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Battleground 2010: Sharks versus Gorillas

After West Side Story, the Sharks got over the Jets and are now targeting the Gorillas.

West Side Story

Actually nothing to do with music or film, we’re talking banks.

Back in the 1950s you had large banks (Sharks) being run around by small banks (Jets) who were nimbler and quicker … so the large banks acquired them and the Sharks became Gorillas.

Now we have large banks that are strong (Sharks) running rings around large banks that are weak (Gorillas), whilst the small banks (Jets) still run circles around both of them.

What am I talking about?

Bank’s competitive strategies for the teens (2010s).

Today, we have three camps of banks:

  • those that are major universal / regional banks with strong balance sheets;
  • those that are major universal / regional banks with weak balance sheets; and
  • smaller, independent or mutual banks with a major customer focus.

It is clear who falls into which camp as the first camp are those cited in the major surveys as being expansion banks like Santander, JPMorgan, HSBC, ICBI; the second camp is the bailout banks like Bank of America, Citibank, RBS, Lloyds, Fortis; and the third are the credit unions, mutuals, building societies and sparkassens.

What is intriguing today is the strategies that each camp will take.

For example, if I were a shark then I would look to acquire strength by buying weakened banks and by offering 50 basis point discounts on my savings and loans products.

No-brainer, and exactly what Santander has been doing in buying cheap banks assets that are positive to the balance sheet – deposit holders, branches, savers and prime rate customers from Alliance & Leicester and Bradford & Bingley.

Thing is that this puts a strain on the conversion process for integrating merged systems and infrastructures, as demonstrated by some of the poor reviews of Abbey which may ripple over onto A&L and B&B.

Equally, it places spotlight firmly onto the account opening, client onboarding and customer acquisition processes, as these banks firmly focus upon gaining market share.

The result is that the Sharks will be investing big time in M&A platforms that are open and easy to develop and evolve, whilst shining internal energies on re-engineering the client onboarding processes to make them as simple and effective as possible.

Which leaves the back-end customer retention processes exposed which is where the Gorillas will be making their investment.

A Gorilla has little opportunity to grow new customer share, as they cannot offer the rate churns that the Sharks will be putting into play. As a result, their focus has to be upon customer retention and share of wallet.

Cross-sell ratio, product margin, incentives to invest more will all be priority for a Gorilla as they aim to strengthen balance sheets. Loans and leverage? Maybe not. Give those to a Shark or even to a Jet.

The nimble Jets are the credit unions and mutuals of this world. They grow and gain business by “not being banks” and they focus on customer needs because their customers are not customers. They are members. And the Jets are not profit-focused, but member-focused. As a result, many of them will do whatever it takes for the customer, and naturally offer very competitive interest rates and strong member (customer) retention processes that promote advocacy and loyalty.

So there we have it.

The Gorillas are snuffling about slowly, whilst the Sharks cut a dash. The Jets are diving upon both and sometimes winning, but it’s no big deal as the Gorillas and Sharks are still dominating the scene.

All of them have a singular focus however upon customer and customer processes.

They all are trying to excel at the customer process of onboarding and retention.

Their focus just varies dependent upon their theme for competitive activity.

Mind you, we shouldn’t forget that we also have the Vampire Squids, as Goldman Sachs are now known, which is why we end up with movies like this …

… nothing like the Sharks versus the Squids versus the Jets.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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