staff development. These are the opportunity costs of not using the technologies we have purchased to their fullest or implementing new technologies to reduce the amount of time and resources we dedicate to the gears of running our bank. Maybe we don’t need the third floor of our headquarters building after all.

There is no question that the pandemic has changed banking. The only thing that is up in the air is who among you will embrace the change to propel your institution forward and who will want to change it back?


Jeffrey P. Marsico, MBA, is a founding shareholder and executive vice president at The Kafafian Group of Bethlehem, Pa., where he focuses on strategy, profitability, and financial advisory. Marsico is a speaker at PICPA’s 2020 Financial Institutions Conference webcast to be held Sept. 22, 2020. He can be reached at jmarsico@kafafiangroup.com


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Disclaimer
Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.