Consolidation in the banking industry has brought an age-old battle back to the forefront.
Banks, whether fresh off an acquisition or a new institution just getting a start, are battling for the customer like never before.
The mega-banks are trying to bring a community bank feel to their branches by offering more service. Community banks, meanwhile, are trying to offer a bigger variety of products, just like the big banks do. Both groups are stretching their limits to gain customers.
The larger banks have been adopting new programs to make better use of their employees and to come across as friendlier to customers. While having bank employees greet customers isn’t new, some banks are mandating workers to shake each customer’s hand and to try to know their names.
“They are all trying. They see the benefits. But it is one thing to try and do it and another to pull it off,” said Robert Keller, chief executive of Laguna Hills-based Eldorado Bank.
While big banks excel at the product breadth, they are limited in terms of customer service because of the sheer number of customers a branch has. In the wake of a consolidation, post-merger banks close offices and customers of closed banks are routed to other branches. And rivals at community banks don’t miss a chance to point this out.
“Everybody becomes a number. There’s no relationship there,” Keller said.
Todd Rosin, a spokesperson for Bank of America, said the bank has been working to improve its service because that has become an issue with customers. Bank of America merged with Nation’s Bank in late 1998, making it one of the largest banking institutions in the nation. Rosin said the bank pushes its employees to get involved in the communities where they work to get a better feel for the area.
“Just because we are a large company, doesn’t mean we can’t provide service,” Rosin said.
Bank of America recently announced the layoff of 10,000 employees, though Rosin said those layoffs are not tellers, but upper- and middle-management employees. The bank plans to use some of the savings from the trimming to add more tellers in its branches in an effort to improve its customer service.
“We flattened the structure to bring the leaders closer to the customer,” Rosin said.
Bank of America also is considering rolling out a new model for its banking centers that will provide more service to the bank’s customers.
On the other side of the ring, the independent banks are trying different ways to offer more products, such as cash management, international banking and online service, in order to grow their customer base.
But some industry officials contend small banks may not have the resources to compete effectively on a broader scale.
“If you spread your resources, then you are doing all the things a big bank is doing, but you are not doing it well,” said Fred Jensen, president of Huntington Beach-based First Bank & Trust.
Small banks have capital constraints that prevent them from offering the same variety and quantity of products as a large bank does. To compensate, many banks are leaning on technology to help.
“If your technology is good, the more assets you can have under management,” Jensen said.
The use of the Internet and new computer hardware and software systems gives banks the ability to be more efficient and offer products not previously viable, such as cash management.
“Because of the technology, we can do just about everything the big banks can do,” Jensen said.
But the technology is not enough.
“A small bank has a limited lending authority,” Eldorado’s Keller said.
Depending on the type of bank and what kind of lending it practices, a bank’s lending limit depends on its deposit base and assets. Mega-banks like Bank of America have deposits and assets in the billions, allowing them almost unlimited lending ability. One-branch independents like Costa Mesa-based Privest Bank or Huntington Beach-based Pacific Liberty Bank may only break $100 million in deposits and assets.
In between the sizes of banks are the medium-sized banks that are able to play both games, offering a variety of products while still being able to greet customers by name. But those banks are continuously getting acquired or making their own acquisitions, making the name-game harder to play. n
