Asset Based Lending
Chief Investment Officer
Commercial Loan Automation
BirdsEye Viewthe hall of fallen giants
A recent article in the New York Times hit home for me. It highlighted the following products:
As I contemplate our industry I see many similarities between us and the stories above. The demise of the products described above does have lessons for us as well. These products died not simply due to technological obsolescence. They died because the management of their makers refused to change the underlying business model (or technology platform) despite the three bell alarm sounds it’s been hearing for years. Sony, for example, was too committed to its proprietary formats to adapt quickly to the digital revolution, and thereby lost the Walkman brand value and market positioning, worth billions.
The parallels are even stronger when it comes to bookstores, we have much in common. Our businesses are real-estate heavy, distribution is key, and the product is largely undifferentiated. "The remaining mega-store, Barnes & Noble, is not expected to disappear overnight. The worry is that it will slowly wither away as more readers embrace e-books", says the NYTimes. Interesting, like many other struggling businesses, book publishers are cutting costs, reengineering processes and slashing workforces. And yet, what will be their fate is Amazon cuts out the middleman and starts publishing ebooks directly?
Barnes & Noble decided to fight back by dedicating 300+ people to offering an alternative to Kindle, the Nook. Their motto, straight from "The great Gatsby," "You can’t repeat the past."
As the book selling industry morphs and past giants fight for survival, we watch and ask, are there any parallels between them and us? Does PayPal resemble Amazon in its quest to transform payments? Will "swipe and go" change the need for cash, the role of vaults and reduce teller volumes even below the minimum requires for separation of duties? I am no doomsday proselytizer, but I am also no ostrich. The cost of physical distribution and the dramatic decline in their main business do not bode well to the future of the branch and are eerily reminiscent of book stores.
Like Barnes & Noble, we need to reevaluate what occurs at the branch. They are considering transforming their stores into cafes with ebook inventory and access. They are looking for ways to straddle the precarious balance between their hard-copy past and the digital future. So are we. Cash and checks are still with us and will be there for years to come, but their percentage of our total business, transactions and payments is plummeting like a rock. We find ourselves in a similar quandary as they do: we can’t abandon one form of payments in favor of another, and hence must carry the costs of both. But without doing so we will have no future, which is one of the important reasons I believe we are witnessing the beginning of another wave of acquisitions of small to mid-size banks.
Our greatest challenge and opportunity in the coming five years is to find ways to straddle the past and the future without being torn apart. Being too tied to past paradigms, technology, brand loyalty etc. can cost us our future, just as abandoning all these good assets can cost us the present. We must build bridges between what occurs at our branches today and what will happen going forward, while considering new income streams at the same time to ensure future prosperity.