Welcome to the Fall issue of the Novantas Review.
What a whirlwind it has been. When we started 2019, few experts were anticipating the Fed would cut interest rates. Now, we are all wondering how much more it will cut and how fast.
Needless to say, this sudden shift has wreaked some havoc on budgets. The pressures have suddenly intensified. Net interest margins are getting squeezed and banks are now trying to figure out where they can cut costs. Even heavyweight Jamie Dimon says that it is prudent for JPMorgan to prepare for the possibility that U.S. interest rates drop to zero.
The theme of this issue is “Race to Digital” because Novantas believes that banks can’t stop investing in the industry’s digital transformation when profit margins come under pressure. After all, customers won’t flock back to branches just because rates are falling. The industry must continue its pursuit of new digital products and services in order to acquire and retain customers. Indeed, moving more quickly to digital will ultimately help to contain costs.
This issue tackles a host of other topics that are relevant as rates start to drop. Appropriate pricing will be critical, but there are significant risks to pursuing a one-size-fits-all approach. There are many levers that banks can pull when rates fall; none of them are easy. If there was ever a time to adopt customer-level analytics, this is it.
History tells us that deposit costs will keep rising even as the Fed cuts rates. That’s why we lay out strategies that can help banks keep those costs in check. One of the first steps is to identify the value that retail and commercial customers bring to the bank by analyzing their behavior. We also provide a roadmap to implement deposit scoring.
Also in this issue, we explore how banks can improve the efficiency of the branch workforce by reducing stranded capacity, analyzing customer traffic trends on a granular level and encouraging customers to set appointments.
And we sit down with Rita McGrath, a Columbia University professor who helps companies spot structural and disruptive changes that will shake up their industries. Her new book, “Seeing Around Corners: How to Spot Inflection Points in Business Before They Happen,” is full of interesting examples that will be instructive to banks.
As always, we welcome your feedback on the Novantas Review. Please feel free to send questions or comments to Robin Sidel at firstname.lastname@example.org.
Novantas sits down for a Q&A with Columbia University Business School’s Rita McGrath, author of the just-released “Seeing Around Corners: How to Spot Inflection Points in Business Before They Happen.”
What will your bank look like in five years? 10? Think about forming a successor bank that can help you plan for your institution’s future.
The recent rate cut hasn’t dampened competition for deposits among wealth managers and broker-dealers.
Give me some analytics with that handshake. Traditional commercial banking has always been about relationships, but customer-level analytics can help banks better determine the right rate for the most valuable customers.
Stranded capacity. Idle tellers. Fewer walk-ins. Customer attitudes toward branches are changing, but too many banks are still following the old workforce models. Think creatively to get the most out of your employees – and make them happier, too.
The Fed cut rates, but that doesn’t mean your bank should. Or should it? In either case, your deposit strategy needs urgent attention because history tells us that deposit costs continue to rise even when the Fed reduces rates.
Digital acquisition of customers is quickly becoming one of the most important metrics for the U.S. industry, joining the old standards of efficiency ratios, net interest margins and market-to-book. Fintechs have long focused on such metrics. As branches lose foot traffic, digital acquisition is critical to banks as well.
The process of scoring deposit customers can have faster impact than you might think. Novantas reveals ways to optimize scoring now.