First, the anomalies:
1. The four largest U.S. banks in an arena all their own
2. 935 de novos created in the past nine years, performing with the experience of a Paul Volcker and the know-how of a General Petraeus
3. Family-owned banks, using technology to settle feuds
4. 20 hybrids (investment banking, credit card, brokerage, Internet, insurance)
Next, as defined by historically-developed models that inhabitants joined en masse:
5. Every credit union, even the Navy's behemoth (approximately 7,500)
6. Very small commercial banks
7. Small commercial banks (#6 & #7 represent 84% of all commercial banks)
8. Mid-tier local banks doing what small banks can't do
9. Mid-tier regional banks preening their feathers to impress the few-dozen capital-rich large banks that are looking for healthy acquisitions
10. 131 large banks, but without the attitude
Dr. John M. Mason, a professor of finance at Penn State University, wrote an article last week that was quite interesting. What struck me most was his characterization of the banking industry consisting of only two groups -- the 25 largest banks and all the rest. Wouldn't tech vendors love that kind of simplicity, where their product orientation had to adjust to only two models?
While economists might accept a binary description of the banking industry, any worthy bank-tech sales rep should be absolutely clear as to which of the ten groups he/she is calling on. Take, for example, Jack Henry & Associates. I've known that company ever since the late Jack Henry and the now Vice Chairman and Director, Jerry Hall, co-founded the company. I have visited Monett more times than my level of excitement can stand; I've eaten great lunches at their employee cafeteria; I've flown on their fleet of planes; I've recommended them to very satisfied clients; I work with one person there who can tell me anything I need to know with same-day-service. I talk to their head of sales because I know I'm not going to get a song and dance, just rock-solid answers. They have 9,097 customers covering the ten groups, and I'm sure they know which group they're in every time they make a call. They know the territory because they are the territory.
I'm quite sure that all experienced bank tech vendors recognize the nuances of the FI landscape, even if they don't agree completely with my 10-group classification. Certainly, two styles wouldn't do the job when it comes to technology. Further descriptions of each of the ten groups deserve separate blogs, so I'll perform that task in subsequent posts.