Community banks have traditionally felt secure in their intimate knowledge of the customer. But, as larger, diversified financial institutions begin to realize benefits from their expensive customer relationship management (CRM) deployments, the home-court advantage has begun to fade. "If you look at what the big banks are doing with things like modeling and predictive selling, the community banks just aren't up to that level," says Ralph Cumbee, SVP and Technology Officer at First National Bank (Pasco, Fla,; $88 million in assets). "They're going to create corporate knowledge of their customers that equals or exceeds what community banks know."
Many community bankers have yet to realize the danger, according to Cumbee. "I don't think community bankers quite have a clue how close the big banks are to really making that [CRM] investment pay off," he says.
The customer drain occurs on both the retail and commercial fronts. "They're able to look at the small businessperson in a unified way," says Cumbee. "It again takes part of the community bank competitive advantage we've had."
Furthermore, customers increasingly expect levels of service that require sufficient scale. "The customers are starting to say, 'Why can't I call someone at 2 a.m. and get my question answered?' " says Cumbee. "Unless you're $400 to $500 million [in assets], a community bank's not able to field a 24/7 call center."
Thus, against superior technological firepower and the expansionary ambitions of larger banks and credit unions, community banks may be faced with a difficult choice: gear up on technology, or sell.
While the price tag on even a standard, off-the-shelf CRM system may seem expensive, it's becoming a necessity, according to Cumbee. "It's going to be one of those things that you don't have a choice to do," he says. "You can say indoor plumbing's expensive, but try selling a house without it."
Community banks do not have the luxury of in-house development. "What we need is a technology partner that can do a lot of the work for us, and provide us with more of a turnkey operation," says Cumbee. "Then, we can capture the information and perform the same feats that big banks can do with that information."
But outside technology support can come at a high cost. "It's scaring a lot of boards of directors," Cumbee says. "When you say you're going to go from 5 miles per hour to 60 miles per hour in technology, and you bring that bill to your board of directors, it's huge."
That could eventually spell big trouble for technology vendors -- especially if the banking industry consolidates to the point where everyone's hunting the same 1,000 customers. "There could be a day when we have the 10 or 12 megabanks in the United States, and 800 to 900 niche players," warns Cumbee.
One option for community banks is to band together. "Bankers' banks can come into play," Cumbee surmises. "Groups of community institutions can form a consortia to spread the costs."
First National Bank uses software from Harland Financial Solutions (Lake Mary, Fla.) for automated lending, account opening and sales management; and modeling software for deposit and loan pricing from US Banking Alliance (Roswell, Ga.). The bank's core banking systems contract expires next year.
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