Now is the time to consider your growth goals and risk exposure, and develop strategies that will lead to your success. As we all know, good compliance is good business. But it's also true that good business can be good for compliance! Here, you'll learn five common growth and compliance related problems, and how a better branch strategy can help you solve them.
It's the start of a new year, which means that now is a perfect time to reconnect with, reassess, and reevaluate the goals you've set for your bank or credit union in 2018 and 2019. If you're like many leaders of American financial institutions, your goals probably fall into at least one of these these categories:
It may surprise you that the solutions to these three goals are deeply interconnected.
In solving these problems, you may uncover unique synergies that fuel future growth.
Many (even most) financial institutions are concerned about their profitability in 2018. The market is competitive; as new technologies and online-only banks gain market share, staying successful becomes even more challenging.
That said, there are still opportunities for traditional banks to win. For one thing, customers that use both physical and digital channels tend to be more loyal! Traditional banks are in a great position to provide the personal and digital, high-touch and low-touch service that consumers want - and expect.
To improve profitability, you need to increase revenue and reduce costs. Increasing revenue is closely tied to serving your customers better. Reducing costs is directly related to eliminating inefficiencies. Both of those goals can be achieved with a better, more efficient, and more customer-centric branch and ATM network strategy.
Building a better branch and ATM network will require a holistic approach to growth that considers customer service, product mix, branch operations, delivery channel efficiency and improvement, competitor performance, market opportunities, and compliance risk associated with changes.
One of the best solutions to this problem is Branch Network Optimization (BNO). Branch Network Optimization will take a holistic view and analyze your entire branch network both collectively and individually, and all delivery channels.
Conducting Branch Network Optimization will:
After the analysis is conducted, expect a scorecard for each branch that will rank and score its performance relative to sister branches, peers and competitors. This analysis will develop a comprehensive view of the branch network and delivery channels. With this knowledge, a clear growth strategy emerges, and bank executives gain a clear road map to be implemented in the future.
Learn more about Branch Network Optimization in this free white paper.
First, congratulations on your success, and your future growth. That's an exciting phase to be in! If you plan on opening new branches for your bank or credit union, you owe it to yourself to start preparing for success before you break ground.
When you change your branch network by adding new branches, you are also changing your risk exposure, because you're changing the markets you serve.
Not only might your market area or Assessment Areas change, but your peers might also be altered. Another thing to remember is that changes to your branch network may also increase the risk of unintentionally appearing to redline against certain demographics you serve.
This is one of the main reasons why compliance needs to be involved in any growth planning. Compliance professionals at your financial institution have a more comprehensive and practical understanding of your institution's compliance risk, and can provide necessary insights and guidance.
This is also why we recommend starting with understanding the impact of any branch changes before you actually implement them. In some cases, certain branch locations can even reduce your existing compliance risk in addition to increasing your profitability potential (that's what we call a win-win)!
These risks may seem daunting, but the right solution makes it easy to navigate them and still achieve your profitability and growth goals.
TRUPOINT provides Site Location Analysis, which leverages our consumer compliance expertise to provide strategic, data-driven recommendations for the most profitable potential branch locations in your market.
After identifying a site for a new branch, and the potential profitability in that new location, we'll also help you estimate the impact on sister branches. Finally, Site Location Analysis will also provide valuable insights into how to use your delivery channel network to improve customer service.
Problem 3: We know that we have Fair Lending, CRA, and/or Redlining risk exposure, and we would like to reduce it.
You may have identified disparities or other risks in your data, and be working to improve it. Perhaps you received a complaint alleging discrimination that you are taking seriously, and investigating. Or, you may have heard from a regulator that you need to conduct a Market or Residential Needs Assessment.
If so, you may be looking for an efficient way to understand your markets and your community's needs. A good Needs Assessment will provide
Learn more about Needs Assessments here.
That's just one way that your branch strategy can impact your Fair Lending, CRA, and/or Redlining risk. However, each of these areas of consumer compliance has unique risks and requirements. For more information on how to manage your risk, here are a few compliance-focused resources you may enjoy:
Mergers and acquisitions are now the norm in the banking industry. In 2007, there were 8,534 commercial banks and savings institutions insured by the FDIC. As of March 2016, there were only 5,913 commercial banks and savings institutions. That's a decrease of approximately 30 percent. To compare, from 1997 to 2007, the decrease was only 20 percent. Those numbers show us that, even though we always expect some consolidation, the pace of consolidation is increasing.
Another facet of this important discussion is that the number of new reporters has dropped from 181 in 2007 to 0 in 2016.
Did you know that CRA, Fair Lending, or Redlining risk can negatively impact merger and/or acquisition plans? The regulators have to approve M&A activity, and if there is unchecked consumer compliance risk, they may not approve your merger or acquisition.
That's why M&A Due Diligence is such an important step in any growth plans. With M&A Due Diligence from TRUPOINT, we'll analyze the individual and combined risk of all institutions involved, and build a strategic plan to reduce it and ensure healthy growth.
Often, this process results in having multiple branch locations that serve the same consumers. As a result, you should identify inefficiencies in your branch and ATM network after a merger or acquisition.With TRUPOINT, we will analyze your data to find such redundancies, and help you decide how to resolve them with an understanding of your growth potential and compliance risk.
Problem 5: We want to attract new customers and do a better job of retaining our existing customers.
To grow and retain your customer base, you have to know what they want. A few statistics can provide some insight into what your consumers want - and how you can provide it:
As you consider your customers, it's absolutely critical to consider your branch network and delivery channels. In addition to evaluating the physical location of your branches, you should also consider the square footage of each branch, the operational hours, the services offered, the support and personal guidance you provide, the deliver channel efficiency, and other customer-experience related factors. You still need branches, but it's imperative that your branch network meets your consumers' needs.
TRUPOINT does offer custom Branch Strategy solutions designed to help you meet unique goals like this. We can help you analyze your current customer base and build a strategy to help you serve them better. Contact us to learn more about a better branch strategy here, and make sure to share your unique goals.
Ncontracts Viewpoint: Banks and credit unions face a branch strategy revolution. Changes in consumer behavior, delivery channels, technological innovation, and compliance requirements are forcing American financial institutions to reconsider their strategies to meet their compliance and growth goals. For many, this means adjusting their branch networks and improving their branch strategy in order to remain competitive.