‘Fintech will not fix banking’: Ron Shevlin on widespread financial institution underperformance

If leading financial institutions are struggling to generate growth, many players in the market are struggling just to keep up. From checking accounts to credit cards, banks and other financial firms are challenged across many of their product lines. Underperforming their peers, these institutions are leaving money on the table. [caption id="attachment_9832" align="alignleft" width="200"] Cornerstone's Ron Shevlin[/caption] This underperformance can cost a firm millions of dollars in revenue. Using his firm's Performance Report benchmark data, Cornerstone Advisors' analyst Ron Shevlin found five key ares that banks are leaving money on the table, adding up to $10 million for a financial institution with $1.5 billion in assets. Tradestreaming had the chance to discuss these current trends with Cornerstone Advisors' Ron Shevlin.

[caption id="attachment_10930" align="aligncenter" width="570"] 5 key areas of FI underperformance[/caption]  

Branch-centric banking doesn't work for the most part anymore. Have we reached Branchamegaddon?

Branch-centric banking may not work anymore, but that doesn't mean that there isn't a place for branches in a bank's channel delivery strategy. Despite the death proclamations from the pundits, we haven't reached Branchamegaddon -- yet. The real impetus for the implosion isn't mobile technology and mobile adoption. It's the development and deployment of AI in tools like chatbots. When these tools and technologies mature, branches are toast.

How are so many financial institutions underperforming and what to do about it?

There's a bimodal bifurcation in the banking industry. I don't know that I'm using the words "bimodal bifurcation" correctly, but it sounds good. What I mean is this: there are many well performing FIs in the industry and many underperforming. The underperformers may be in the "wrong" geographic area, may be too small to compete, may be overwhelmed by compliance costs, may be laggards from a technology perspective, may simply not have evolved fast enough for today's competitive demand. What to do about it? For many the answer is going to have to sell and get acquired. Plain and simple. There will continue to be a ton of consolidation in the banking and credit union markets for at least another 5 years.

Fintech will fix banking. True of false?

False. Here's reality: There will always be some group of people who will claim that banking is broken: whether it be entrepreneurs looking for opportunities, consumer advocate groups who believe that people have been wronged, or politicians looking for scapegoats to blame for their own stupid regulatory actions. Whatever impact fintech has on "fixing" banking will be downplayed by those with a vested interest in painting banking as broken.

You're now CEO of Wells Fargo (sorry!). What do you do?

Let's assume you mean the new CEO of Wells Fargo. Because if you mean, I'm John Stumpf, then the answer is clear: I donate some (significant) portion of my past bonuses to a fund to be used for restitution to the victims -- who, by the way -- are both customers and remaining employees. As the new CEO, I do 2 things: 1) I announce a new FREE checking account. FREE means no monthly fee, but means no overdraft fees, no ATM fees, no any freaking fees, to be offered for the next 5 years. 2) I announce the elimination of "products per customer" as an internal performance measure, and adopt a new performance metric that a consultant named Ron Shevlin calls the Referral Performance Score. Hear more from Ron Shevlin as he presents at Tradestreaming Money 2016 on November 14 in New York City.