Experts offer political analysis, community banking advice

Northwestern Financial Review, Aug 19, 2000 by Bengtson, Tom

In a convention featuring a heavy dose of political analysis, members of the Independent Community Bankers of Minnesota were encouraged to review their management systems and adopt new technologies. Meeting at Breezy Point Resort August 3-5, bankers heard from industry experts Ed Krei of Oklahoma-based James Baker & Associates, and Lee Wetherington of Equifax E-Banking Solutions, among others.

Mounting credit card debt is making it difficult for bankers to assess credit risk. Responding to prompts from Krei, bankers said they knew of customers with $125,000, $119,000 and $72,000 in credit card debt. Krei relayed a story about a consumer who had $500,000 outstanding on credit cards. "Every one of his accounts was current the day he filed for bankruptcy," said Krei. "We don't know today when our customers are having trouble as quickly as we used to."

Krei added that the banking industry is doing well because of the economy. "The economy is strong because people are willing to spend," said Krei, who suggested that consumer spending could fall off quickly without warning.

Bankers, noted Krei, must "understand their bets." He said that as complex investment instruments become more accepted, interest rate risk becomes more difficult to manage.

Krei encouraged bankers to "think, act and plan" with a longterm focus.

"Ask yourself what you want to look like in three years," Krei encouraged. Strategic planning, he added, is not a once-a-year activity, but something bankers need to be doing on a continual basis.

Krei suggested that bankers think about their institutions from the perspective of their customers. "How easy is it to do business with my bank?" Krei said bankers should ask themselves.

Finally, Krei noted that technology is key to the future of community banking.

Wetherington followed up by challenging bankers to see the advantages of offering services through the Internet. Wetherington said customers want to consolidate their financial relationships to as few providers as possible, with the community bank remaining in good position to survive as the preferred provider. For example, Wetherington noted that 42 percent of consumers report a desire to get their bills from their bank's Web site rather than through personal financial management software or Internet sites. Furthermore, he said 75 percent want the ability to pay their bills from a single site. Wetherington said the tools are available for community banks to create a Web site that meets these needs.

Many banks that have tried to create Web sites have come up short, Wetherington said. He cited a survey that disclosed 3.1 million people who had tried online banking had discontinued using the service because they found it frustrating or cumbersome. Some bank Web sites didn't even return e-mail inquiries, and only 39 percent responded within one day.

Wetherington said aggregation services are growing in popularity. Such sites collect information from separate Web sites and present them on a single Web site for the convenience of the consumer. The customer authorizes the site to collect the information, providing Web site addresses, passwords and other access information. Bankers can get a glimpse at how such services work by visiting www.yodlee.com, Wetherington said.

Most community bankers understand the importance of technology for their survival, but Wetherington noted a survey that revealed only 50 percent of bankers have a strategic technology plan in place. He encouraged bankers to form a plan and put it into action.

Election Year Politics

Political analysis came from Carleton College professor Steven Schier, and a panel consisting of experts D.J. Leary, Dean Barkley, Al Olson and Jerry Schoenfeld. Speaking the morning after the Republican nomination acceptance speech by George W. Bush, Schier predicted a low turnout in this fall's elections. "That will help Bush," Schier said.

He called this fall's election incredibly important, noting it is the first time since 1952 that control of the presidency, the Senate and the House are all "up for grabs." He said the next president also is likely to get the chance to appoint three Supreme Court justices, and that the states will be drawing new district lines as census data comes in.

Schier called this an "issueless" presidential election, which means voters will put more emphasis on the personality of the candidates. He said this tends to favor Bush, "who is generally liked," while Vice President Al Gore is "not liked, stiff and partisan."

ICBM's Olson and Schoenfeld said they were impressed by Bush's acceptance speech. All panelists said the U.S. Senate race in Minnesota is important and will be close. Barkley, who engiveered the campaign to elect Jesse Ventura as governor, said he sees Rod Grams winning re-election, "especially if the independent candidate wins 5 or 6 percent of the vote."

Olson announced that for the first time in its history, ICBM will conduct its convention out-of-state. In August 2001, the convention will be conducted in Lake Geneva, Wis. The new location is intended to attract members who usually skip the convention. Olson said the association will attempt to arrange for an Amtrak train to make a trip from northwestern Minnesota, across the state, and across Wisconsin to Lake Geneva. It would pick up bankers along the way, and perhaps even offer seminars on the train.