The impersonal, sterile formula-driven processes of banks have resulted in the public's antipathy toward banking. Customers complain of the inaccessibility, unresponsiveness and insufficient knowledge of bankers and the lack of impartial financial advice.
Allegations of unfair predatory lending practices, discriminatory underwriting and inadequate levels of participation and investment in their local communities have seriously impaired the industry's reputation. The public's growing distrust in banks has provoked customers' endless price-comparison shopping in lieu of seeking a comprehensive, long-term banking relationship.
Commercial bankers are traditionally perceived as one of the three principal advisers to businesses, and unless a business secures a good banking relationship or receives the service levels it needs, it can suffer.
Unfortunately, bankers are abdicating this responsibility without appreciating its vital importance. Their primary objective is to attain lucrative commissions for attracting new business instead of developing existing relationships. Some institutions are forcibly retiring senior, experienced credit officers and replacing them with younger, more aggressive business development lenders with lower salaries.
These new lenders do not possess the necessary business knowledge and therefore cannot determine appropriate remedies and loan structures or define suitable products for customers. As a result, rather than concentrating their efforts on assisting the customer as an ally and mentor, commercial bankers are more concerned about protecting their careers.
What's in store for the banking industry? One thing is certain. Banking as we know it will be infinitely different. Banks continue to lead with pricing without considering the long-term impact their strategies will have on net interest margins.
Logic would seem to dictate that one cannot offer credit at the lowest rates possible while also availing the highest market rates on deposits. As banks fail to recognize the value of a long-term, profitable relationship in their pricing decisions, customers begin seeking alternatives.
Over the past several years, mortgage bankers and brokers have obtained a majority share of the residential market, forcing community banks to limit their distribution of mortgage products solely to accommodate existing customers. Banks were displaced by mortgage brokers who serviced customers better by visiting their homes or offices and expedited the processing and decision timelines in closing a loan.
Likewise, customers' distress with commercial banks may facilitate the success of the growing number of 'non-bank' banks such as Merrill Lynch and American Express, as well as the neighborhood Wal-Mart. Each possesses greater economies of scale and can easily absorb extraordinary advertising and staffing expenses.
However, there are there negatives to these non-bank banks. Financial service companies that deliver exceptional service in a timely manner have a unique opportunity to attract an increasing share of good business and professional customers, previously served by large, bureaucratic business banks.
Smaller banks, however, can offer the prospective customer a viable, exciting alternative that large banks can't -- personal relations. Smaller banks take the time to get to know you and your business.
They have talented, experienced bankers who can offer substantive, valuable advice to enhance a business or improve a commercial real estate project's marketability. A smaller bank's first and foremost concern is listening to you and determining what products or services will best accommodate your needs -- not simply meeting their sales quotas.
To overcome growing cynicism toward the banking industry and compete with non-bank banks, smaller bankers must ensure their customers' banking experiences are much better than their expectations. And they must always execute what they say they can do. Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400.www.newcenturybk.com.