As in life and literature, business (and banking) is full of contradictions. No matter what the economists posit about logical, predictable behavior, the only thing that is truly predictable is that just when you think you've figured out customer or competitor attitudes and actions, you will inevitably be thrown a curve.
Consider, as an example, a study released recently by the Cambridge Consumer Credit Index. It revealed that, for the first time, getting out of debt was Americans' top New Year's resolution, narrowly surpassing losing weight (28 versus 27 percent of respondents). Considering that there is an obesity epidemic in our country, this might not be viewed as good news by the medical profession; but for financial-services providers, it is encouraging news indeed.
That is, until you consider another set of statistics. On the same day the Cambridge Consumer Credit Index trumpeted its good news about Americans' new-found sense of fiscal responsibility, the American Bankers Association reported credit card delinquencies rose to a record high in the third quarter of 2003.
Whether this is a matter of inconsistency, or reflects the possibility that Americans recognize they need to grapple with their rising levels of debt, for banks it presents the proverbial mix of challenge and opportunity. Cross-selling and expanding relationships continue to be enticing possibilities. With the renewed focus on retail banking-reflected in expanded investment in branches and other distribution channels-it is clear there will be an aggressive push to get consumers to do more business in a greater variety of ways with their banks.
But, along with the potential for greater fee income and profits, these more intricate and comprehensive relationships also bring with them a greater degree of risk (both to institution and customer), since the financial stakes are potentially much higher. How many banks are technologically, financially and culturally prepared for this? Knowing your customer is part of it, as is knowing your products, markets and competition. Technology is key to that part of the equation; unfortunately, it can do little about the strong wills and stomachs needed to weather the ups, downs and contradictions inherent in this new business model.